Climate Change

Climate change is an existential threat to the planet and an emerging and increasing threat to the global financial system and economy, including our own.  At the same time, the transition to a net-zero economy represents an historic economic opportunity for companies, industries, and countries.

The U.S. Department of the Treasury is committed to leveraging the full extent of its capabilities in support of the Biden Administration’s government-wide approach to addressing climate change.  Treasury is working to enable and expedite the whole-of-economy net-zero transition while promoting the resiliency of the financial system to climate-related risks.  Treasury is also actively working to ensure that the benefits of clean energy investments reach low-income or underserved communities, as well as coal and other energy communities and those that have borne the brunt of legacy pollution.

Since tackling climate change requires global action, Treasury is also focused on helping the United States mobilize and provide the climate finance, policy advice, and technical assistance that can help emerging and developing countries accelerate progress on climate mitigation, adaptation, and resilience.

Since taking office in January 2021, Secretary of the Treasury Janet L. Yellen has prioritized climate issues at the Treasury Department. She appointed the first-ever Climate Counselor and established a Climate Hub in the Office of the Secretary to help set the strategic direction of Treasury’s climate work and coordinate information sharing across the Department. She also took steps to integrate climate issues across the departmental offices, which have responsibility for day-to-day policy design and execution of Treasury’s ambitious climate-related priorities. 

  • The Climate Hub provides overarching strategic direction and coordination.  It also tracks and facilitates progress to advance Treasury’s Strategic Plan goal on Combatting the Climate Crisis; identifies opportunities for greater climate ambition; helps to represent Treasury’s climate work externally and with other agencies; and provides additional resources for priority workstreams.
  • The Office of International Affairs leads Treasury’s international engagement, including: climate finance negotiations; climate policy at the Multilateral Development Banks and the International Monetary Fund; oversight of environmental trust funds, such as the Green Climate Fund, Climate Investment Funds, and Global Environment Facility; implementation of the Just Energy Transition Partnerships; representation and engagement in multilateral forums such as the G7, G20 (including co-chairing its Sustainable Finance Working Group), Asia-Pacific Economic Cooperation Forum, Coalition of Finance Ministers for Climate Action, Financial Stability Board, and Organization for Economic Cooperation and Development; climate finance-related trade policy; and multilateral sustainable infrastructure initiatives. 
  • The Office of Domestic Finance leads Treasury’s climate-related work with respect to the U.S. financial system, domestic community investment programs, household finances, and engagement with the insurance sector and state and local governments. It also includes the Financial Stability Oversight Council (FSOC) Secretariat, which coordinates among FSOC member agencies to advance the recommendations in the FSOC’s 2021 Report on Climate-Related Financial Risk. 
  • The Office of Tax Policy leads the development of tax policy related to climate and energy security, including implementing provisions in the Inflation Reduction Act of 2022, which is considered the largest investment in addressing climate change in U.S. history. The Office of Tax Policy is currently developing guidance to implement the Inflation Reduction Act’s tax law changes and is partnering with the IRA Program Office on broader IRA implementation efforts.
  • The IRA Program Office partners with the Office of Tax Policy on the implementation of the Inflation Reduction Act, with particular focus on operational issues and stakeholder outreach related to the clean energy tax incentives. 
  • The Office of Economic Policy leads on economic analysis of climate and energy-related policies, interacts with other executive branch offices on climate and energy analysis, and supports the integration of climate in the development of the President’s budget projections. 
  • The Office of Terrorism and Financial Intelligence works to protect the U.S. and international financial systems from abuse by illicit actors, including by combatting nature crimes such as wildlife trafficking and illegal logging and associated trade, criminal activities associated with illegal, unreported, and unregulated (IUU) fishing, and illegal mining.
  • The Office of Management is working to make Treasury’s facilities and operations more resilient to the effects of climate change, including extreme-weather events. It is also charged with procuring electric vehicles to reduce Treasury’s fleet emissions. 

REMARKS AND ANNOUNCEMENTS

Remarks by Secretary of the Treasury Janet L. Yellen 

Implementing the Climate and Energy Security Provisions of the Inflation Reduction Act

The Inflation Reduction Act is the single most significant legislation to combat climate change in our nation’s history. The vast majority of the law’s climate change investment is delivered via tax incentives, putting Treasury at the forefront of this landmark legislation. Since the measure was signed into law in August 2022, Treasury has worked expeditiously to write the rules that will make real the promise of this legislation. Below is a roundup of work related to implementing this landmark law For more information, including guidance released to date, please visit the Internal Revenue Service’s website: Credits and Deductions Under the Inflation Reduction Act of 2022 | Internal Revenue Service (irs.gov) 

Advancing Climate Action Globally 

Treasury plays a leadership role in developing the U.S. Government’s international climate finance agenda and engages foreign counterparts to increase global climate ambition and support developing countries adapt to a changing climate.  Treasury’s work on international climate policy includes bilateral engagement with finance ministry counterparts and in multilateral forums as well as overseeing and engaging with multilateral financial institutions, including multilateral climate trust funds.  Below is a subset of Treasury’s international climate agenda and recent accomplishments.

Assessing and Mitigating Climate-Related Risks to the Financial System 

In October 2021, the Financial Stability Oversight Council identified climate change as an emerging threat to financial stability and issued over 30 related recommendations to financial regulators. The Council and its members have been working in close coordination since the report to advance these recommendations, and have made considerable progress in the areas of capacity building, disclosure, data, and risk assessment. As climate change continues and associated economic costs are expected to grow, the Council recognizes the critical importance of ensuring the resilience of the financial system.

Below please find announcements on treasury.gov. For more information, please refer to announcements by Financial Stability Oversight Council member agencies.

Climate Change and the Insurance Sector 

The increased frequency and severity of climate-related disasters, as well as the magnitude of associated insured losses, highlight the significance of climate-related financial risks and the role of insurers in responding to such risks. The President's May 20, 2021 Executive Order on Climate-Related Financial Risk recognizes the important role of the insurance sector. In response to the May 2021 Executive Order, the Federal Insurance Office (FIO) is advancing three climate-related priorities: (1) assessing climate-related issues or gaps in the supervision and regulation of insurers, including their potential impacts on U.S. financial stability; (2) assessing the potential for major disruptions of private insurance coverage in U.S. markets that are particularly vulnerable to climate change impacts, as well as facilitating mitigation and resilience for disasters; and (3) increasing FIO’s engagement on climate-related issues and leveraging the insurance sector’s ability to help achieve climate-related goals.    

Other Climate-Related Announcements and Remarks