The state of the economy affects people’s sensitivity to the future versus the present. Historically climate change has fallen into the same camp as a lot of other environmental issues, where people’s answers tend to wax and wane with the economy. — Professor Lyle Scruggs, political scientist at the University of Connecticut
The state of the economy affects people’s sensitivity to the future versus the present. Historically climate change has fallen into the same camp as a lot of other environmental issues, where people’s answers tend to wax and wane with the economy. — Professor Lyle Scruggs, political scientist at the University of Connecticut
How Should the Fed Deal With Climate Change?
The climate crisis is at high risk of becoming an economic crisis.

That is an increasingly widespread view among leading economic thinkers — that a range of economic and financial problems could result from a warming planet and humanity’s efforts to deal with it. But if you believe that to be true, what should the United States’ economist-in-chief do about it?

That question has taken new urgency as President Biden weighs whether to reappoint Jerome Powell to another term leading the Federal Reserve or choose someone else.


Climate activists and others on the left have argued that Mr. Powell should be replaced by someone with stronger credentials as a climate hawk. Demonstrators backing this cause were planning to protest at an annual Fed symposium in Jackson Hole, Wyo., starting Thursday, but the event was made online-only at the last minute because of a rise in coronavirus cases. Among other things, they want the Fed to use its regulatory powers to throttle the flow of bank lending to carbon-producing industries.

At the same time, some Republicans are assailing the Fed for mere research efforts involving climate. It is clear there would be a huge outcry on the right if a new Fed chair were to take an activist stance in trying to limit the availability of capital in energy-extraction businesses.

So far, Mr. Powell and other leaders at the central bank have taken a middle ground. They’ve committed to studying the ways global warming will affect the economy and the financial system, and they’re factoring those conclusions into their usual jobs of guiding the economy and regulating banks — but not trying to manage how loans and resources are allocated.

Arguably, one of the more important things the Fed can do to help fight climate change is to excel at its primary job: maintaining a stable, strong economy. Consider some surprising public opinion data.

Since 1989, Gallup has polled Americans about whether climate change worried then personally. The net share of people who have expressed concern — those who have said they worry about climate “a fair amount” or “great deal” versus those who have worried “only a little” or “not at all” — offers a sense of how seriously Americans take the threat.

The net share of people worried about climate change reached its peak not in recent years, when the damaging effects have become more visible. The peak was in April 2000, when the share of people worried about the climate was 45 percentage points higher than the share not worried. That was also one of the best months for the U.S. economy in decades, near the peak of the late 1990s boom, with unemployment a mere 3.8 percent.

Two of the times when climate worry in the survey hit a low were in 2010 and 2011, in the aftermath of the global financial crisis, when the net shares of those worried versus not worried were only four and three percentage points.

... “The state of the economy affects people’s sensitivity to the future versus the present,” Professor Scruggs said. “Historically climate change has fallen into the same camp as a lot of other environmental issues, where people’s answers tend to wax and wane with the economy.”
Read the full article: https://www.nytimes.com/2021/08/26/upshot/fed-climate-change-analysis.html