Financial Regulators’ Climate Fetish

South Beach

The attention of financial regulators in the US and globally seems focused on issues far afield from the core mission at a time when turmoil is roiling global markets. Inflation is at 40-year highs and the public is overwhelmingly concerned with pocketbook issues. Yet financial regulators seem fixated on carbon emissions and potential global temperatures decades hence. They should refocus on their core mission and leave environmental concerns to the political branches.

In one sense, the dodge is understandable. To discuss the current inflation crisis is to expose the embarrassing faux pas of those tasked with financial stability. Both Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell have meekly backtracked on prior statements about inflation’s cause and their expertise in containing it.

Conversely, discussing carbon-emission risks to the financial system that may materialize in the distant future yields glowing press and applause at international conferences. 

Treasury Secretary Janet Yellen focuses on climate not finance

Secretary Yellen has taken the lead in her role as chair of the Financial Stability Oversight Council (FSOC), a product of the Dodd-Frank law. The council has extraordinary power to bypass Congress and act unilaterally to address “emerging threats” to US financial stability. In her first FSOC meeting Yellen called climate change an “existential threat.” And she urged a “rapid transition to a net-zero carbon economy.”

Federal Reserve chair Jerome Powell echoed Ms. Yellen’s sentiment, “One of our goals is to make climate change a part of our regular financial stability framework.”

Global Financial Regulators Fetishize Climate

Global financial regulators agree. In a July 11 speech Pablo Hernández de Cos, Chair of the Basel Committee on Banking Supervision for the Bank for International Settlements (BIS), the global central banking authority, spoke in strikingly similar terms. Mr. Hernández de Cos described “a growing consensus that climate change is the most existential [challenge]” the world now faces. He too pushed for “Net Zero” carbon emissions citing the Glasgow Financial Alliance for Net Zero and the Net-Zero Banking Alliance.

The consequences of inaction would be dire warned Mr. Hernández de Cos. This includes a 1.5-degree Celsius rise in temperatures this century. He concluded his remarks citing the critical need for global cooperation and the necessity to hear from “a broad set of external stakeholders.”

The Public Cares about Finance not Climate

Those stakeholders apparently do not include the public, which must bear the brunt of the global climate push. The most obvious current stakeholders are the protesting Dutch farmers whose livelihoods are jeopardized from climate-related regulations.

In a recent poll, Americans placed economics at the fore of their concerns. The AP/University of Chicago poll found the top five concerns: 1. Inflation; 2. Gas prices/energy costs; 3. Gun issues; 4. Immigration; and 5. The Economy. Environment/climate change placed seventh at 17 percent—a four percent drop since December.

Financial Regulators’ Climate Fetish distracts from Crypto

Regulators’ climate fetish also threatens cryptocurrencies, which authorities already view suspiciously because of their decentralized, private nature. Earlier this month, researchers at the European Central Bank opined the European Union will likely ban Bitcoin. Even though assumptions about this topic usually come littered with fallacies. Financial regulators should focus on their core mission of financial stability and leave climate concerns to the political branches. As Agustín Carstens, head of the BIS stated last year, financial regulators core mission is to “do no harm” to their country’s monetary system or the citizens within it. Yet financial regulators’ climate fetish is doing just that at a time when their attention is urgently needed elsewhere.

By Jossey PLLC

This post originally appeared in the blog of the Competitive Enterprise Institute,

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