Yellen: Treasury’s approach to climate will ‘change dramatically’ from Trump era

Treasury Secretary Janet Yellen told key U.S. allies Thursday that the department’s approach to climate change will “change dramatically” under her watch.

During a virtual meeting of Group of Seven (G7) finance ministers and central bankers, Yellen said the U.S. would take a lead role in the global fight after years of environmental rollbacks under former President Trump.

“She expressed strong support for G7 efforts to tackle climate change, highlighting that her colleagues should expect the Treasury Department’s engagement on this issue to change dramatically relative to the last four years,” the department said in a statement.

“The Secretary noted ‘we understand the crucial role that the United States must play in the global climate effort.’ ”

Yellen’s pledge to global allies marks a notable turning point in the U.S. government’s approach to fighting climate change, a major priority for the Biden administration. Under Trump, the U.S. pulled out of the Paris climate accords, which Biden has since rejoined, and weakened emissions and energy efficiency standards meant to slow the pace of global warming.

Yellen has also promised to make climate change a primary focus of her tenure as Treasury secretary. She called rising global temperatures an “existential threat” to both the planet and the economy during her confirmation hearing, and said the federal government needs to develop “regulations necessary to assess and mitigate this risk.”

As Treasury secretary, Yellen is responsible for detecting risks to the financial system and can take action to mitigate them through the Financial Stability Oversight Council, an interagency panel of regulators she chairs. She is also expected to bring in Sarah Bloom Raskin, who served as deputy Treasury secretary during the Obama administration, to serve as the department’s climate czar, The Wall Street Journal reported Friday.

Climate hawks and advocates for tougher financial rules have warned that the financial system can be upended by climate change through multiple means. The financial troubles facing the oil and gas industry could send tremors through the broader economy, banks could faces losses from mortgages on coastal properties due to rising sea levels and countries that depend on fossil fuel exports could face serious challenges amid the rise of renewable energy.

Yellen would also likely be involved in crafting any carbon pricing plans proposed by Biden. She told the Senate Banking Committee that the president supports “an enforcement mechanism that requires polluters to bear the full cost of the carbon pollution they are emitting,” but did not specify if that would be imposed through a carbon or emissions tax.

While Democrats are widely supportive of Yellen’s climate stance, Republicans have criticized efforts to fight climate change through the financial system as both the Treasury and the Federal Reserve step up their efforts. Bank advocacy groups have also opposed efforts to subject lenders to climate-related stress tests and other regulatory requirements related to climate risks.

Federal Reserve Chairman Jerome Powell, a Republican, in December called climate change “an emerging risk” to the financial sector, one day after the Fed joined a global network of central banks dedicated to fighting global warming.

The Fed system is also creating a committee to monitor climate-related risks to the U.S. banking system, which it oversees alongside the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation.