WASHINGTON, D.C. – U.S. Reps. Mondaire Jones (D-N.Y.), Rashida Tlaib (D-Mich.), and Ayanna Pressley (D-Mass.) today introduced the Fossil Free Finance Act, which requires the Federal Reserve to regulate financial institutions’ contributions to the climate crisis. The impacts of climate change, along with the necessary transition to a clean energy economy, pose systemic risk to the U.S. financial system.
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“The Fossil Free Finance Act sends a powerful message that Congress won’t accept the Federal Reserve’s failure to do its job,” said Yevgeny Shrago, policy counsel with Public Citizen’s climate program. “The International Energy Agency and the United Nations have made it clear that continued fossil fuel expansion is incompatible with avoiding climate catastrophe. But Wall Street banks keep financing that industry, sowing the seeds of their own destruction in pursuit of short-term gains. If nothing changes, it’s just a matter of time before the party stops and this risky gambling triggers a new financial crisis.”
The Fossil Free Finance Act requires the Federal Reserve to mandate that the largest banks under its supervision align their financing of greenhouse gas emissions and deforestation risk commodities with science-based emissions targets. The bill requires the Federal Reserve to prohibit financing of new or expanded fossil fuel projects after 2022, any thermal coal financing after 2024, and all fossil fuel financing after 2030. In addition, banks must reduce their financed emissions 50% by 2030 and reach zero emissions by 2050.
These targets will make sure banks are not disproportionately invested in fossil fuels or other high emissions activities as the U.S. meets the Biden administration’s emissions reduction commitments under the Paris Climate Agreement. The legislation also amends the Dodd-Frank Wall Street Reform and Consumer Protection Act to incorporate financing of emissions into the designation of systemically risky nonbank financial companies for enhanced oversight by the Federal Reserve.
“Just like in the runup to the 2008 financial crisis, the Fed is standing by as banks threaten the financial system and the economy with risky bets on toxic assets,” said David Arkush, managing director of Public Citizen’s climate program. “This time they’re churning out assets that produce greenhouse gas pollution rather than predatory subprime mortgages, but the consequences will still be catastrophic for ordinary Americans, especially communities of color. We applaud Reps. Jones, Tlaib, and Pressley for their leadership in directing the Fed to stop Wall Street from continuing to inflate the financial risks associated with the climate crisis and to shepherd the financial system through the inevitable transition away from fossil fuels.”
Organizations joining Public Citizen in endorsing the bill include 350.org, Evergreen Action, Sierra Club, Sunrise Movement, Americans for Financial Reform, Zero Hour, Stand.earth, Friends of the Earth US, Future Coalition, Action Center on Race and the Economy, and the Revolving Door Project.