A U.S. commodities regulator has issued a warning against the devastating and lasting consequences climate change could have on global markets.
Rostin Behnam, a commissioner at the Commodity Futures Trading Commission (CFTC), claims that climate change could affect every aspect of the U.S. economy. By highlighting the risk, Behnam is positioning himself in direct opposition with President Trump, whose administration has mostly denied or ignored statements made by climate scientists.
“The impacts of climate change affect every aspect of the American economy – from production agriculture to commercial manufacturing and the financing of every step in each process,” Benham said at the meeting of the CFTC’s market risk advisory committee.
At the meeting, the regulator cited a $160 billion global cost related to natural disasters in 2018, a record high that paints a very bleak picture of the world we live in today. In the U.S. Midwest alone, the increase in temperature has led to catastrophic tornadoes and floods. The country has also experienced reduced crop yields, which resulted in volatile markets and chaos in commercial manufacturing.
Rostin Benham also stated that climate change could cause a mortgage meltdown, similar to the one in 2008. With natural disasters so widespread and probable, insurance companies will be faced with higher concentrations of risk and won’t be able to collect enough premiums to support payouts or sustain themselves in the long run. This could negatively impact the stability of the financial system by causing a domino effect and spreading to other industries.
It’s important to point out that the commissioner was appointed by President Trump in 2017. The law of vacancy states that a Democrat must fill the position, which puts Benham in a unique position to push towards climate change awareness and warn businesses about the impending consequences.
The damage must be mitigated if the commodity and financial markets are to survive. Commercial banks, farmers, and insurance companies are at a particularly high risk at the moment, and steps must be taken to preserve the health of the economy. President Trump will be forced to talk about the issue when he addresses farm states during the 2020 reelection campaign, which puts him in an awkward position, given the fact that natural disasters have already caused damage in these states.
Financial regulators have also decided to pay greater attention to the effects of climate change. The Network for Greening the Financial System, recently formed by a group of central banks, has taken the initiative to “manage risks and mobilize capital for green and low-carbon investments,” according to their website.
The country must prepare for the dangers that global warming poses to the economy. Without adequate systems that can minimize the damage, the whole world could be faced with appalling financial consequences.