Newly confirmed Treasury Secretary Janet Yellen is giving climate change a prominent role in her talks with her counterparts around the world, signaling a significant shift by the Biden administration to prioritize addressing climate change not just from the White House but also at the agency.
Yellen has spoken to the finance ministers of Italy, Japan, Canada, Mexico, France, Germany and the United Kingdom since being sworn in less than a week ago, according to statements provided by the Treasury Department regarding those talks. In all of those calls, “forcefully addressing the threat of climate change” has been discussed as one of Yellen’s top priorities and tackling climate change has been a topic of conversation, according to those statements.
Yellen’s early focus on climate change with other finance leaders comes after she told senators during her confirmation hearing last month she would appoint someone at a senior level within the Treasury Department to address efforts on climate change and create a “hub” within her department focused on the risks climate change poses to the financial system and tax policy-related incentives.
Her remarks came in response to a question posed by Senator Sheldon Whitehouse. The Rhode Island Democrat cited warnings that climate change will lead to a crash in the value of coastal properties as well as concerns about the so-called “carbon bubble” – or massive investments in the fossil fuel sector.
“I think we need to seriously look at assessing the risks to the financial system from climate change,” Yellen said during the hearing, in which she also called climate change an “existential threat.”
Yellen acknowledged climate change and the policies implemented to address it could have a major impact on the value of assets and credit risks within the financial system.
“I think everyone understands that the State Department has an important role, the EPA has an important role, but the Treasury actually is really influential in global discussions around finance and climate,” said Joe Thwaites, an associate in the Sustainable Finance Center of the nonprofit research organization the World Resources Institute. Thwaites said the administration’s “whole-of-government approach” has been well received.
Prior to her nomination last year, Yellen co-chaired a working group on climate change and finance for Group of 30, an international organization comprised of academics, economic officials and bank leaders, which released a report calling for immediate action to put the world economy on a path toward a net-zero carbon economy by 2050. The working group recommended governments to come up with strategies including implementing carbon pricing as well as invest in low-carbon infrastructure.
In a dramatic shift from the Trump administration, President Joe Biden is making tackling climate change a central component of his agenda. Just hours after being sworn in, he signed an order recommitting the United States to the Paris Climate Agreement, which the Trump administration had announced in 2019 the U.S. would exit. Last week, Mr. Biden also signed a series of executive actions aimed at combating climate change.
“That’s something that in the campaign, Biden said he wanted to see the end of fossil fuel subsidies globally by the end of his first term, so the Treasury Department will play a key role in that domestically, but also as it engages internationally,” said Thwaites. “There’s this recognition that it’s not just about turning off the faucet of dirty energy flows, but also to ramp up clean energy financing.”
Ending the use of fossil fuels and building renewable energy is the mission of the international organization 350. The group is closely monitoring where Yellen and the Treasury Department go with fossil fuel financing.
“Our hope for Janet Yellen and her communication internationally is that she is a leader in generating discourse of the effect of the finance community on the climate,” said Brett Fleishman, head of 350.org Finance Campaigns. But he argued she needs to walk the walk at home as well.
“Is her rhetoric signaling positive change? Absolutely,” said Fleishman. “Now we just need to see some of those general statements about climate being an urgent priority and guiding policy, if that all turns into the kind of action driving the just transition.”