[Congressional Record Volume 165, Number 80 (Tuesday, May 14, 2019)]
[Senate]
[Pages S2839-S2841]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             CLIMATE CHANGE

  Mr. SCHATZ. Madam President, climate change is already wreaking havoc 
on the American economy, and anyone who cares today about having a 
strong economy in 10, 20, or 30 years needs to be committed to acting 
now.
  We are already seeing the economic risks related to climate change. 
Temperatures are rising, sea levels are rising, and extreme weather 
events are becoming more frequent and more severe.
  Ask families in California whose homes and businesses have been 
burned to the ground in record-setting fires or construction workers in 
Texas who have to cut their hours because of the heat or farmers in 
Nebraska, where the State Farm Bureau estimates that this spring's 
flood will cost ranchers $500 million and will cost grain farmers $400 
million. Farm bankruptcies were already at a 10-year high even before 
the flooding.
  We are getting closer to long-term tipping points. Within 30 years, 
which is a typical span of a mortgage, nearly 400,000 existing homes in 
the U.S. coastal areas are at risk of being uninhabitable. These homes 
collectively are worth about $210 billion. That is more than four times 
the estimated insured losses of Hurricane Katrina.
  The ``National Climate Assessment'' says that $1 trillion worth of 
coastal real estate in the United States is threatened by the effects 
of climate change. The assessment also shows that labor productivity 
will take a hit. Under one scenario, the Southeast United States alone 
could lose $47 billion in productivity each year.
  The ``National Climate Assessment'' also predicts that maize and 
soybean yields will each be down as much as 25 percent across the 
Midwest by midcentury, mostly due to hot temperatures. In other words, 
we are looking at a real estate bubble, massive changes in 
productivity, and increased disaster costs for State and Federal 
governments.
  It is no wonder that experts say that climate change is the top 
economic risk facing our planet today. The World Economic Forum has 
warned us that we are ``sleepwalking into catastrophe.'' Citigroup 
estimates that world economies could lose at least $44 trillion in 
economic activity between now and the year 2060. Actuaries name climate 
change the No. 1 risk to insurers in North America.
  All of those individuals and institutions and companies and agencies 
that just described the risks related to climate change--I have no idea 
how they feel about birds and butterflies. I have no idea if they care 
about conservation on a personal level. I don't know if they surf or 
they snowboard or they hike or they bird-watch. I don't know how much 
they care about the natural environment. I do know they care about 
money, and they are paid to care about money, and they are very worried 
about the impact that climate change will have on our economy.
  You will notice that this is not a traditional climate speech. I got 
involved in climate because I care, but I understand that not everybody 
has the luxury of worrying about the birds and the butterflies and the 
creatures in the ocean. A lot of people worry every day about whether 
they are going to be able to put food on the table, and a lot of people 
worry about the value of their home and value of their 401(k) and 
whether the government is going to be consumed with these disaster 
costs.
  You should be worried about the new and growing risks of droughts, 
floods, storms, wildfires, and sea level rise because these events 
reduce the value of assets. They decrease investment income. They can 
increase insured and uninsured losses. In other words, they promise to 
disrupt financial institutions. That means the health of our financial 
system is at stake.
  There are now 36 central banks and financial regulators around the 
world who are worried about climate's economic impact and how to plan 
for it, including the UK, Germany, Australia, Canada, France, Japan, 
and China. They have come together to work on developing the tools to 
assess climate change risk to the financial system. This is not the 
ecological system, and these are not communities. This is about money 
and how much money is at risk when it comes to climate change.

