Fed Governor: Climate Change Not a Risk to U.S.

Federal Reserve Gov. Christopher Waller: Climate Change Not a Unique Risk to US Financial System

Federal Reserve Gov. Christopher Waller has stated that climate change does not pose a “sufficiently unique” risk to the US financial system. Speaking at a conference in Spain, Waller said that he did not believe climate change posed a serious risk to the safety and soundness of large banks or the financial stability of the United States. He added that risks posed by climate change were not sufficiently unique or material to merit special treatment. Waller’s comments were consistent with those made by Fed Chairman Jerome Powell in recent months, who said the US central bank is not going to be a climate policymaker.

Addressing Climate Change

Central bankers have to look into whether any change to the climate would have a “near-term” impact that would cause large enough losses to the macroeconomy, Waller said. He noted that banks are already adept at hedging against weather-related losses, while more slow-moving weather patterns were locally—but not systematically—important. To address US financial stability, he added, policymakers must balance the broad set of risks they face and prioritize using evidence and analysis. Based on what he has seen so far, Waller believes that placing an outsized focus on climate-related risks is not needed, and the Federal Reserve should focus on more near-term and material risks in keeping with its mandate.

Policy Agenda

There have been concerns that climate-related policies brought about at the local, state, and federal level will place undue economic burdens on ordinary consumers. At the same time, some scientists have expressed concern that so-called renewable sources of energy such as wind power may not be sufficient to meet power grid demands. This week, the federal Environmental Protection Agency proposed a rule that would require most fossil fuel power plants to cut their emissions by 90 percent between 2035 and 2040 or be shut down. The rule, if approved, will likely be challenged by Republican-led states and the US Supreme Court.

Scientists’ Declaration

In mid-2022, about 1,000 scientists and professionals issued a letter decrying the widespread alarmism over the climate, saying there is no climate-related emergency amid decades worth of predictions claiming civilization will end as we know it due to the warming of the Earth’s atmosphere. Those scientists suggested that such claims are exaggerated and used by bad actors to acquire more political power and influence. Meanwhile, “politicians should dispassionately count the real costs as well as the imagined benefits of their policy measures,” the declaration said.

• Climate science should be less political, while climate policies should be more scientific
• Scientists should openly address uncertainties and exaggerations in their predictions of global warming

Reuters contributed to this report.

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