Today, Democratic Representatives Mondaire Jones of New York, Ayanna Pressley of Massachusetts, and Rashida Tlaib of Michigan introduced a bill that would require the Federal Reserve to phase out the financing of fossil fuel projects. The legislation, known as the Fossil Free Finance Act, would mandate that big banks and other financial institutions align their financing with the United States’ obligations under the Paris Agreement, prohibiting the financing of all fossil fuel projects after 2030.
“The climate crisis poses an existential threat to every aspect of our society, including our economy and financial system,” Representative Jones said. “The Federal Reserve has failed to acknowledge climate change as the threat that it is. As climate disasters grow in frequency and intensity, we can no longer afford to stand by while big banks and other financial institutions invest trillions in the companies fueling the climate crisis.”
The world’s 60 biggest banks have pumped nearly $4 trillion into fossil fuels in the past five years alone, according to a recent report from a group of climate organizations. This financing doesn’t just hasten the climate crisis and the destruction of the planet but also injects all sorts of volatility into the economic system.
“For too long, our federal government has looked the other way while our nation’s largest banks bankroll the dirtiest fossil fuel projects, exacerbating the climate crisis and setting us up for a massive, climate-induced economic collapse,” Pressley said. “That must change. It’s time for a financial system that is truly safe, sound, and just. One that recognizes the existential threat posed by climate change and takes aggressive action to save our economy, save our planet, and save lives.”
Under the proposal, all bank holding companies with more than $50 billion in assets and nonbank systemically important financial institutions (SIFIs) would be prohibited from financing new or expanded fossil fuel projects after 2022 and all fossil fuel projects after 2030. The Federal Reserve would also be required to report its progress on these greenhouse-gas emission targets to Congress.
The bill comes amid a broader progressive push for the Federal Reserve to use its authority to mitigate climate risk in the financial system. Jones, Pressley, and Tlaib—along with Representatives Alexandria Ocasio-Cortez of New York and Chuy García of Illinois—have been calling on President Joe Biden to replace the current Federal Reserve chair, Jerome Powell, with someone more aggressive on climate. Powell’s term is up in February, and Biden is expected to make a decision soon. Though Powell, a Trump appointee and lifelong Republican, enjoys overwhelming bipartisan support, and has even won over some on the left, congressional progressives say the climate fight is too urgent to not nominate a successor.
On the Senate side, Democrats like Ohio Senator Sherrod Brown, who chairs the Senate Banking Committee, and Massachusetts Senator Elizabeth Warren have gone after Powell for his record on regulation. Brown told Axios that he hasn’t yet made a decision about whether Powell should be replaced. But Rhode Island Senator Sheldon Whitehouse recently said that 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.” In contrast to the Fed, other central banks, like Japan’s and the European Union’s, have declared the fight against climate change an important consideration in determining monetary policy.
The Fossil Free Finance Act has also been endorsed by a number of environmental and advocacy groups, including Sunrise Movement, Sierra Club, Public Citizen, the Revolving Door Project, and Americans for Financial Reform, among others.