Will Hild writes at Real Clear Policy The Biden Administration Proves Itself Wrong on ‘Climate Risk’. The report shows how the feds’ own numbers prove their net zero policies pose a far greater financial risk than the climate itself. Excerpts in italics with my bolds and added images.
Environmental activists and left-leaning political bodies have long argued that climate risk is a form of financial risk, constantly pressuring blue states and the Biden Administration to make the issue a central part of their agendas. Recently, a group of those states has started suing oil and gas companies directly in their state courts. California, for example, claims that oil companies have colluded for decades to keep clean energy unavailable. Such lawsuits are ludicrous, and my organization, Consumers’ Research, filed an amicus brief at the Supreme Court supporting an effort to stop this litigation abuse that drives up consumer costs.
These harmful suits are driven in part by the idea that climate risks are inherently financial risks. However, evidence from the Biden Administration’s own study on climate risk shows that these risks are grossly exaggerated and immaterial. In an attempt to justify its radical and onerous climate policies, the Administration inadvertently exposed the fraud behind the environmental movement.
Soon after taking office, President Biden issued an executive order asking executive agencies to assess “the climate-related financial risk, including both physical and transition risks, to … the stability of the U.S. financial system.” Agency officials quickly responded to the order. Treasury Secretary Yellen announced that “climate change is an emerging and increasing threat to U.S. financial stability.” The FDIC declared that climate risk endangered the banking system. The SEC issued controversial climate risk disclosure rules, which impose massive regulatory burdens on Americans.
The problem with these new rules is that the Administration lacked
sufficient evidence to show that “climate-related financial risk” existed.
The SEC and Secretary Yellen relied on a Biden Administration report issued in 2021 by the Financial Stability Oversight Council. However, the report itself admitted that there were “gaps” in the evidence needed to support its speculative assertion that climate change would “likely” present shocks to the financial system.
John H. Cochrane, a respected Stanford professor, slammed the Biden Administration’s “climate-related financial risk” assertions and highlighted that the Administration has not shown any serious threat to the financial system. “Financial regulators may only act if they think financial stability is at risk,” but “there is absolutely nothing in even the most extreme scientific speculations” to support the type of risk that would allow financial regulators to intervene. [See my synopsis Financial Systems Have Little Risk from Climate]
In response to criticism, the Biden Administration came up with an idea to manufacture its own evidence. If the Federal Reserve created scenarios in which banks must simulate extreme “physical” and “transition” climate risks, these custom-designed scenarios could show a large impact to the financial system just like federal “stress tests” for banks.
To ensure that the “stresses” were sufficiently severe,
the Biden Administration manipulated the scenarios
to ensure as much stress as possible.
For example, for “physical risk,” major banks had to simulate the effect of a storm-of-two-centuries-sized hurricane smashing into the heavily populated Northeast United States with no insurance coverage available to pay for the damage. For “transition risk,” the government demanded a simulation in which “stringent climate policies are introduced immediately,” without any chance for banks to prepare for such policies, along with rapidly rising carbon prices.
Despite these attempts to make the climate risk as extreme as possible, the tests utterly failed to demonstrate any significant effect. The Administration’s study demonstrated that even under some of the most extreme climate scenarios imaginable, the probability of default on loans only increased by half a percentage point or less. In contrast, federal bank stress tests involving true financial stresses, such as a severe recession, have resulted in probabilities of default jumping by 20 to 40 times that amount or more, leading to hundreds of billions in losses.
The climate analyses also revealed the expected costs
of the Biden Administration’s quixotic net zero quest.
The Biden Administration employed scenarios from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS). Those climate scenarios envision the cost of carbon emissions steadily rising and reaching over $400 per ton by 2050. Given that the average American emits about 16 tons of carbon a year, the Biden Administration’s hand-picked climate scenarios would cost the average American around $125k between now and 2050 in government mandated carbon fees.
Thus, the Biden Administration’s own bank stress test proved that climate risk is not a material financial risk, and that the biggest financial risk at issue is that the Administration’s net-zero policies would result in massive financial losses for everyday Americans. The Biden Administration should stop using lies to support their burdensome policies, and blue states should drop their punitive lawsuits against oil and gas companies. Otherwise, the result of both efforts will be to inflict high costs on everyday Americans without any benefit.
via Science Matters
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August 6, 2024 at 09:43AM
Iowa Climate Science Education 