The Federal Reserve Is Catastrophically Wrong About Climate Change
Does climate change really not pose a risk? Let’s look at the numbers.
At a recent event, Federal Reserve Governor Christopher Waller said that climate change does not pose a serious risk to financial systems, and the large banks don’t need to worry about it. To be clear, he does believe that climate change is real, just that it isn’t a risk, at least when it comes to the banking industry. But this notion seems to fly in the face of what climate scientists have said for years and what common sense seems to say about the knock-on effects of the looming climate disaster. So, is Mr Waller misguided? And is the Federal Reserve, and in turn, the American economy, on course to be woefully underprepared for climate change?
To quote Mr Waller exactly, he said, “Climate change is real, but I do not believe it poses a serious risk to the safety and soundness of large banks or the financial stability of the United States” and then went on to say “Risks are risks. There is no need for us to focus on one set of risks in a way that crowds out our focus on others.” In other words, Mr Waller doesn’t see climate change affecting the economy or the banking system, and so the Federal Reserve, who “monitors financial system risks and engages at home and abroad to help ensure the system supports a healthy economy for U.S. households, communities, and businesses” doesn’t need to give it any special attention. While it is true that the Federal Reserve has a lot of other risk factors to mitigate presently, such as ensuring inflation doesn’t go bananas, this seems terribly short-sighted.
But rather than speculate whether Mr Waller has the right stance here, let’s look at the numbers and see if he is right.
US Farming will by far be the most affected by climate change. The stable weather patterns and vast stores of water in underground aquifers to see farms through bad years have helped US agriculture over the past century. But any slight change in climate can spell disaster. Just a few degrees of climate change can collapse these weather patterns, leading to prolonged megadroughts that last years, biblical floods that can wash away entire farms, heatwaves that decimate crops and livestock alike, and far, far more…