Hosted by the Federal Reserve Bank of Kansas City, the Jackson Hole Economic Policy Symposium brings together central bankers, economists, academics and financial market participants to discuss key long-term policy issues relating to monetary policy and financial regulation. Held annually since 1978, it one of the oldest central banking conferences and is often called the Davos of central banking.
The event normally takes place over a weekend at the somewhat austere Jackson Lake Lodge in beautiful Jackson Hole, Wyoming, but this year’s conference will take place online and has been truncated to one day only. Beginning with a brief speech by Fed Chair Jerome Powell at 9am US central/3pm CET, the theme this year is ‘Macroeconomic Policy in an Uneven Economy’ and the panelists are almost exclusively academics. The full agenda of today’s event is available here.
GreenCentralBanking.com will be following today’s symposium to bring you climate and environment-related news and references as they happen. A civil society perspective on the Jackson Hole symposium is available here.
It’s fair to say that expectations of any developments on climate or the environment from today’s conference are very low. Restricted by the Covid-19 pandemic, today’s one-day, online symposium is a shadow of its normal self and seems to be more of an academic exercise than a central banker’s forum. The conference also occurs at a sensitive time as the US remains bitterly divided and President Joe Biden decides whether to replace Fed Chair Jerome Powell or not – a decision expected within weeks. It’s clear that this will be a low key event.
The US Fed has been slow to recognise the climate emergency, first identifying climate change as a threat to US financial stability less than a year ago. The Fed was also one of the last major central banks to join the Network for Greening the Financial System (NGFS) – in stark contrast to the People’s Bank of China (PBOC – a founding member) and the European Central Bank (ECB – an early member). As the PBOC, Bank of England, Bank of Japan, ECB and other major central banks begin to introduce climate and environmental considerations into their monetary policy, the Fed remains firmly in the research and study stage – still focusing only on identifying climate risk and ignoring the impacts of its funding and support for the fossil fuel industry and high emission activities.
Many observers and analysts blame this conspicuous inaction on Powell (a Trump-appointee), and calls are growing for his replacement due to his climate inaction and light touch to regulation. “I would say climate change is an important issue, but not principally for the Fed,” Powell told a Senate hearing in late 2019. “It is really an issue that is assigned to lots of other government agencies, not so much the Fed.” Speaking at June’s Green Swan conference alongside the CB’s Christine Lagarde and the PBOC’s Yi Gang, Powell was clearly out of step with his peers on climate change and continued to minimise its significance to the Fed.
Despite a summer of record-breaking extreme weather events across the world and as wildfire smoke drifts across America, the big question as we wait for Powell’s speech is whether he will mention climate change at all.
Climate Protests (08:30)
Climate protestors have gathered outside the Federal Reserve Building in Denver ahead of today’s Jackson Hole symposium. Dressed in matching T-shirts reading “Climate risk is extreme today” and holding banners reading “Fossil Free Federal Reserve” and “We need a climate leader Fed Chair”, the protestors are calling for President Biden to replace Jerome Powell with a Fed Chair more serious about the climate crisis.
A major “Action in Jackson” protests calling for a new and more climate-friendly Fed chair had been planned for Jackson Hole, Wyoming but was scaled back when the conference was moved online and scaled back. In a press release in advance of today’s protestors, organisers suggested that the move online was an attempt to evade the climate activists and called on the Fed to “stop big banks from financing fossil fuels and the destruction of our planet.” Protestors nevertheless scaled Teewinot Mountain in Jackson Hole to unfurl a “Stop the Money Pipeline” banner calling attention to the connection between climate and finance.
The protestors come from several climate campaigning groups, including Protect Our Winters (POW), 350.org, and the Stop the Money Pipeline Coalition.
Fed Chair Jerome Powell Speech (09:00)
In a speech focusing solely on another global crisis – the Covid-19 pandemic – Fed Chair Jerome Powell did not mention climate change at all. Focusing on the economic shock of the pandemic and the Fed’s response, Powell indicated that the Fed would taper bond purchases this year in the face of strong employment growth but would be in no hurry raise interest rates as the recovery from the pandemic continued. However his speech was tightly focused on the short term and drew no lessons from the Covid-19 emergency that might be applied to the long term global climate crisis.
The absence of climate change from Powell’s speech has added fuel to the growing calls for his replacement by President Biden. “He’s failing to take the climate crisis seriously. We need a Fed chair who will,” climate campaigning group 350.US said in response to Powell’s remarks, calling for Biden to appoint a Fed Chair who’ll create a “Fossil Free Fed”. The group is currently gathering signatures for a petition seeking the replacement of Powell with a “climate leader” as Fed chair.
