Climate crisis poses ‘serious risks’ to US economy, Biden administration warns
Joe Biden’s administration on Friday issued a 40-page report warning that the climate crisis “poses serious and systemic risks to the US economy and financial system” and setting out steps for action as “climate impacts are already affecting American jobs, homes, families’ hard-earned savings, and businesses”.
Under the new plan, the federal government will weigh up climate risks for employee benefit and retirement plan investments, incorporate climate disasters into lending and budgeting decisions and revise building standards for homes at risk of flooding. Government-backed mortgages for public housing will factor in the risk of calamitous floods, wildfires and other climate impacts.
“The intensifying impacts of climate change present physical risk to assets, publicly traded securities, private investments, and companies,” the US president said in the report. The climate crisis “threatens the competitiveness of US companies and markets, the life savings and pensions of US workers and families, and the ability of US financial institutions to serve communities”, he added.
Gina McCarthy, Biden’s top climate advisor, said that the climate crisis “poses a risk to our economy and to the lives and livelihoods of Americans, and we must act now”. McCarthy added: “This roadmap isn’t just about protecting our financial system – it’s about protecting people, their paychecks and their prosperity.”
The new White House plan has been welcomed by environmental groups eager for the administration to weave climate considerations throughout its decision-making. Under Donald Trump, the US ditched many of these policies, declining to factor in climate change when making decisions over the building of new infrastructure, for example.
“Never before in the history of our country has a US president taken such a sweeping view on climate change,” said Mindy Lubber, chief executive of Ceres. “The Biden administration is showing the importance of addressing climate risks and opportunities across all government agencies.”
The White House report was issued as the crucial Cop26 global climate talks are due to begin in Scotland at the end of the month, with world leaders attending and intending to spell out their plans to help the planet avoid catastrophic heating and the climate destabilization that is already under way.
Prominent figures from Britain’s Queen Elizabeth to Swedish teen activist Greta Thunberg have in recent days expressed, in their very different ways, exasperation with leaders favoring talk over action on the climate emergency.
Many are looking for the US to lead the way. Trump was infamously skeptical about the climate crisis and was exuberant about pulling the US out of the Paris climate accord, agreed at the groundbreaking UN global summit on climate in France in 2015.
Biden immediately returned the US to the agreement upon taking the presidency, when he beat Trump in November 2020.
The White House report on Friday was a follow-up to a May executive order from Biden that essentially called on his own administration to analyze how the world’s largest economy could be affected by extreme heat, flooding, storms, wildfires and the broader adjustments needed to address climate change.
Friday’s report stated: “The scientific evidence on climate change has grown increasingly stark. Continued warming will further destabilize our climate and produce more frequent and intense storms, wildfires, and heatwaves as well as more damaging droughts and more extensive ecosystem losses.”
It also noted: “In August 2021, the United Nations’ Intergovernmental Panel on Climate Change released its latest report in which 234 of the world’s leading scientists, citing over 14,000 different studies, concluded with high confidence that the climate crisis is a ‘code red for humanity’.”
Global temperatures are already up 1C since industrialization. Keeping them from rising more than 1.5C and avoiding environmental catastrophe would require unprecedented action to begin phasing out fossil fuels within the next 12 years, according to the UN Intergovernmental Panel on Climate Change.
“If this year has shown us anything, it’s that climate change poses an ongoing urgent and systemic risk to our economy and to the lives and livelihoods of everyday Americans, and we must act now,” Gina McCarthy, the White House national climate adviser, said.
A February storm in Texas led to widespread power outages, 210 deaths and severe property damage. Wildfires raged in western states. The heat dome in the Pacific north-west caused record temperatures in Seattle and Portland, Oregon. Hurricane Ida struck Louisiana in August and caused deadly flooding in the north-east.
The actions recommended by the
Biden administration reflect a significant shift in the broader discussion about climate change, suggesting that the nation must prepare for the costs that families, investors and governments will bear.
Among the steps outlined is the government’s Financial Stability Oversight Council developing the tools to identify and lessen climate-related risks to the economy. The treasury department plans to address the risks to the insurance sector and availability of coverage. The Securities and Exchange Commission is looking at mandatory disclosure rules about the opportunities and risks generated by the climate emergency.
The labor department on Wednesday proposed a rule for investment managers to factor environmental decisions into the choices made for pensions and retirement savings.
The Office of Management and Budget announced the government will begin the process of asking federal agencies to consider greenhouse gas emissions from the companies providing supplies. Biden’s budget proposal for fiscal 2023 will feature an assessment of climate risks.
Federal agencies involved in lending and mortgages for homes are looking for the impact on the housing market, with the Department of Housing and Urban Development and its partners developing disclosures for homebuyers on flood and climate-related risks. The Department of Veterans Affairs will also look at climate risks for its home lending program.
The Federal Emergency Management Agency is updating the standards for its National Flood Insurance Program, potentially revising guidelines that go back to 1976.
“We now do recognize that climate change is a systemic risk,” McCarthy said. “We have to look fundamentally at the way the federal government does its job and how we look at the finance system and its stability.”