A former deputy secretary of the Treasury thinks fiscal policy can be rewritten to combat the climate crisis – here’s how

FILE - In this Oct. 10, 2018, file photo, Amazon Prime boxes are loaded on a cart for delivery in New York. Amazon said Tuesday, June 23, 2020, that its carbon footprint rose 15% last year, even as it launched initiatives to reduce its harm on the environment. (AP Photo/Mark Lennihan, File)
Amazon said in June 202 that its carbon footprint rose 15% over the previous year, even as it launched initiatives to reduce its harm on the environment.

When we think of combating climate change, our minds tend to turn to green energy like solar or wind power. But the world of finance has a tremendous impact on the environment, and we’ll never be able to steer away from impending climate calamities until big business takes action.

Remarkably, Sarah Bloom Raskin says in the latest episode of “Pitchfork Economics,” financial firms have largely never even considered climate change in their financial plans and projections: “It just hasn’t been incorporated as a particular factor that is producing economic costs,” she said.

Given that experts predict climate change will cost the United States nearly two trillion dollars in GDP per year by the end of this century, this statement might sound absurd. But Raskin knows what she’s talking about: As the former deputy secretary of the US Department of the Treasury and a former governor of the Federal Reserve Board, she has spent her career closely observing the activities of banks, Wall Street firms, and other entities that shove billions of dollars around in any given workweek.

The good news is, big business is finally starting to acknowledge that climate change is happening.

As Germany faces biblical flooding and the United States is wracked from coast to coast with heat waves, droughts, and wildfires, the threat is now too real to ignore.

And now Raskin is a member of the Biden Administration’s Regenerative Crisis Response Committee, which is working to recommend a new suite of monetary and financial regulations to guide the United States to carbon neutrality by 2050. Raskin is tasked with helping to envision regulations that can be employed by the Federal Reserve, the SEC, the FDIC, and Fannie Mae and Freddie Mac, among other financial regulatory institutions, to address climate change.

Raskin is right now considering all of her options for how to create environmentally sound fiscal policy.

“Maybe what we want is to have a better understanding of what kind of carbon footprint a particular publicly traded company has – and what risk that carbon footprint might cause for them,” she said. The solution for that might be to call on the Securities Exchange Commission to require the company to release an environmental disclosure to shareholders, so “investors will then have a better ability to make decisions regarding where their capital goes and where they choose to invest.”

Raskin said “there’s quite a bit of momentum for” requiring environmental impact disclosures. And it’s not an unusual request to make: Publicly traded companies already have to provide hundreds of pages annually documenting potential risks that they face. A new requirement to reveal environmental risks falls well within these pre-existing guidelines.

The committee is also examining the concept of an environmental stress test for financial institutions.

“The stress test was a regulatory innovation used after the [2008] financial crisis to determine whether a regulated institution, particularly a bank, could withstand the shock of a particular magnitude, and what would happen to that bank if that shock was long-lasting,” Raskin explained.

If banks are unable to prove that they’d survive another Great Recession, for instance, they are barred from paying dividends out to shareholders until they can demonstrate that their foundations are more solid.

Raskin says European institutions are working to establish an adverse climate stress test for banks and other such institutions. If London suffered the extraordinary floods or long-term droughts that are plaguing other parts of the world, for example, would their banks be able to continue to serve their clients, or would a bailout be necessary?

Raskin and the rest of the committee is hard at work compiling a list of financial regulations and procedures for President Biden to take under consideration. And the best part is, because the policy would be delivered through existing financial regulatory structures, these financial regulations are unlikely to get held up in a partisan Congressional gridlock.

“I think it can all be done without new legislation,” Raskin said.

Policies like stress tests and disclosures already exist and are well-known to financial workers. And while “they haven’t been used to deal with this particular existential risk that confronts us,” Raskin explained, “they can be and they need to be.”

Now that the climate crisis has been proven, beyond a reasonable doubt, to be real, it’s time for Big Finance, with the help of smart regulators like Raskin to adapt and respond to this new reality.

