Former Treasury Secretary Finds In Climate Change An Economic Threat

As secretary of the treasury from 2006 to 2009, Henry Paulson grappled firsthand with the U.S. financial crisis. He says he sees a similar pattern now developing related to climate change: mounting excess, flawed policies and unheeded warnings. For that reason, Paulson is working to convince his fellow Republicans and the American business community that a carbon tax is not only a wise move, but a critical one.

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AUDIE CORNISH, HOST:

From NPR News, this is ALL THINGS CONSIDERED. I'm Audie Cornish. Climate change is an economic threat. That's the bottom line of a new report out today. It spells out costs on regional economies in the U.S. from lost properties because of rising sea levels, to reduced productivity of outdoor workers because of extreme heat. The study was commissioned by the Risky Business Project, a group that includes former New York City Mayor Michael Bloomberg, billionaire environmentalist Tom Steyer and former Treasury Secretary Henry Paulson. Paulson also wrote, in a New York Times op-ed, that a carbon tax is needed to protect the environment and the economy. We reached him in New York just after he unveiled the Risky Business report.

HENRY PAULSON: The study that we've come out with is a first attempt, and I think a very good one, to quantify the economic impacts, threats and risks of climate change which are every bit as real as the environmental impacts and all the other impacts that are going to threaten to change the lives of Americans.

CORNISH: You wrote in your op-ed earlier this week that you're drawing on lessons from the Wall Street financial crisis, but that was a crisis defined by, basically, tone-deaf reactions of the business community.

PAULSON: Well...

CORNISH: And why would they fall in line for something like this?

PAULSON: I did say the financial crisis resulted from a failure in risk management, but there were certain similarities. You know, the excesses had been building up for decades with the financial crisis. It was debt in the financial crisis. Here, it's greenhouse gas. But unlike the financial crisis, there's no possibility for the government to come in at the very end and take action and avoid the very worst outcomes. What we are attempting to do is call the U.S. business community into action. You know, investors can demand better disclosure about the risks that come with emissions, about the potential risk with stranded assets. And the business community, in addition to doing the things they're doing right now - and they're doing a lot. The investment decisions they make are long-term decisions, and they are going to help determine our economic future. And the other thing is they can lobby and increase the sense of urgency for national legislators so that they can take the kinds of actions we need to give us an insurance policy against the worst outcomes.

CORNISH: It's sort of hard to see talking about any of these policies without talking about the Environmental Protection Agency. And so far, the agency's faced an uphill battle over its regulatory authority to curb greenhouse gas emissions. Republicans lead that charge. Are you also, in effect, here, asking conservatives to back off of this agency?

PAULSON: First of all, in terms of the study, the study deals with the risks. It doesn't deal with the solutions. Now, in terms of me personally, I believe putting a price on carbon - I think that is the best way to change behavior. I don't favor the EPA regulations, but I would say this. If we can't get a nationwide solution or putting a price on carbon, then I would reluctantly agree that the EPA regulations are necessary because I think the problems we are facing are so significant that we need to act. To those who argue against putting a price against carbon because it is a big government solution - what I say to them - that's rather perverse thinking, because by not dealing with the issue on a national level and changing policy, you are guaranteeing that the government's going to play a bigger and bigger role because we are increasingly going to see disasters.

CORNISH: Why do you think talking about the economic impact will make a difference, especially given the way conservatives and Republicans have really fought this issue, precisely on the economics, saying that a carbon tax or some solution in that direction would hurt the economy?

PAULSON: I don't think we're going to solve this problem until the American public demands that its elected officials take action. And here we're up against short-termism. And you keep bringing up Republicans. I'm a proud member of the Republican party. There are many, many Republicans I know that are business leaders - many in government - that want a responsible, fact-based, science-based discussion of the issue. And I would also say that Democrats and others oppose taking the kinds of actions we are going to need to take. So it's going to take a while but hopefully not too long to get the kinds of actions we need to make a real difference here.

CORNISH: Henry Paulson, thanks so much for speaking with us.

PAULSON: Thank you.

CORNISH: Former Treasury Secretary Henry Paulson is part of the Risky Business Project. The group just released a report warning about the economic cost of climate change.

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