  The Bank of England is planning to include climate impacts in its 
bank's stress tests as early as next year, and the central bank of the 
Netherlands is doing more to include climate-related risks in its 
financial supervision. Yet guess who is not part of this group of 36 
countries that is trying to develop the analytic tools to figure out 
what impacts climate change is going to have on our economic system--
the United States.
  The three Federal Government Agencies that oversee the financial 
system are taking a unique approach to this problem by putting their 
heads in the sand. I know this because I asked them. I was part of a 
group of 20 Senators who sent a letter to the Federal Reserve, the OCC, 
and the FDIC, and asked them how they are accounting for climate change 
risks to our financial system. Their response was basically--listen, 
extreme weather shocks happen all the time. As for the risks of climate 
change, since they are so far out and hard to quantify, our regulators 
book that risk at zero. Now think about the absurdity of this. It is 
not that they are saying the risk doesn't exist. They are conceding 
that it exists. They are just saying it is so hard to quantify that 
they have decided it is nothing.
  There are all kinds of risks that all of these supervisory 
institutions evaluate on a regular basis. That is their job. They have 
these big manuals that they use--these thick manuals--to supervise 
banks and financial institutions. They can look at how much excess 
capital you have, how much exposure you have to a real estate bubble, 
or how much exposure you may have to a downturn in the economy. They 
have decided the risk related to climate change is nothing at all.
  This is in direct contrast to almost every other industrialized 
country and its regulatory agency. It doesn't matter what their 
politics are--whether they are run by rightwing or leftwing 
governments; everyone else is taking the financial risk related to 
climate change seriously except the United States. Everyone--the 
insurance industry, the defense community, the intelligence community, 
the international community--knows that climate is at increasing risk. 
They all know that climate change is real and that it is impacting our 
financial system right now, that it is impacting the finances of 
publicly held corporations and banks and the government itself. The 
U.S. financial community needs to join them.
  Let me end by saying this: We don't have to agree on the many ways in 
which we should be acting on climate change. It is OK if you hate my 
bill, with my good friend Senator Whitehouse, on a carbon fee. It is OK 
if you think we should do the Green New Deal or not do the Green New 
Deal. It is OK if you think the Paris Agreement is bad or good. You get 
to think what you want, but you cannot ignore the risk that climate 
change is imposing on our financial system. You don't get to think that 
this cost--that this risk--is

[[Page S2840]]

