Most people already know that climate change is costly, but now US Treasury Secretary Janet Yellen warns that the climate chaos experienced by the United States will cost significantly more and have significant effects on the financial system.
Storms, wildfires, and floods. Like the rest of the world, the United States has experienced natural disasters that cost billions of dollars and are happening more frequently. On Tuesday, Janet Yellen warned that these disasters could soon cause asset devaluations, which will have significant negative effects on the American financial system, according to Reuters.
Climate disasters are becoming more expensive, according to Janet Yellen.
And there is no doubt that the price tag for climate chaos is going up. In fact, the number of billion-dollar climate disasters has quintupled in the last five years compared to the 1980s, even when inflation is taken into account, according to the Treasury Secretary.
She believes that the longer we wait to transition to a society free of fossil fuel emissions, the longer the financial system will be burdened by increasing costs.
“As climate change intensifies, natural disasters and warming temperatures can lead to declines in asset values that could cascade through the financial system. And a delayed and disorderly transition to a net-zero economy can lead to shocks to the financial system as well,” she said in remarks prepared for delivery at the advisory board’s first meeting.
– Reuters
Therefore, the new committee on climate-related financial risks was established last fall, tasked with trying to reduce the risks that climate change poses to the US economy. Next month, new regulations will also force companies to be more transparent about their environmental commitments.
As usual, the proposals are met with opposition from Republican lawmakers who do not want to see new regulations imposed outside of the judicial process.
It will be harder to insure
However, insurance companies have already introduced new regulations, where they no longer want to insure, for example, homeowners in high-risk areas. This is just the beginning, according to Yellen, of a situation that could soon spill over into other areas, such as major companies within the financial system.