Why climate change will keep interest rates low for decades, according to Carson Block

AP Photo/Noah BergerIn a letter to investors, Carson Block of Muddy Waters stated that interest rates will remain at "ridiculously low" levels for decades.According to Block, rates will remain low in order to combat climate change.Block stated that interest rates would be at these levels to encourage investment in technologies to decarbonize the economy.Subscribe to our daily newsletter 10 Things Before The Opening Bell.According to Muddy Waters' Carson Block, investors who expect a rise in interest rates from the Federal Reserve might be waiting a while.Block wrote to investors on Wednesday explaining why he believes interest rate will remain at "ridiculously low" levels for the next decade: Climate change.According to the letter, to decarbonize our economy, we will need to lower interest rates to encourage investments in new technologies that can reverse or slow down the warming trend.Block stated that he believes that this will be the ECB's, BOJ's, and then the Fed's express policy. He also said that he doesn’t believe government spending will suffice to combat climate change. Block believes that technological innovation will be the key to decarbonizing the economy. Lower interest rates will encourage this innovation.The Federal Reserve still projects a Fed Funds rate rise sometime in 2023, provided that the economy recovers from the COVID-19 pandemic. In June, Jerome Powell, Fed Chairman, stated that climate change was not an important consideration in determining monetary policy.However, this doesn't mean that the Fed has stopped paying attention to climate change. A recent paper by Michael Kiley, Fed economist, highlighted how rising temperatures have a "very strong impact" on economic growth.Continue reading: Goldman Sachs names 31 stocks that you should buy when the economy reopens, despite the threat from the COVID-19 Delta variantLael Brainard, Governor of the Federal Reserve, has spoken out about the negative effects climate change is already having upon the global economy.In prepared remarks, she stated that "Climate Change is already imposing substantial economic cost and is projected to have an profound effect on the economies at home and overseas." Future financial and economic effects will depend on how severe and frequent climate-related events are, as well as the nature and speed with which countries around the globe transition to a greener economy.Block believes that if the economy slows down because of climate change-related effects, the Fed will have good reasons to keep interest rates low."I'm not an environmentalist - my household of two drivers is the proud owner 30 cylinders ICE that collectively produce almost 1,400 horsepower. Block stated that our way of living is not sustainable.