Yellen lays out 'bold' climate agenda for US economy, markets

The cost of achieving net-zero carbon emissions by 2050 could climb to $2.5trn over 10 years for the US alone, she said

Photo: EPA Janet Yellen

US Treasury Secretary Janet Yellen on Wednesday pledged to aggressively tackle climate change using all the tools at her disposal, warning that a failure to do so effectively and promptly could undermine economic growth.

To bring the US economy in line with international goals of eliminating carbon emissions will "require bold and urgent action - nothing less than transforming important sectors of the global economy, especially when it comes to how we generate power and move people and goods," Yellen said in a wide-ranging speech to the Institute of International Finance.

“It’s going to be tremendously important for the financial services industry to marshal and allocate capital that’s needed to make the transition toward net-zero” emissions, she said in a question-and-answer segment that followed the speech. “Massive investments are likely to be needed and the bulk has to be private,” Yellen said.

The Treasury chief also highlighted the need to strengthen financial risk disclosures - making them more reliable, consistent and comparable across markets and countries - so investors can accurately gauge risks and opportunities.

Yellen pledged that the US will help developing countries that are especially vulnerable to threats from climate change, but stopped short of making any specific financial promises on that front.

The infrastructure-focused economic proposal that President Joe Biden unveiled last month, including money to address climate change, “will be the most significant public investment in America since the 1960s, dramatically reducing US emissions by greening the electricity and transportation sectors,” she outlined.

The costs would be "enormous," Yellen insisted, noting that Biden's $2.3 trn infrastructure plan would make some needed investments in greening the economy while removing tax subsidies for fossil fuels, which cost taxpayers some $4bn a year.

Yellen's remarks reflect a sharp reversal of the policies of the Trump administration, which had pulled the United States out of the 2015 Paris climate accord and blocked greater action by the Group of Seven advanced economies. Her comments also come as Biden convenes the leaders of 40 nations, corporate executives and union leaders in a two-day virtual summit on the climate change, with a focus on how to galvanize finance in the endeavor.

While many recent international climate-change discussions have focused on the role of multilateral development banks and formal climate-assistance programs, the conversation at the summit will include a more expansive look at the role of private funds in propelling clean energy and building resilience, administration officials said Wednesday.

Yellen said the Treasury is involved in a number of initiatives aimed at removing hurdles, including efforts to improve financial reporting and increasing the reliability of climate-related disclosures. The Financial Stability Oversight Council, a multi-agency body of regulators chaired by Yellen, will be the Treasury’s principal tool in attempting to minimize financial-sector risks associated with climate change. 

“It’s FSOC’s job to understand these risks, to coordinate across US regulatory agencies in assessing the risks and, if necessary and appropriate, acting to mitigate risks to overall US financial stability,” she said in the Q&A after her speech.

To achieve Washington's goals, US officials will also work with the multilateral Financial Stability Board and other international bodies to make reporting requirements consistent and comparable across borders. She endorsed a “solid framework” for climate-related disclosures from an FSB task force chaired by Michael R. Bloomberg, founder and majority owner of Bloomberg News parent Bloomberg LP.

"This is an immense, immense task. We need to work together closely ... in order to deal with what has become an essential risk to our planet," she continued, adding that the financial sector had a big role to play in funding the transition to a net-zero economy.

More on this subject: Climate crisis

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