not material. You don't get to think that we should do nothing.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Rhode Island.
  Mr. WHITEHOUSE. Madam President, let me first thank my friend Senator 
Schatz, of Hawaii, for joining me on the floor today to talk about the 
financial hazards that are associated with ignoring climate change. He 
has been a really terrific leader on this subject. I have to say that I 
am sometimes a little bit embarrassed that Rhode Island is the Ocean 
State when Hawaii has so much ocean out there in the Pacific. I guess 
that is what you get for getting there first, but I am delighted that 
Senator Schatz is here.
  What I want to do in my time here, in my following up on Senator 
Schatz' remarks, is to go through some of the recent warnings that have 
come out. One I will go back to from last year, and the other ones I 
will follow up on quickly. They are all between March 25 of this year 
and now, just in the last couple of months.
  The one from last year is a Wall Street Journal article that 
documented the increasing climate risk and the insurance industry's 
need to recalculate. It had the legendary investor--the ``Wizard of 
Omaha''--Warren Buffett warning that if reinsurance contracts--and he 
is a reinsurance guy--covered 30 years, he would be crazy not to 
include climate risks. Those were his words.
  The article goes on to point out that climate change may be gradual 
but that its effects are volatile. It is like something steady for a 
long time and then, in the words of the article, a sudden large, 
unexpected hit. ``You can have an increased potential for an outsized 
loss in a single year,'' and they conclude ``there's a cost for 
inaction.'' What we are doing here, which is nothing on climate change, 
has a very significant cost.
  The article points out that after Hurricane Andrew hit Florida, 13 
insurance companies were ordered liquidated because they were not 
adequately well prepared. The risks are going up precipitously. The 
probability of a Texas storm dropping about 20 inches of rain was about 
1 percent a year until 2000, and it is expected to increase to 18 
percent a year--an 18-times increase in the risk of that level of storm 
and flooding.
  Swiss Re says in the article that coastal flooding could leave 
certain coastal areas ``so exposed, insurance becomes no longer viable. 
It becomes uninsurable.'' Indeed, in this article, it points out that 
if you take climate change into account, flood losses could exceed $1 
trillion per year by 2050. In saying this, it aligns with Moody's, the 
famous bond evaluator and insurer, which is going to start evaluating 
municipal bonds for coastal communities based on their preparation for 
coastal risk. This is not some green organization. When it is starting 
to evaluate, something is going on.
  Freddie Mac has warned of a coastal property values crash that could 
be as serious as the 2008 mortgage meltdown. Again, Freddie Mac is not 
a green or environmental group. It is warning about a coming risk. We 
will not listen to those risks because too many people here are told 
what to do and what to think by the fossil fuel industry.
  Just recently, on March 25, 2019, a Federal Reserve research paper 
warned that climate risk could cause a financial crisis: Losses from 
natural disasters magnified by higher temperatures and elevated sea 
levels could spark a financial crisis. The article identified the three 
key forces that are transforming the economy in our time, and one of 
those three is climate change.
  This is not some side-bar issue. It quoted the latest National 
Climate Assessment. ``Without substantial and sustained global 
mitigation and regional adaptation efforts, climate change is expected 
to cause growing losses to American infrastructure and property and 
impede the rate of economic growth over this century.'' The reason, it 
describes, is due to a fundamental market failure. ``Carbon fuel prices 
do not properly account for climate change costs.'' Of course, the 
fossil fuel industry loves that market failure, but we should not 
tolerate it if we purport to believe in a market economy.
  Senator Schatz and I support a carbon fee. They call it a carbon tax, 
pointing out that it can appropriately incentivize innovations, which 
we need, and that it should equal the social cost of carbon, which our 
bill does. It also points out that we are creating a risk for 
generations to come. We might get off pretty free in terms of the punch 
that comes back, but our kids and our grandkids are not going to think 
that we did a very responsible job here.
  What are the increasing financial risks the article mentions? They 
are business interruptions in bankruptcies, unexpected losses in the 
value of assets or companies, and climate-based credit risk exposure, 
particularly in my coastal State, which is concerned about loans to 
affected businesses or mortgages on coastal real estate--again, lining 
up with what Freddie Mac and others have said about the dangers of a 
coastal property value crash.
  The next article of April 4, BlackRock, which is the world's largest 
asset manager, warns that investors are underpricing the impact of 
climate-related risks. The report points out that all major U.S. 
metropolitan areas were already suffering mild to moderate losses to 
GDP as a result of climate change--already suffering that--and that the 
risk of a property being hit by a category 5 hurricane was expected to 
rise by 275 percent if no climate action were taken.
  This is a map from that article of the economic impacts of climate 
change. All of the reds are in real trouble; the tans are in trouble; 
yellows are in some trouble; trouble for the light green, and green is 
very scarce and is seeing a little bit of GDP improvement. Yet, if you 
look at the map, that is a country that is hurting economically as a 
result of climate change.
  OK. Four days later, on April 8, EPA scientists published an article 
that climate change will cost the U.S. hundreds of billions of dollars 
per year. Unchecked, climate change will cost the United States 
hundreds of billions of dollars per year. Cutting emissions of carbon 
dioxide and other greenhouse gases would prevent a lot of the damage 
and reduce the annual economic toll in some sectors by more than half. 
Unmitigated warming could reduce the global GDP by as much as 20 
percent, said a related report by the British Government.
  Now, think about that. You are going to take a 20-percent hit to the 
global GDP. What does that do? That is an economic downturn of a very 
dark order. It also points out that the cost of inaction is really high 
and that the cost of reducing emissions pales in comparison.
  We are taking the more dangerous and expensive path because the group 
that gets hurt has control over this body, the fossil fuel industry. 
Yet, as other warnings will point out, it can't change the inevitable. 
All it can do is postpone it, and the inevitable then gets worse. It 
warns that damage to coastal property, primarily on the gulf and east 
coast, will reach $120 billion per year.
  If you are from a noncoastal State, you may think that is funny. I am 
from a coastal State, and I don't think that is funny at all. I think 
my colleagues should take a warning like that seriously. The benefits 
that the country stands to reap by cutting greenhouse gas emissions was 
another theme. There is an upside here. We win economically by cutting 
greenhouse gas emissions. If we don't, the cost is hundreds of billions 
of dollars.
  Next, on the same day of April 8, 2019, a CNBC article, in 
summarizing an Urban Land Institute report, warns that for real estate 
investors in particular, risk is rising exponentially in the age of 
climate change to the point at which a new cottage industry of 
companies has emerged that assess climate risk to real estate. 
``Climate change,'' the article reads, ``is likely to have a bigger 
impact on valuation in the future as asset and market liquidity are 
affected.''
  Asset and market liquidity mean that the market seizes up, that you 
can't sell your house. Of course, that matches Freddie Mac's prediction 
because, if the person you are trying to sell your house to can't get a 
mortgage because the bank thinks, at the end of 30 years, the property 
is going to be literally underwater or that the bank will not be able 
to get insurance for its mortgage, suddenly, you have a real problem in 
selling that house. Now you are only selling to cash buyers, and that 
is a dramatic shift in the price

