As the new U.S. Treasury secretary, Janet Yellen will have to navigate the US economy not only through the devastation of the pandemic, but also towards a more sustainable future. Rachel Kyte, Dean of the Fletcher School at Tufts University and former World Bank vice president, has shared key areas where Yellen can implement environmentally-conscious financial policy. Here’s how the treasury can make lasting progress on climate change.
The first area of action identified by Kyte is carbon pricing. Although carbon taxes alone will not yield the green financial transformation we need, they are a great starting point. This would look like first seeking bipartisan support for an effective carbon tax program as well as potentially implementing a “carbon council,” independent government bodies to oversee markets and ensure follow through on legitimate climate action.
The second avenue of action is shedding light on climate related risks for the financial sector. As it stands, major companies have little personal incentives to take climate action. Fortunately, the US already has the Federal Stability Oversight Council. Expanding this council to identify how climate change will destabilize financial systems will raise climate awareness on Wall Street.
Lastly, Yellen has a unique global perspective and influence on financial matters. Programs like USAID, the Millennium Challenge Corp., and the U.S. Trade and Development Agency help support development in other countries. These provide an avenue for the US to not only offer development opportunities in low or middle income countries, but also to ensure these projects encourage green economy principles like circularity, carbon taxation, and emissions standards.
As we’ve discussed before, the economic recession caused by the pandemic offers the opportunity to simulate economic growth with sustainable incentives. Renewable energy, food system resiliency, and green technology are all avenues to promote significant economic recovery and environmental resilience.