By Elyse Schupak, political lawyer for the public citizen's climate program
The Federal Reserve Bank of Kansas City will host its annual Jackson Hole Economic Policy Symposium this week – the highest annual event of the Federal Reserve. Central bankers, political decision -makers, academics and economists will gather to exchange research and political ideas for this year's symposium topic: Work markets in the transition: demography, productivity and macroeconomic politics.
Despite the significant and well -trapped adverse effects of climate change on the economy and the financial system, including the labor markets, climate change in the symposium agenda lacks. Instead of dealing with the investigation, which show that climate change reduce labor productivity, push back economic growth and redesign the geographical distribution of the US working population, the Federal Reserve again ignores the effects of climate change and the necessary political response.
Since the beginning of the year, the Federal Reserve, under Chairman Powell, has withdrawn numerous climate -based initiatives and supervisory measures. Cover by the Trump administration after pressure. In addition to the effects of monetary policy, the chairman Powell neglected the topic of climate change as a whole. This negligence affects both the effectiveness and independence of the Federal Reserve, and exacerbates the economic hardship that the climate crisis arises.
Climate effects on the labor markets should be at the front and in the center of Jackson Hole.
If the Federal Reserve leaves climate change in the agenda in Jackson Hole, it neglects one of the most important drivers of developments on the US work markets in the coming decades and not in the way in the way the price stability and maximum employment.
Climate change, in particular the extreme warmth, has already had a significant impact on the US labor markets -the pressure on labor offers and productivity downwards, while the negative effects on health and injuries to work increases. At the moment, Extreme heat costs the US economy around 100 billion US dollars a year in terms of labor productivity The US product loss losses are expected to reach $ 200 billion per year by 2030 and 2050 per year. Research published in Lancet estimates that Global effective work (combined job offer and productivity) will remove 6.7 percent below 1.5 ° C warming, 10.3 percent below 2.0 ° C heating and 18.3 percent below a heat scenario of 3.0 ° C. Without an urgent change in the guidelines, we are on the right track for a scenario of 3.0 ° C.
The effects of extreme warmth on labor productivity are not uniform in areas and regions. Building, agriculture, mining and other economic sectors in which workers are mainly carried out outdoors are exposed to productivity due to extreme warmth. These front workers are expected to lose approximately 2.6 billion US dollars in annual profit of 2.6 billion US dollars due to the extreme heat until 2065. In the United States, the earnings have a disproportionate influence due to extreme heat that workers earn under the national median as well as black and Hispanic workers. Memory of inequality, also across racist lines. It is also important to note the tribute of human life and suffering that the workers in the USA cause extreme heat, especially in view of the Patchwork of the worker of the worker Only in a few states and the long delay in a covenant Osha heating injury and illness standard.
A decline in labor productivity and resource shortage, inconsistency, shift, conflict, physical damage, mortality and other effects of climate change are expected to lead to a significant global GDP loss. The British Institute and the Faculty of Agents and Exeter University warns that the global economy could be faced between 2070 and 2090 GDP loss of at least 50 percent if the containment of emissions is not done. Economists Adrien Bilal and Diego R. Känzigig Appreciate that 1 ° C heating the global GDP by 12 percent and 3 ° C of warming over the pre-industrial values reduces around 2100, a GDP reduction of 46 percent implies. In order to put these numbers into the right perspective, the economic damage associated with 3 ° C of the warming corresponds to those who are experienced during the global economic crisis would be permanent.
Climate change carries risks to the economy and financial stability beyond the labor markets.
The effects of climate change on the economy and the financial system are not limited to labor markets. Climate change will have a destabilizing effects on insurance and housing farms that have state and local governments and contribute to a variety of negative economic results, including inflation above the finish.
