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I’m a businessman, not a climatologist. But I’ve spent a considerable amount of time with climate scientists and economists who have devoted their careers to this issue. There is virtually no debate among them that the planet is warming and that the burning of fossil fuels is largely responsible.
Farseeing business leaders are already involved in this issue. It’s time for more to weigh in. To add reliable financial data to the science, I’ve joined with the former mayor of New York City, Michael Bloomberg, and the retired hedge fund manager Tom Steyer on an economic analysis of the costs of inaction across key regions and economic sectors. Our goal for the Risky Business project — starting with a new study that will be released this week — is to influence business and investor decisionmaking worldwide.
We need to craft national policy that uses market forces to provide incentives for the technological advances required to address climate change. As I’ve said, we can do this by placing a tax on carbon dioxide emissions. Many respected economists, of all ideological persuasions, support this approach. We can debate the appropriate pricing and policy design and how to use the money generated. But a price on carbon would change the behavior of both individuals and businesses. At the same time, all fossil fuel — and renewable energy — subsidies should be phased out. Renewable energy can outcompete dirty fuels once pollution costs are accounted for.
Some members of my political party worry that pricing carbon is a “big government” intervention. In fact, it will reduce the role of government, which, on our present course, increasingly will be called on to help communities and regions affected by climate-related disasters like floods, drought-related crop failures, and extreme weather like tornadoes, hurricanes and other violent storms. We’ll all be paying those costs. Not once, but many times over.
In a future with more severe storms, deeper droughts, longer fire seasons and rising seas that imperil coastal cities, public funding to pay for adaptations and disaster relief will add significantly to our fiscal deficit and threaten our long-term economic security. So it is perverse that those who want limited government and rail against bailouts would put the economy at risk by ignoring climate change.
There is a tendency, particularly in government and politics, to avoid focusing on difficult problems until they balloon into crisis. We would be fools to wait for that to happen to our climate.
When you run a company, you want to hand it off in better shape than you found it. Just as we shouldn’t leave our grandchildren with mountains of national debt and unsustainable entitlement programs, we shouldn’t leave them with the economic and environmental costs of climate change. Republicans must not shrink from this issue. Risk management is a conservative principle, as is preserving our natural environment for future generations. We are, after all, the party of Teddy Roosevelt.
This problem can’t be solved without strong leadership from the developing world. The key is cooperation between the United States and China — the two biggest economies, the two biggest emitters of carbon dioxide and the two biggest consumers of energy.
When it comes to developing new technologies, no country can innovate like America. And no country can test new technologies and roll them out at scale quicker than China.
The two nations must come together on climate. The Paulson Institute at the University of Chicago, a “think-and-do tank” I founded to help strengthen the economic and environmental relationship between these two countries, is focused on bridging this gap.
We already have a head start on the technologies we need. The costs of the policies necessary to make the transition to an economy powered by clean energy are real, but modest relative to the risks.
Climate change is the challenge of our time. Each of us must recognize that the risks are personal. We’ve seen and felt the costs of underestimating the financial bubble. Let’s not ignore the climate bubble.
Henry M. Paulson Jr. is the chairman of the Paulson Institute at the University of Chicago and was secretary of the Treasury from 2006 to 2009. He wrote this article for the New York Times.
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