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Bitcoin uses more energy than American Airlines and each $1 billion in inflows is equal to owning 1.2 million cars, Bank of America says

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The bitcoin price has soared in 2021

  • Bank of America research shows bitcoin’s immense environmental footprint.
  • It is one one of the biggest carbon-emitting sectors, on a par with huge firms and even the US federal government.
  • Other less climate-related concerns include use of bitcoin in cybercrime such as money laundering.
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Bitcoin’s energy consumption is comparable to that of major corporations like American Airlines, which flies over 200 million passengers a year, and even the entire US federal government, which employs 2 million people, according to research on Wby Bank of America.

Each $1 billion in inflows into bitcoin uses the same amount of energy as 1.2 million cars, estimates the report. “Looked at differently, a single Bitcoin purchase at a price of ~$50,000 has a carbon footprint of 270 tons, the equivalent of 60 ICE cars,” Bank of America said in a note published on Wednesday.

Bitcoin’s carbon footprint is directly linked to the price. As the price goes up, so do the resulting emissions, as more crypto miners become involved. In turn, the bitcoin network has to become more complex to cope with the demand and prevent hacking. This then requires more hash power, which drives up energy consumption, the bank said.

“Given the relatively linear relationship between bitcoin prices and bitcoin energy use, it is perhaps no surprise that bitcoin’s estimated energy consumption has grown over 200% in the past two years,” Bank of America said.

Bitcoin uses as much power as a small, developed country like Greece, which has a population of over 10 million people, at a time where most companies and countries are focused on lowering their environmental impact, the bank said.

“Another key concern is that most hash power comes from China, where the government actively encourages bitcoin mining and where electricity costs are very low.

“Nearly 60% of Chinese electrical generation is from coal fired power plants, with less than 20% coming from natural gas or renewables,” Bank of America said. This means most bitcoin mining is fueled by unsustainable fossil fuels.”

Other crypto currencies including Ethereum’s ether token are only slightly less impactful on the environment, the report said. However, the digital currencies proposed by central banks would not have the same negative impact, it added.

Beside the environmental impact, the report also discusses social and governance risks associated with investing in bitcoin, which Bank of America says should not be underestimated.

Democratisation and decentralisation of money have value, “But negatives outweigh. Anonymity aids nefarious activities,” it said.

US Treasury Secretary Janet Yellen has said on numerous occasions one of her concerns around cryptocurrencies is their use in criminal online activity, including money laundering.

The report also provides a wider assessment of Bitcoin, coming to the conclusion that the main reason for investing into Bitcoin is its price appreciation – rather than inflation protection or diversification.

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EY says it will be ‘carbon negative’ by the end of the year – here’s its 7-point plan for getting there

Ey
EY office in London.

  • Ernst & Young aims to be carbon negative this year, cut emissions by 40%, and be net zero in 2025.
  • Steve Varley, EY chief sustainability officer, told Insider he was inspired by Microsoft’s strategy.
  • The company plans on removing more carbon dioxide from the atmosphere than it emits through seven key goals.
  • Visit Business Insider’s homepage for more stories.

Accounting giant Ernst & Young announced Monday plans to become carbon negative in 2021, “net zero” in 2025 and cut its total emissions by 40% with seven key commitments.

The London-headquartered firm achieved its goal of becoming carbon neutral in 2020, but after reviewing the science and talking to the company’s climate change experts, it became clear that being carbon neutral wasn’t enough.

Steve Varley, EY’s chief sustainability officer who was appointed in July 2020, told Insider the company emitted 1.1 million tonnes of carbon dioxide in 2019. The travel restrictions brought on by the coronavirus crisis has meant these emissions have fallen to 769,ooo tonnes, but Varley said EY’s commitment is “regardless” of the impact of the pandemic. 

“Our commitment is to remove more carbon dioxide from the atmosphere than we emit every year, forever,” he said.

Varley said he was inspired by Microsoft becoming carbon negative in January 2020. “That’s been on our minds and part of the inspiration for EY also declaring that we become carbon negative.”