The most visible risk of climate change for the economy and the financial system today is the destabilizing effects on real estate insurance markets. The costs increasingly increasingly and severe climate disaster increase and reduce the availability of real estate insurance across the country – financial burden on homeowners and tenants. The Federal Reserve Bank of Dallas found that Increasing costs for real estate insurance companies drive the debt of households as well as mortgage and credit cards.. The lack of availability of insurance will reduce the credit on the loans and erode real estate values, which creates financial risks for lenders, and creates sponsored companies and investors sponsored by the government. As Chairman Powell said at a hearing from the Senate banking committee In February “If you proceed for 10 or 15 years, there will be regions of the country where you do not receive a mortgage, there will be no ATMs, banks have no branches and things like that.”
The loss of insurance – and in the context of loss of credit and other financial services – as well as in the climate taster itself carry out families and companies from the municipalities. First Street projects that are over 55 million Americans will move to the USA in areas by 2055. This climate and lesser municipal tax revenue will displace the real estate values and the lower municipalities. At the same time, the investments of disaster clearance and reduction increase the costs for state and local governments. A Analysis by Bloomberg Intelligence found that the USA spent almost $ 1 trillion for disaster help and other climate medical needs in the 12 months until May 1, 2025, the total of three percent of GDP. Although the costs have increased, the proportion of disaster cleaning and prevention funds assumed by the Federal Government fell to two percent, which instead burden households and local governments. For communities in need of protection, the effects of climate change can create one Financial doom loop– List orders, reduce tax revenue and increase the credit costs to close this gap.
Climate change also has a negative impact on the macroeconomic variables, which are of central importance for the mandate of the Federal Reserve. Research of Potsdam University and the European Central Bank It is clear that climate change will lead to continuing price increases in several sectors in several sectors. Climate disaster and Extreme heat damage roads, ports and other essential infrastructure, lead to considerable labor market disorders and otherwise Disability of transport, logistics and the delivery of goods and services. These supply shocks can create inflation peaks. The existing monetary policy instruments of the Federal Reserve are not suitable to remedy. In conjunction with the effects of climate change on productivity and growth, the climate-related inflation pressure can advance the stagflation and low growth-a worst case for the Federal Reserve, which restricts the effectiveness of its monetary policy and causes significant economic pain for Americans.
This list of transmission channels is not exhaustive. Without quick and significant global emission reduction, climate change will affect practically all aspects of the economy and financial system. So far, the Federal Reserve has not adequately included these risks into monetary policy or banking supervision. On the contrary, The chairman Powell has described the Federal Reserve's approach to climate change as “the minimal”.
The Federal Reserve should not repay its measures against climate medical risks and developments.
Since the beginning of the year, the Federal Reserve has given up many of its previous efforts to combat the risks of climate change for the economy and the financial system. Three days before President Trump's inauguration, the The Federal Reserve withdrew from the network of central banks and superiors for the Green of the Financial System (NGFS).The organization, which comprises more than 90 countries, to facilitate the exchange of information and the best practices for the mitigating climate medical financial risks. It Four climate -long committees dissolved In order to support the understanding of the climate risk through the financial system and the banks of the Federal Reserve, they could not continue to evaluate the commitment of climate risks with scenario analysis and no further led unsuccessfully effort Dissolving of the Basel Committee for the Climate -sk Force of Bank Surveillance. The New York Times has reported that too Regional banks in the Federal Reserve system have withdrawn to the climate of economic research Since President Trump started his office.
These actions move the Federal Reserve in the wrong direction, but it would be inadequate to stop this trend and even roll back the clock. In order to adequately tackle the economic and financial effects of climate change, the climate risk must be fully integrated into the Superal Reserve's supervisory role. It requires an extended research agenda to the numerous transmission channels, through which the effects of climate change in the economy and the financial system will come about. And the Federal Reserve must integrate climate change into their monetary policy in order to create the way climate change creates disadvantageous macroeconomic results and the ability of the Federal Reserve to address these results with existing monetary policy instruments. If the Federal Reserve neglects climate change in Jackson Hole, it doesn't even look at this urgent work, let alone this urgent work.
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