ROBINSON MEYER, AUG 1, 2019
A few years ago, Mark Carney, a former Goldman Sachs director who now leads the Bank of England, sounded a warning. Global warming, he said, could send the world economy spiraling into another 2008-like crisis. He called for central banks to act aggressively and immediately to reduce the risk of climate-related catastrophe, taking the warming planet as seriously as they would a cooling economy.
Adam Tooze, a history professor at Columbia University, knows quite a bit about central banks—and the Great Recession. Last year he published Crashed, an award-winning account of the 2008 collapse and its aftermath. In that book, he argues that the U.S. Federal Reserve was the pivotal American institution in stopping a second Great Depression. Its actions were “historically unprecedented, spectacular in scale,” he writes, and widely understood by experts to be the “decisive innovation of the crisis.”
Now, in an article this month in Foreign Policy, Tooze asserts that the Fed needs to battle climate change in the same way. “If the world is to cope with climate change, policymakers will need to pull every lever at their disposal,” he writes. “Faced with this threat, to indulge in the idea that central banks, as key agencies of the state, can limit themselves to worrying about financial stability … is its own form of denial.”
Jerome Powell, the Fed chairman, would not call himself a climate-change denier. Indeed, he is probably the most powerful person in the American government who affirms climate science. Yet he has taken a subdued approach to mitigating climate change. In April, in a letter to Senator Brian Schatz, Powell wrote that “addressing climate change is a responsibility that Congress has entrusted to other agencies.” The Federal Reserve, he added, is using its tools to “prepare financial institutions for severe weather.” In England, by contrast, Carney has convened 33 central banks to investigate how to “green the financial system.” According to Axios, every powerful central bank is working with him—except for Banco do Brasil and the Fed.