“How can Powell attempt to talk about an ‘uneven economy’ and fail to mention the impacts of climate change perpetuating inequities on vulnerable communities?” asked 350.org Senior Regional Communications Specialist Lindsay Meiman.
US Senator Sheldon Whitehouse (Dem. – Rhode Island) also called for a new Fed Chair more attentive to the climate emergency. Responding to yesterday’s New York Times op ed examining the Fed’s response to climate change, Whitehouse was explicit: “If Powell still wants to find “middle ground” between the warnings of science and the lies of the fossil fuel industry, he has to go.”
Morning Session (12:00)
The morning sessions echoed Powell’s earlier theme of avoiding even the mention of climate change. Panels on monetary and fiscal policy and their interactions during uneven shocks did not recognise climate change as such a shock, largely focusing on the very short term and the Covid-19 pandemic. Unlike this morning’s opening statement from the Fed Chair, none of the morning session’s three panel discussions were live broadcast, although copies of the papers and presentations were published.
A word search of these documents revealed no mention of the word “climate” in any presentation or paper. The only exception was IMF Research Director Gita Gopinath’s talk on the “Interaction of Fiscal and Monetary Policy” in which climate was included in a list of “Structural reforms and fiscal policies needed to raise growth potential” (along with infrastructure, digital, health, education, and investment). Apart from that, there was no mention of climate change at all in any of this morning’s sessions.
Although the theme of this morning’s sessions was “Uneven Shocks”, climate change was clearly not recognised as a potential source of such shocks. Despite a summer of record-breaking droughts, wildfires, flooding and extreme heat events around the world, and despite the alarming findings of the the IPCC “Code Red” AR6 report, the attention of the panelists was firmly on the immediate and climate emergency did not intrude into the discussions.
The Next Fed Chair (12:40)
Jerome Powell, Lael Brainard or… 350.org founder Bill McKibben? That’s the half-joking suggestion of Executive Editor David Dayen writing today in the American Prospect. Pointing out that U.S. banks provided over $1.2 trillion in fossil fuel finance between 2016 and 2020, Dayen reviews a range of policy tools available to the Fed to work with the national effort to reduce emissions rather than against it. “The Fed is failing at the most basic level to counteract the greatest threat mankind has yet seen,” says Dayen, but “Powell is only at the “say pleasing things” stage of seriousness on climate.”
Lael Brainard has been tipped as a more climate-aware replacement for Powell, but Dayen is not convinced. “Climate is too important to leave to someone inside the Fed bubble,” he says, finally settling on former Bank of Canada and Bank of England Governor Mark Carney as the best person to lead the Fed through the transition to climate stability.
David Arkush at Public Citizen is also looking for a new Fed Chair, but without mentioning names. “Under current Chair Jerome Powell, the Fed’s performance on climate has been a near-complete failure, he writes. “The Fed hasn’t just done nothing on climate – it has exacerbated the problem.” Arkush also outlines a series of proposals for what the Fed and US financial regulators could be doing to protect the American economy and financial system from climate risk and join global efforts to mitigate climate change.
“The biggest banks are aiming the financial system and the economy at near-certain disaster. More than any other U.S. regulator, the Fed has the power and responsibility to require them to change course. We need Fed leadership that takes this mission seriously and won’t just sit by while Wall Street recklessly fuels world-historic destruction,” he said.
Afternoon Session (16:00)
In another disappointment for the climate-concerned, the afternoon session of the Kansas Fed’s Jackson Hole conference saw only one reference to climate change (a paper by Bart Hobijn and Ayşegül Şahin offered the differential impact of climate change on jobs and employment as a reason for the large unevenness in long-run labor market outcomes). Essentially the entire Jackson Hole symposium – a conference supposedly focusing on uneven economic shocks – has taken place as if the climate crisis was not happening. Climate change – the largest and most uneven shock human society has ever seen, was all but ignored (and least in the public documents).
The Jackson Hole symposium comes to an end as virtually all of the Western United States experiences prolonged drought. Seven western US states, including Wyoming, are under air quality alerts due to 92 large wildfires burning across the USA and Jackson Hole itself has experienced a succession of fires this year. There is even evidence that the smoke has increased the severity of the Covid-19 in affected areas.
But the climate denial of President Trump and the GOP has made even acceptance of scientific climate facts a very politically sensitive issue. It is clear from today’s ‘dog that didn’t bark’ that many in the Fed wish that climate change would just go away. But of course it won’t, and the likelihood that Jackson Hole 2022 will take place under a pall of wildfire smoke are high.
The big climate question in US central banking is who will be leading the Federal Reserve then.
This concludes our live blog coverage of what has been a very subdued and disappointing Jackson Hole Symposium. Thank you for joining us.
This page was last updated September 21, 2021
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