Our new reality, filled with extreme weather events across the globe on a regular basis, demands a change towards clean energy and away from outdated climate destroying energy sources of the past – fossil fuels. To do this, the US Federal Reserve has to reverse its direction by ceasing to subsidize fossil fuel companies and instead accelerating the clean energy transition. We can examine the history of government and bank actions towards energy to demonstrate how this is possible, and the Fed is one of the biggest economic instruments we have to create the change needed to solve the climate crisis
Throughout history there have been transitory epocal changes in energy resources. From the 16th to 19th century, people used to light their streets, factories and homes with lamps powered by whale oil. Yet by the mid-1700s, it was becoming nearly impossible to find whales near the Atlantic coast, and they were almost hunted to extinction. Slowly adapting over decades and generations, sources for lighting energy changed from whale oil to other sources. The US government and its agencies, as well as banks, guided energy transitions as they saw necessary, and US energy incentives can be traced as far back as 1789.
In the 1800’s, ships used steam energy to move people up and down the Mississippi river, and steam powered trains transported people and goods from the East to West Coasts. Steam, created mainly by wood until the forests ran out, and then coal, were the main sources of energy during the 19th century. Transport and energy were subsidized at the time through government and bank support, for example through backing for massive infrastructure projects.
Government and its agencies underpinned these old energy sources even though the first oil wells in this period were drilled in Pennsylvania in 1859. Although oil would later become the wonder fuel of the 20th century thanks to 100 years of public subsidies in the 1900s, in the late 1850s the instruments of government, including central banks like the Fed, were still subsidizing steam energy infrastructures. This is not because wood or coal were necessarily more efficient energy sources than oil, but because the well established energy lobby profiting off of steam ships and trains still had more power entrenched in the political and banking system than the new oil industry did.
During the heyday of coal, the US government and its agencies spent billions subsidizing this polluting energy source. As coal energy gave way to other fossil fuels like oil and gas, business and political leadership of the US began to use public money to subsidize these newer energies. For the last 100-plus years, governments and central banks like the Fed have used policy and public funds to massively subsidize fossil fuels, even though oil company scientists have known for over 50 years that fossil fuels contribute to likely catastrophic climate disruption.
Globally, inefficiency promoting subsidies of fossil fuels have reached $5.9 trillion a year, or $11 million every minute. Such subsidies over the last century have artificially propped up the fossil fuel industry, using taxpayer money to finance life-threatening climate disruption. Agencies operating in the public interest, especially the Fed, must turn this situation around, and back clean energy to solve the expanding climate crisis.
Practical energy transition solutions are being worked on now by Stop the Money Pipeline, a well respected coalition holding the financial backers of climate chaos accountable. They are urging concrete actions from President Biden, especially if he wants to be known as the climate President. These include the following moves that the Treasury and Federal Reserve can and should make:
- stop using emergency rescue and recovery programs to subsidize fossil fuels and deforestation. Instead, they should invest in a productive, just, clean recovery.
- Include climate and financial stability conditions in Treasury- or Fed-backed emergency or stimulus initiatives.
- Wind down the Federal Reserve’s existing fossil fuel exposure to zero in a responsible way consistent with science-based climate targets.
- In the immediate term, lend directly to cities, counties, states, territories, tribal governments, and other public borrowers at zero percent interest for green, just recovery programs.
Additionally, direct loans should be made to public borrowers to prevent further harm to Brown, Black, and Indigenous communities that have borne the brunt of COVID-19, the climate crisis, pollution from the fossil fuel industry, and financial hardship.
The Biden Administration, and the Federal Reserve, should study and design a public investment authority to lend directly to cities, counties, states, and other public borrowers for Green New Deal type initiatives and green infrastructure and housing projects that create good, local, union jobs with targeted hiring of frontline communities, those impacted the most by climate disruption. An example might include improving or building new public housing with sustainable materials with these funds and ensuring local residents benefit from the jobs created.
The vast possibilities for solutions to the climate crisis are evident right now. It is only lack of vision, expertise, and political will that fails us. Just as once long ago people and governments took actions to save the whales from becoming extinct by supporting transitions to new energies, so now is the time for the Federal Reserve and government to take action to save people and the planet from the climate crisis caused by fossil fuels.
That is why 350.org is mobilizing to bring activists to the annual Jackson Hole Economic Symposium, in Wyoming, on August 25-27. Join us in person, or in online actions, and demand that the Fed turn from a climate destroying institution which subsidizes outdated fossil fuels, to one that functions in the public benefit, and creates climate justice to support the earth and future generations.