A Report by a major United States (US) financial regulator, the Commodities and Futures Trading Commission (CFTC) commissioned by the US President, Donald Trump has warned that climate change poses a ‘major risk’ to the financial system.
“Climate change poses a major risk to the stability of the US financial system and to its ability to sustain the American economy,” the report said.
“Climate change is already impacting or is anticipated to impact nearly every facet of the economy, including infrastructure, agriculture, residential and commercial property, as well as human health and labour productivity.”
The Sub-committee appointed by Trump was charged with the responsibility to give a report on the effects of global warming on the US financial market.
The report titled “Managing Climate Risk in the U.S. Financial System” noted that if significant action was not taken to check rising global average temperatures, climate change impacts could impair the productive capacity of the economy and undermine its ability to generate employment, income and opportunity.
According to the sub-committee, the risk posed by global warming includes disorderly price adjustments in various asset classes.
“This reality poses complex risks for the U.S. financial system. Risks include disorderly price adjustments in various asset classes, with possible spill-overs into different parts of the financial system, as well as potential disruption of the proper functioning of financial markets,” the report read.
The report further stated that the transition to a net-zero emission in the economy also pose risks to the financial market if market participants failed to adapt to rapid changes in policy technology.
“The process of combating climate change itself—which demands a large-scale transition to a net-zero emissions economy—will pose risks to the financial system if markets and market participants prove unable to adapt to rapid changes in policy, technology, and consumer preferences.
“Financial system stress, in turn, may further exacerbate disruptions in economic activity, for example, by limiting the availability of credit or reducing access to certain financial products, such as hedging instruments and insurance,” the committee reported.
Part of the recommendations in the report includes the establishment of a price on carbon by the United States Government.
The carbon price, according to the report which says is the single most important step to manage climate risk, must be fair economy-wide, and effective in reducing emissions consistent with the Paris Agreement.
Another recommendation by the report is that all ‘relevant federal financial regulatory agencies should incorporate climate-related risks into their mandates and develop a strategy for integrating these risks in their work, including into their existing monitoring and oversight functions’.
Trump had in 2018 called the bluff of a report that the US economy could lose hundreds of billions annualy and battle health damage to Americans.
The President was quoted to have said ‘I don’t believe it’ to journalists outside the White House the report aided by US departments and agencies over climate change.
Lukman Abolade is an Investigative reporter with The ICIR. Reach out to him via [email protected], on twitter @AboladeLAA and FB @Correction94