Fed to banks: What’s the climate damage?

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Jan 18, 2023 View in browser   By Arianna Skibell Federal Reserve Chair Jerome Powell at the Brookings Institute. | Nathan Howard/AP Photo The climate emergency is threatening to disrupt the country's financial system, and the Federal Reserve wants to know by how much. The Fed has set a July deadline for the nation's six largest banks to show how various climate change scenarios would impact their bottom lines, writes POLITICO's E&E News reporter Avery Ellfeldt. The climate tests will evaluate the physical risks from hurricanes, wildfires, floods, heat waves and droughts to banks' operations, investments and real estate portfolios. Also under the microscope is how such events could compromise customers' ability to repay loans. Banks will be asked, for example, to model how their real estate portfolios would weather hurricanes of various sizes in the Northeast. In 2012, Hurricane Sandy's 15-foot waves wiped out entire blocks, killing at least 147 people and causing about $80 billion in damages. Total damages from extreme weather events in 2022 reached $165 billion. The banks — JP Morgan Chase & Co., Bank of America Inc., Wells Fargo & Co., Goldman Sachs Group Inc., Morgan Stanley and Citigroup Inc. — will also be asked to model a transition away from fossil fuels to low-carbon electricity. Fed officials have repeatedly made clear the modeling exercises are purely educational and exploratory, with no direct capital consequences for banks. Fed Chair Jerome Powell vowed his agency "will not be a climate policymaker." That has not stopped conservative lawmakers from lampooning the Fed, accusing it of overstepping its authority. The watchdog group Public Citizen, meanwhile, says the tests are too narrow and will underestimate the risks by using models that rely too heavily on carbon offsets, for example. The six banks either declined to comment or did not respond to requests for comment for Avery's story. The Fed isn't the only one concerned about climate risks to the financial system. Regulators across the board are stepping up efforts to understand the hazards faced by banks, insurers and other companies. The Securities and Exchange Commission is finalizing a rule that would ask corporations to disclose their greenhouse gas pollution. And the Treasury Department is preparing to ask major insurers for details about their policies and claims so it can identify geographic areas that might lack coverage as disasters grow more damaging.   It's Wednesday — thank you for tuning in to POLITICO's Power Switch. I'm your host, Arianna Skibell. Power Switch is brought to you by the journalists behind E&E News and POLITICO Energy. Send your tips, comments, questions to askibell@eenews.net. Listen to today's POLITICO Energy podcast Today in POLITICO Energy's podcast: Alex Guillén breaks down why conservative pundits and lawmakers freaked out about a nonexistent ban on natural gas stoves. Stove wars A pan sits on flames burning on a natural gas-burning stove. | Scott Olson/Getty Images The furor last week over a hypothetical ban of natural gas stoves sparked rants of protest and partisan posturing. But one voice was not heard amid the clamor: the researcher whose study the gas industry seized on to tout the safety of the common kitchen appliance, writes Ariel Wittenberg. Bert Brunekreef, a professor of environmental epidemiology at the Netherlands' Utrecht University, says his research is being misused. Power Centers The Mirant Kendall Cogeneration Station in Massachusetts, which produces both steam and power. | Fletcher6/Wikipedia Reality bites New England power plants burned more oil for electricity on a single day during last month's deep freeze than they have in four years, writes Miranda Willson. That reality underscores the gap between Northeastern states' clean energy targets and the current resource mix in the region. Youth of the future They're bird enthusiasts. They're policy wonks with White House access. They're filmmakers and podcasters who are skilled at using Instagram and want to diversify the climate movement, writes Robin Bravender. Meet the next generation of climate and environmental visionaries who are making climate change a top issue among politicians. Fossil fueled Davos United Nations Secretary-General António Guterres chided the World Economic Forum's annual Davos summit for listing climate change as a major issue while counting top fossil fuel executives among its members, writes Karl Mathiesen. "Today, fossil fuel producers and their enablers are still racing to expand production, knowing full well that their business model is inconsistent with human survival," Guterres said. in other news Signal Peak Energy's Bull Mountain mine near Roundup, Mont. | Matthew Brown/AP Photo A faked kidnapping and cocaine: A Montana coal mine's descent into chaos. Connections: What real estate, oil wells, racism and yogurt containers reveal about the disparate damages caused by fossil fuels.   STEP INSIDE THE WEST WING: What's really happening in West Wing offices? Find out who's up, who's down, and who really has the president's ear in our West Wing Playbook newsletter, the insider's guide to the Biden White House and Cabinet. For buzzy nuggets and details that you won't find anywhere else, subscribe today.     Subscriber Zone A showcase of some of our best subscriber content. Two people walk through a heavy snowfall in Mammoth Lakes, Calif., last week. | Patrick Griley/Mammoth Lakes Tourism via AP The series of extreme storms barreling through California have left behind a snowpack that is on pace to rival the state's largest in recent history. The Biden administration's support for "clean" hydrogen is igniting a debate about how the fuel would be transported and whether moving it through pipelines would be safe. The owner of New Jersey's largest utility is backing out of a deal to own a quarter of the state's first offshore wind farm. That's it for today, folks! Thanks for reading.   LISTEN TO POLITICO'S ENERGY PODCAST: Check out our daily five-minute brief on the latest energy and environmental politics and policy news. Don't miss out on the must-know stories, candid insights, and analysis from POLITICO's energy team. Listen today.       Follow us on Twitter Arianna Skibell @ariannaskibell   Follow us

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