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Yellen touts 'whole-of-economy' plan to fight climate change

Yellen touts 'whole-of-economy' plan to fight climate change
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Treasury Secretary Janet YellenJanet Louise YellenRepublicans attack Biden agenda after disappointing jobs report On The Money: Five takeaways on a surprisingly poor jobs report | GOP targets jobless aid after lackluster April gain Bad jobs report amplifies GOP cries to end 0 benefits boost MORE on Wednesday laid out the department’s plans to mobilize the U.S. economy against climate change, defying growing criticism from Republicans over the pace and scope of President BidenJoe BidenDefense lawyers for alleged Capitol rioters to get tours of U.S. Capitol Sasse to introduce legislation giving new hires signing bonuses after negative jobs report Three questions about Biden's conservation goals MORE’s environmental agenda.

In a speech to the International Institute of Finance, Yellen insisted that the U.S. must take an ambitious approach to fighting climate change through the economy despite the challenges of measuring and curbing the economic and financial risks it poses.

Republicans and advocates for the oil and gas industry have ripped Yellen and several other financial regulators for laying out plans to account for the financial and economic risks of climate change. Critics argue that holding banks and companies to strict climate-related standards is unfair given the uncertainty surrounding climate risk and a threat to fossil fuel producers.

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“I know some have argued that this is a reason for us to move slowly. The thinking goes that because we know so little about climate risk, let’s be tentative in our actions — or even do nothing at all,” Yellen said in prepared remarks. “This is completely wrong in my view. This is a major problem and it needs to be tackled now.”

Yellen’s Wednesday speech comes two days after Treasury announced the creation of a Climate Hub, a division meant to drive investments toward projects that will reduce carbon emissions, expand access to affordable renewable energy, and prepare the economy for climate-related risks such as increasingly frequent and dangerous extreme weather.

John E. Morton, a former Obama administration official and climate finance consultant, will lead the new Climate Hub with a special emphasis on an “expedited transition” away from fossil fuels in “high-emitting sectors and industries.”

The Climate Hub is but one prong of what Yellen called the Treasury’s “whole-of-economy” approach to fighting climate change — a combination of massive federal investments in research and development and a range of new incentives designed to steer money away from fossil fuel production and toward green energy.

Yellen highlighted the wide range of climate-focused programs in Biden’s $2.3 trillion infrastructure proposals, dubbed the American Jobs Plan, including extended tax credits for renewable energy production, grants and credits intended to spur the creation of 500,000 new electric vehicle chargers and direct funding of research and development.

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Even so, Yellen said the federal government does not have the economic capability to cover the $2.5 trillion needed to “green our economy” in the long haul and needs to spur investment from the private sector to make up the gap.  

“In theory, it should not be very challenging to mobilize capital. Investor demand for climate aligned investments, including green bonds and sustainable assets, is rapidly increasing,” Yellen said.

While climate-focused investment products and strategies have taken off in recent years, Yellen said that the space is hindered by a lack of “reliable, consistent, and comparable disclosures needed ... to accurately compare” risks and opportunities.

“Climate change science is relatively new to financial institutions and regulators. And so, at this point, it’s hard to translate changes in climate — and climate policy — into economic and financial projections,” she said. “It is even more difficult to pull together sector-by-sector assessments to form a systemwide perspective.”

Yellen said the Treasury Department would work with the Securities and Exchange Commission (SEC) in international discussions meant to create universal standards for climate disclosures. The SEC is also reviewing its 2010 disclosure guidance for climate-related risks and is expected to tighten it under new chairman Gary GenslerGary GenslerPutting the SEC cops back on the Wall Street beat On The Money: US economy roars in first three months of 2021 | Jobless claims drop again | White House: No tax hikes for couples making less than 9K SEC enforcement chief resigns just days after taking job MORE, a Democrat and staunch advocate for exhaustive transparency.