[[Page S2841]]

you can get. That is why Freddie Mac is talking about the coastal 
property value crash.
  The following day, on April 9, the investment advisory firm Mercer 
comes out with another report that describes this warning is the latest 
from the financial sector of the physical and financial risks posed by 
rising temperatures. Some investment strategists warn of physical and 
social damage cascading across the economy.
  Again, these are not environmentalists. This is an investment 
advisory firm. It is warning us of financial perils ahead if we don't 
start paying attention. A part of it is the loss in value or simply the 
outright loss of wide swaths of coastal property. So, when I come back 
to rely on mine as a coastal State, I hope my colleagues here can 
appreciate that this isn't funny when you are talking about the loss of 
value or simply about the outright loss of wide swaths of coastal 
property.
  The scenarios aren't good. They are negative for global growth, and 
they aren't really great for anyone. It is a declining global economy 
that has no big winners spiking up, and it can move fast. Asset prices, 
they say, could quickly shift to reflect the risk. There could be 
material impacts, especially at the sector level, in a relatively short 
period of time. That is how crashes work. They creep up on you, and 
then they crash. That is why they call them crashes.
  Next, on April 18, 2019--9 days later--we have the central banks. 
Thirty central banks around the world called for a better assessment of 
the risks from higher global temperatures. As Senator Schatz pointed 
out, the U.S. Fed and the Central Bank of Brazil were among the 
institutions not involved in the initiative. It is pathetic on our 
part.
  Climate change is identified as a source of financial risk that these 
financial regulators feel is well within their mandate to begin to 
address. They considered that the report issued a loud wake-up call for 
the global economy to act on climate change. Good luck getting through 
the muscling of the fossil fuel industry around this particular 
building, but the wake-up call is ringing in the financial community.
  Mark Carney, the Governor of the Bank of England--who was warned 
about this previously--and Villeroy de Galhau, the Governor of the Bank 
of France, warned that climate change and the poor management of the 
transition to a low-carbon economy have the potential to trigger a 
``sudden collapse in asset prices that could devastate the global 
financial systems.''
  ``If some companies and industries fail to adjust to this new 
world,'' they argue, ``they will fail to exist.''
  Again, as others have said, the article argues that the costs of 
decarbonization are likely to be small compared to the costs of not 
taking action.
  Yet again, we are listening to the fossil fuel industry here. It has 
a huge stake in all of this. It has a huge conflict of interest. It has 
control over a significant part of Congress, and it is blocking us from 
taking the essential safe, low-cost path.
  The last one is from April 17, the Network for Greening the Financial 
System, which is the comprehensive report by a group of central banks. 
Again, it points out that these climate-related risks are a source of 
financial risk.
  Indeed, the head of the Bank of England--the regulator for insurance 
and banking in the UK--has described this as a systemic risk. What is a 
systemic risk? That means that when the entity collapses, like when the 
carbon asset bubble collapses, it doesn't just take the carbon asset 
bubble companies down with it; the rest of the economy pours in behind, 
and you have a systemic economic meltdown. Just like happened in 2003, 
it wasn't just the banks with the junk mortgages that failed; a whole 
bunch of others businesses got sucked into that vortex, and the same is 
predicted here.

  They point out a couple of final things about the nature of this 
financial risk:
  One, it is far-reaching in its breadth and magnitude. That is an 
ominous description of a financial risk. It is potentially aggravated 
by tipping points in a nonlinear fashion; i.e., it gets to a certain 
point and then crashes. We New Englanders appreciate this when we have 
the snow melt in the springtime. The snow piles up on the roof of your 
house. It piles up storm by storm and snowflake by snowflake. But one 
warm spring day, you suddenly hear ``woomph'' outside because the whole 
snowpack on your roof has slid off. It is a catastrophic failure of 
snow adhesion in that case. In this case, it is an example of how 
quickly a nonlinear tipping point can lead into economic distress.
  Two, it is foreseeable. We know it is coming. There is a high degree 
of certainty that these risks will materialize. We know perfectly well 
this is coming; we just won't do anything about it because the people 
who have to deal with it first--the fossil fuel industry--have this 
place tied in knots.
  Three, irreversibility. When it happens, there is no going back. 
There is currently no mature technology to reverse the process of 
overheating our climate and acidifying our ocean. For our children and 
grandchildren and their children and grandchildren, that leaves a 
pretty bleak prospect that we have just discounted away as if they 
weren't going to be born, as if they didn't exist now, as if this 
weren't going to happen, as if we shouldn't care. Irreversibility.
  Here is the last one: dependency on short-term actions. The magnitude 
and the nature of these irreversible, foreseeable, far-reaching, future 
impacts will be determined by actions taken today. It will be 
determined by actions taken today. If we don't make the right decisions 
now, our mistakes, our indolence, our ignorance, our greed, our 
subservience to this industry--whatever it is--will cascade through the 
decades irreversibly with far-reaching impact. They will look back at 
us and say: It was foreseeable. Didn't you guys know this was 
foreseeable? You were told. You were warned. How could you have done 
nothing?
  I don't have a very good answer.
  It is time to wake up.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Ohio.

                          ____________________