TOPICS > Economy

Former treasury secretary urges business world to heed climate change risks

June 25, 2014 at 6:44 PM EDT
If you are an American investor, the risks of climate change should matter to you. That's the message from the Risky Business Project, led by former New York Mayor Michael Bloomberg, billionaire financier Tom Steyer and former Treasury Secretary Henry Paulson. These business and political leaders have come together to quantify the economic costs. Judy Woodruff talks to Paulson about the project.
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JUDY WOODRUFF: Finally tonight: new estimates on the cost of climate change and the attention it’s drawing about the potential economic effect in the U.S.

For years, reports on climate change have largely been the province of scientists. But a new group of business and political leaders is now trying to focus on the costs.

Called the Risky Business Project, the nonpartisan effort is led by former New York City Mayor Michael Bloomberg, an independent, former Treasury Secretary Henry Paulson, a Republican, and billionaire financier and Democratic donor Tom Steyer. The group warned Tuesday that if carbon dioxide levels continue rising at their current pace, between $66 billion and $106 billion worth of U.S. coastal property will likely be below sea level by 2050, days with temperatures exceeding 95 degrees may triple, and farm production could drop 14 percent.

In a video statement, Bloomberg says it’s time to change course.

FMR. MAYOR MICHAEL BLOOMBERG, I, New York City: If you invest in real estate, commodities, municipal or corporate bonds, these risks matter to you. Unless we get serious about managing the risk of climate change, we’re likely to see more severe losses in the future.

JUDY WOODRUFF: The group calls for a comprehensive response, but makes no specific recommendations.

Former Treasury Secretary Henry Paulson joins me now. Thank you for being with us.

HENRY PAULSON, Former Secretary of the Treasury: Judy, it’s good to be here.

JUDY WOODRUFF: So, this is an effort to focus on the economic impact of climate change, rather than the effect on human health. Why?

HENRY PAULSON: Well, absolutely.

There’s been a lot of work that’s been done in the past on the environment and the huge risks that climate pose to the way of life as we lead it here on this planet and so on.

But this is the first serious look on an industry-sector-by-industry-sector basis, region-by-region basis to try to quantify the economic impacts, because those are every bit as real as the environmental impacts.

JUDY WOODRUFF: So we just heard about some of the data that you — that’s in this report. But let’s try to get a clearer understanding. I mean, when it comes to the coastal areas of the United States, when it comes to temperature change in the center of the country, what are you finding?

HENRY PAULSON: Well, Judy, first of all, we look at the most likely cases. We look at best cases. We look at worst cases, because this is about insurance and taking out an insurance policy, so this is about understanding the risks and managing the risks.

Now, what we see in some ways shouldn’t be surprising, because areas that are hardest-hit are the coastal areas. Let’s start with the coastal areas. You know, you look out even, you know, to just mid-century, you will have somewhere between $75 billion and $120 billion of infrastructure underwater.

You know, so there’s serious damage there. I grew up on a farm in Illinois. And if you look at what we call the I-states, Illinois, Indiana, Iowa, you know, they get hit pretty hard in terms of agriculture as the — as time moves on.

If you look out, you know, 15, 25 years, agricultural production goes down 10 percent. If you go out farther, it goes dramatically down as these states which benefited from being a temperate zone become arid states and farming goes farther — farther north or to Canada.

JUDY WOODRUFF: And your concern is that these economic impacts have not really been focused on before now?

HENRY PAULSON: Yes, it’s — that’s absolutely right, and because what you are going to increasingly see, and what we’re seeing right now, is that when Mother Nature acts, and you have these natural disasters, whether they’re tornadoes or hurricanes like Sandy or floods or forest fires, that what happens is, the government comes in.

That’s the role of government. People expect to government to come in. We all pay. These are big economic costs that go along with these. And what you find is, if you look at it carefully, if there was spending today, relatively small amounts of spending, to harden infrastructure, be smart about where you build plants, that we could avoid a fair amount of these costs.

JUDY WOODRUFF: Well, let’s talk about that. I mean, one of the things you specifically have said you think should be done is a tax on carbon, a tax on companies that emit carbon dioxide.

You have already acknowledged that members of your own Republican Party aren’t going to like this idea, so how do you persuade them that it’s the right thing to do?

HENRY PAULSON: Judy, just to step back for one minute and make a huge point about this study, this study is bipartisan, Republicans, Democrats…

JUDY WOODRUFF: Right.

HENRY PAULSON: … Treasury Secretary George Shultz, Bob Rubin, et cetera.

So what we do is, we don’t focus on solutions in the study. I will get to me and the carbon tax in a minute. But — but we’re starting in the middle here. We’re — what we want to do is just understand the risks, use business-type methodologies, start a fact-based discussion on the science and on the economics. And I think that there are — I know many, many Republicans, CEOs of companies, political leaders that are ready for a fact-based discussion.

Now, in terms of the carbon tax, which is a fee on — you know, that companies pay that emit carbon, this is, I think, the most efficient way to change the behaviors and creates incentives for new clean energy technologies.

But the reason I am suggesting that is because, as you look at these risks, you see that some of the risks — you know, some of the costs are already baked in.

JUDY WOODRUFF: But in terms of the carbon tax, there’s already pushback from conservatives. You’re not surprised to hear that. They are saying, first of all, they don’t believe the climate change threat is as serious as you say it is. And, secondarily, they say a tax is the last thing Americans need, another levy on business owners.

HENRY PAULSON: Right.

And that was why the tax proposal was one I made in an op-ed I wrote. In terms of this study, the study is going to be one that’s a lot harder to attack. And I think that people are going to welcome it, because it’s very rigorous. We look at best cases. We look at worst cases. We use very standard business risk analysis methodology.

And, so, one of the things we’re calling on — and we’re focused on business here. And there’s three things that I think businesses need to do. And, first, when they make investments, they need to, I think, be very conscious of the climate risks, in terms of the kinds of facilities they build, where they build them, and because these are long-term investments and it makes a — it makes a big difference.

Secondly, I think investors need to call on businesses. And businesses, in my judgment, need to start making disclosures of the CO2 emissions, of where they’re — you know, possibly stranded assets, so that investors can look at these risks, and I would like to see the SEC do something there. And, then, thirdly…

JUDY WOODRUFF: Securities and Exchange Commission.

HENRY PAULSON: Yes.

JUDY WOODRUFF: That’s the government proposal again.

HENRY PAULSON: Yes, in terms of requiring that, because that, again, would really start a very serious discussion about this.

And then, thirdly, working on policies that will help us avoid these really adverse risks. So, when I say to people, and they say, well, we don’t — why should we do something so dramatically? We want more facts. And I’m saying that’s radical risk-taking, taking this cautious approach, because if you wait until you have all the facts, it will be too late.

JUDY WOODRUFF: But my question is that if a group like this that believes that climate change is coming and is very serious can’t come together on a group — a set of solutions, how do you expect policy-makers and others to come together on solutions?

HENRY PAULSON: Well, we didn’t try to come together on solutions. That wasn’t even a thought. The idea was, let’s come together and really put facts out there.

I bet you would find everybody in this group, although we may differ to a degree, everyone would like to see strong action. I’m not saying this is going to bring everybody to the table or that this is going to solve the issue. But business executives play a significant role. And if you get leadership from them, and they’re talking seriously about it, and they’re taking the kinds of steps they need to take, this will be — this will advance the discussion, and I think make it easier for, you know, federal government to do some of the things they need to do, and harder not to.

JUDY WOODRUFF: Former Treasury Secretary Henry Paulson, getting the debate started, thank you very much.

HENRY PAULSON: Thank you.