From floods to fires, the rising number of billion-dollar catastrophes each year has underscored the need for swift action on climate change. How bad these effects get will depend on how quickly global economies can mobilize resources to transition away from fossil fuels.
“The climate is affecting all of us every day in ways that are increasingly visible,” John Morton, climate counselor to the treasury secretary, told Yahoo Finance Live (video above). “This past year 2020, we had over $117 billion worth of climate-related impacts to the economy from natural disasters — climate-enhanced natural disasters. So this is affecting us. It's affecting us today. And it's affecting us with increasing speed.”
Under the Biden administration's directive to address the climate crisis, the U.S. Treasury Department's Federal Insurance Office (FIO) released a request for information for public input on how climate-related risks affect the insurance sector and financial stability.
And in an April speech to the Institute of International Finance, Treasury Secretary Janet Yellen stated that the Treasury is focused on turning the United States' “whole-of-government” approach to addressing climate change into a “whole-of-economy” approach.
She also voiced support for more reliable climate risk disclosures to help investors factor in the risks and opportunities posed by climate change. The SEC is currently reviewing its 2010 guidance on climate risk disclosures, as part of a global shift from voluntary disclosures to mandatory ones.
Morton explained that he expects a forthcoming report on the matter from the Financial Stability Oversight Council (FSOC) to find areas where climate-related risks can be better articulated “because we see significant risk in the financial system that is not currently being recognized and disclosed.”
“So we do see an opportunity for enhanced disclosure. And I think the SEC is moving in a direction consistent with that point of view,” Morton added.
And while the energy transition began decades ago, Morton said, the Biden administration has emphasized that it sees the emission reduction goals “not as a cost on businesses and a cost on society, but an important economic benefit that we will experience if we can, in fact, transition our economy, lead the global economy in the transition to a net-zero economy, and to do so in a proactive way across the suite of our industries.”
'Last, best hope' to fight climate change
International cooperation on cutting greenhouse gas emissions is essential to reaching the Paris Agreement's target of limiting climate change to 1.5 degrees Celsius above pre-industrial levels.
John Kerry, the special presidential envoy for climate, visited Japan, China, and India over the past two weeks with the aim of securing more ambitious climate efforts ahead of a major climate summit in November. Kerry described the upcoming summit in Glasgow, Scotland, as the world's "last, best hope" to stave off what scientists say will be the most devastating and irreversible effects of climate change.
As tensions mount between the U.S. and China — the top two emitters of carbon dioxide — the U.N. chief urged the two powers to not let competition interfere with the summit.
Earlier this year, President Biden signaled that infrastructure spending would be necessary to compete with China, including in areas that will facilitate decarbonization, such as manufacturing batteries and electric vehicles. (China is the world's largest manufacturer of electric vehicles, followed by the European Union.)
Yet, Kerry struck a more conciliatory tone when meeting with Chinese officials, and hoped the nations could set climate apart from other geopolitical tensions as a key area of cooperation. China's Foreign Minister Wang Yi told Kerry that while joint efforts on climate created an “oasis,” cooperation between China and the U.S. on this issue “cannot be separated from the wider environment of China-U.S. relations.”
Last year, Chinese President Xi Jinping pledged that China would attain peak emissions by 2030 and carbon neutrality by 2060. China leads the world in renewable energy capacity; however, it also outpaces the world in building new coal-fired power plants.
“In many ways, they have been leaning into and leading the industrial transformation that is enabling the low carbon economy like very few other countries, if any,” Morton said. “And so while it is true that China needs to do much more — much more — to reduce its own emissions, and that is a point of American geopolitical engagement with China, I think there's some lessons learned too about how they have prioritized investments in low carbon economies to the long-term benefit of key industries now in this transition.”
Another central point of negotiations at the Glasgow climate summit will be around deploying resources to help low- and middle-income nations, which face the brunt of climate impacts, achieve their development goals in a manner consistent with the Paris Agreement emission targets.
In a push for international financing to prioritize renewable energy projects, Secretary Yellen issued guidance to multilateral development banks (MDBs) that the U.S. would oppose funding coal and oil energy projects. The U.S. is a member and significant shareholder of five MDBs including the World Bank, the African Development Bank, and the Asian Development Bank.
“We are very much focused as a U.S. government in using our public dollars — our public climate finance dollars, our development dollars — to help developing countries develop cleaner, greener sources of energy for the future,” Morton said, adding that, due to the falling costs of renewable energy, “it's a fast-growing boom in those markets right now.”
Grace is an assistant editor for Yahoo Finance and a UX writer for Yahoo products.