“Wouldn’t it be fantastic if society recognized that business is a positive driver rather than a negative contributor” to the environment, he said.

Here are the seven ways in which EY plan to become carbon negative this year.

Cut down on business travel emissions

EY’s first commitment is to reduce travel emissions produced by the business by 35% by 2025. That includes employees or clients travelling by plane, train or bus.

Of the 1.1 million tonnes of carbon emitted by EY in the financial year of 2019, three quarters (76%) of those emissions came from air travel. Since the pandemic struck in March, this amount has reduced as less people are travelling.

While the pandemic won’t last forever, Varley said EY expects employees to continue to use technology such as Zoom to communicate which will ultimately reduce the need to travel. The company is also investing in collaboration technologies to help achieve this goal, he said. Many EY clients have made similar commitments to reduce their carbon emissions, Varley said, who believes there will be teamwork between both parties to make sure they cut down together. 

Reduce overall office electricity usage

Another commitment EY has made is lowering the electricity usage in its offices and procuring 100% renewable energy for the remaining needs of the company. This will help EY become a member of the RE100, a group of organizations worldwide committed to renewable electricity, by 2025, the company said.

Given that coronavirus has forced many employees to work from home, this may seem quite easy to reduce. But Varley said the commitment includes calculating how much carbon EY employees, like himself, are emitting from home working.

“The future we see is a mixed economy of working,” said Varley, who said staff and clients have been working in a range of places including home, offices, and client’s sites.

Structure electricity supply contracts

EY also want to sign more contracts with electricity suppliers so any electricity they don’t use can go straight back into the national grid.

Varley said it has a multi year deal with Lightsource BP, a subsidiary of BP, which will provide the accounting firm with renewable electrivity. The deal involves EY buying more electricity than it needs from Lightsource BP, and the electricity it doesn’t use is put back into the national grid for others to use as renewable electricity, Varley said.

Provide employees with tools that calculate how much carbon they’re emitting

In order for employees to take matters into their own hands, EY are providing them with a modelling tool which will work out how much carbon they’re emitting whilst working.

The tool will work similar to another tool that EY uses to calculate the financial budget on a project, according to Varley. It will show you how you can achieve the same result but with a lower footprint, he said.

Plant trees and use technologies to remove carbon from the atmosphere

One of the projects EY has invested in as part of its strategy to cut down on carbon is helping to protect five million trees in the Amazonia rainforest through an organization called South Pole.

EY plans to use more nature-based solutions and carbon-reducing technologies to offset more carbon than it emits every year.

Read more: ‘Big 4’ salaries, revealed: How much Deloitte, KPMG, EY, and PwC accountants and consultants make, from entry level to executive roles

Invest in services to help EY clients decarbonize their company

Varley said EY is accelerating its investment in the company’s Climate Change and Sustainability Service (CCASS) practice, which helps clients and companies identify and understand how to be more sustainable.

The accounting firm is also planning to invest in its tax practice, Varley said, as it’s increasingly likely that many countries will introduce or strengthen carbon taxes.

EY is also part of the “Terra Carta” – a charter unveiled by His Royal Highness The Prince of Wales on January 10, which gives businesses a roadmap to a more sustainable future.

Ensure EY suppliers set science-based targets

EY will require 75% of its suppliers to set science-based targets, which help businesses reduce emissions in line with the Paris Agreement goals, by no later than 2025. Having a science-based target means that companies will reduce their emissions at a quicker pace to make sure they’re not warming the planet up, according to Varley. 

“I wouldn’t be surprised that in subsequent years we don’t increase that 75% to 100%,” Varley said. “We realise that we have a role to play systemically because we’re a big global organisation of making sure our supplier also live our values and don’t contribute to the warming of the planet.”

Not enough [companies] have gone carbon negative in their announcement, according to Varley. “There’s an opportunity to get a science-based target, to become net zero and to remove more carbon from the atmosphere than they emit.”

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