‘Existential threat’: Yellen wants a climate hub at Treasury

Source: By Avery Ellfeldt, E&E News reporter • Posted: Wednesday, January 20, 2021

President-elect Joe Biden’s pick to lead the Treasury Department said she plans to hire a high-level official to direct a new climate initiative within the agency.

The plan to create a climate “hub” — which Janet Yellen unveiled yesterday during a confirmation hearing before the Senate Finance Committee — is a huge deal, said climate finance experts and advocates.

They said the effort would elevate climate to a level unmatched in the 231-year history of the Treasury Department. It also would put the agency in position to play a leading role on climate issues, alongside traditional players such as EPA and the Energy Department.

Climate change is “one of the most critical issues facing our country and the world,” Yellen said. During the hearing, she repeatedly referred to global warming as an “existential threat.”

“Both the impact of climate change itself and policies to address it could have major impacts — creating stranded assets, generating large changes in asset prices, credit risks and so forth that could affect the financial system,” she added. “These are very real risks.”

Lawmakers convened yesterday to consider Yellen’s nomination to head Treasury; the Democratic-controlled Senate is expected to confirm her appointment. Yellen served as chair of the Federal Reserve between 2014 and 2018.

The Biden transition team did not comment on Yellen’s remarks or where the climate hub and senior official would be situated within the agency.

But Yale University economist Matthew Kotchen — who previously worked on environmental issues at Treasury — said that even though it remains to be seen how Yellen’s plan would take shape, appointing a climate-focused senior official “at any level” would be a significant departure from the agency’s past.

Previously, the highest-level Treasury official directly responsible for considering climate was the deputy assistant secretary for environment and energy. Kotchen is among those who filled that role before it was eliminated by the Trump administration.

Kotchen said that when the position existed, it dealt with domestic and international issues related to the environment. But he added that a higher-level official who “transcends” both areas and has access to the Treasury secretary would “really elevate the importance of the issues … and is necessary to accomplish what Yellen has said are [her] priorities.”

Yellen said the planned climate hub would focus on “financial system-related risks and tax policy incentives toward climate change.”

When pressed by lawmakers for more specifics, she said the agency in general would assess the best ways to “direct investment” toward clean technology, renewable energy and electric vehicles, as well as “enable private firms to have the information they need to support sustainable investing.”

Sierra Club finance campaigner Ben Cushing is among those who welcomed Yellen’s comments. He said they were a “really powerful signal.”

But Cushing also said it’s unclear how aggressive the agency will be on climate issues in the years ahead, especially when it comes to addressing the threats that climate poses to the economy and the ways that the financial system itself exacerbates global warming.

The rest of Yellen’s confirmation process is expected to go smoothly. The Senate previously confirmed her by a wide margin: 56-26 when President Obama tapped her to lead the central bank in 2014.

Also notable is that all former living Treasury secretaries recently signed a letter calling on the Senate to quickly confirm Yellen. They said it is “hard to imagine a better prepared nominee to meet this great moment of need than Dr. Yellen.” Outgoing Treasury Secretary Steven Mnuchin did not sign the letter.

Sen. Ron Wyden, the top Democrat on the Senate Finance Committee, said the full Senate could vote on Yellen’s nomination as soon as tomorrow.