The inclusion of the term “climate change” in a statement from the Group of 20 finance ministers appeared to be a notable, but subtle, acknowledgment by the United States that the threat from rising temperatures was a valid economic concern. Alan Rappeport and Lisa Friedman write about the G20 joint statement in an article on the New York Times website.
Finance Ministers Grapple Over Economic Threat of Climate Change
The United States, under pressure from European countries to address the economic threat of climate change, agreed on Sunday to include a reference to those risks in a joint statement at the conclusion of a meeting of the world’s top economic leaders.
The inclusion of the term “climate change” in a statement from the Group of 20 finance ministers appeared to be a notable, but subtle, acknowledgment by the United States that the threat from rising temperatures was a valid economic concern. The reference, on the third page of the document and at the bottom of a long list of potential risks, said the “financial stability implications of climate change” were being monitored by the G20’s Financial Stability Board.
The Trump administration does not accept the established science that human activities are the dominant cause of climate change. It has aggressively rolled back environmental regulations, including those aimed at curbing greenhouse gases, over the last three years. President Trump’s position that these regulations hold back business have left the United States at odds with other countries at international forums, regularly threatening to derail official statements, or communiqués. But rising temperatures and increasingly frequent and severe weather events have stoked concerns that climate change poses a significant risk to the world economy and the global financial system.
Bruno Le Maire, the French finance minister, said in an interview on Sunday he and Treasury Secretary Steven Mnuchin had a long discussion on Saturday evening about the language. While Mr. Le Maire had hoped for something more extensive, he said he believed that progress was made.
“I think he clearly understands that even if we do not share the exactly the same assessment on climate change, there is a need to address the issue within the G7 and within the G20,” Mr. Le Maire said of Mr. Mnuchin. “I think that we have a totally different perspective on the risk of climate change — for us, this is clearly one of the major risks. This is a financial risk.”
Mr. Mnuchin’s counterparts were pushing for a more assertive pronouncement of climate change as an economic headwind, leading to last-minute negotiations over how the phrase would appear in the statement. References to climate change as a risk have been excluded from such statements while Mr. Trump has been in office.
At a news conference on Sunday, Mr. Mnuchin played down the inclusion, saying it was “merely” a factual reference to work that the Financial Stability Board was already doing.
“I did not bend to pressure from the Europeans,” Mr. Mnuchin said. “Some of the people felt it was relevant to put in.”
The Trump administration has long demonstrated antagonism to combating global warming, including pulling out of the Paris Agreement, the attempted censoring of basic scientific facts and advocating policies of developing more fossil fuels that are responsible for planet-warming emissions.
In recent months, Mr. Mnuchin has faced questions about the consequences of failing to safeguard the environment. He has generally demurred, noting that while he used to drive an electric car — a Tesla — he is not an expert on climate science.
However, he has cast doubt about climate policies that he believes could inhibit growth and under his watch the Treasury Department has rejected policies such as carbon pricing to fight climate change. In December, he said he did not believe that studying the economic risk of climate change fell under the purview of the Financial Stability Oversight Council, the interagency panel he oversees that is charged with monitoring risks to the financial system.
Over the past three years, the Trump administration has systematically disengaged the Treasury Department from all aspects of addressing climate change.
In 2017, it reversed an Obama-era guidance restricting the United States from supporting the financing of coal plants through the World Bank and other global investment institutions. The new policy calls for the United States to “promote universal access to affordable, reliable, sustainable and clean energy, help countries access and use fossil fuels more cleanly and efficiently.”
The administration also eliminated the agency’s Office of Environment and Energy, reassigning its staff elsewhere within the Treasury Department.
At the World Economic Forum in Davos, Switzerland, last month, Mr. Mnuchin garnered headlines when he mocked Greta Thunberg, the teenage climate change activist, for expressing views on fossil fuel investments without a degree in economics. Mr. Mnuchin’s wife, Louise Linton, took to Instagram to defend Ms. Thunberg and her environmental views before deleting the posts.
While in Davos, Mr. Mnuchin also told Christine Lagarde, the former managing director of the International Monetary Fund, that she was incorrect in pinpointing the risks of climate change as a critical issue for the global finance community.
“I just don’t want to kid ourselves,” he said. “I think there’s no way we can possibly model what these risks are over the next 30 years with a level of certainty, given what I think is changes in technology and everything along the way.”
At a time when investors are more alarmed and active than ever on climate change, the absence of the United States Treasury Department is notable. On Friday, economists at JPMorgan issued a report to clients warning that life “as we know it” could be threatened by climate change, and that it could affect economic growth, health and the stability of national security.
“Here you are, you’re the most important economy in the world still. All of your peers are working together to figure out how to use the instruments of fiscal monetary policy in order to manage a smooth energy transition, and you’re not in the room,” said Rachel Kyte, the dean of the Fletcher School at Tufts University and a former climate change envoy for the World Bank.
Matthew J. Kotchen, an economics professor at Yale University who led the Office of Environment and Energy during the Obama administration, said having a specialized office dealing with environmental issues meant climate change was being discussed alongside tax policy and exchange rates three times a week at the highest levels of the department.
“The fact that Treasury is not leading on this and getting involved says they’re not even responding to their immediate constituency,” Mr. Kotchen said, noting that the insurance and finance industries are increasingly thinking about how to manage the risks from climate change.
The Federal Reserve has also been cautious in its approach to climate-related issues, even as other central banks have made them a top priority — most notably the Bank of England, which under Mark Carney has been developing climate risk-related stress tests for banks.
Jerome H. Powell, the chairman of the Federal Reserve, summed up the central bank’s approach to climate change during his January news conference: “Society’s overall response to climate change needs to be decided by elected officials and not by the Fed.”
While Mr. Powell has emphasized that climate issues are largely outside the central bank’s remit, he and his colleagues are attentive to the risk that global warming and severe weather could pose to the financial system, which the Fed supervises.
“I think the public has every right to expect and will expect that we will assure that the financial system is resilient and robust against the risks from climate change,” he said in January.
As part of that effort, Mr. Powell suggested the Fed might join the Network for Greening the Financial System, a group of central banks that advocates sustainable finance and low-carbon economic growth. The Fed currently attends the meetings but has not formally signed on.
But just weeks after Mr. Powell said the Fed would probably join the network “at some point,” he seemed to soften that stance in testimony before the House Financial Services Committee: “We haven’t made a decision yet,” he said.
“Climate change is an important issue, a very important issue, but it’s essentially assigned to many other agencies in the federal government and state governments,” Mr. Powell said.
European countries, which are currently considering new carbon border taxes, are pressing ahead with their climate responses and trying to pull the reluctant United States along.
The International Monetary Fund warned last week that the global economy could face “major shocks” if climate change was not addressed.
“The climate crisis is upon us,” Kristalina Georgieva, the I.M.F.’s managing director, said Friday at an event in Riyadh on the eve of the G20.