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Climate Change Is Single Biggest Risk To Global Economy - Paulson At CGI2014

By Daniela Cambone of Kitco News
Monday September 22, 2014 6:55 PM

New York City (Kitco News) - Few were more tightly involved with managing the financial crisis than Henry Paulson, Treasury Secretary during President George W. Bush's administration. Speaking Monday, he said the stresses that nearly brought down the U.S. financial sector are now playing out in climate. 

During a panel discussion at the Clinton Global Initiative’s annual meeting in New York, Paulson made parallels between the 2008 financial crisis and today's climate crisis. The build-up of greenhouse gas emissions mirrors the debt excesses of 2008. And flawed U.S. government policies, encouraging the overuse of carbon-based fuels are much like the banking incentives, which encouraged borrowing to finance homes.  

The panel, which focused on how confronting climate change makes for good economics, was moderated by Judith Rodin of the Rockefeller Foundation and featured Henry Paulson of the Paulson Institute and the Prime Minister of Denmark, Helle Thorning-Schmidt. 

Photo courtesy of CGI2014: From Left to right: Judith Rodin, of the Rockefeller Foundation moderated a discussion with Henry Paulson, of the Paulson Institute and the Prime Minister of Denmark, Helle Thorning-Schmidt on climate change the global economy.

"I am looking at this through the lens of risk - climate change is not only a risk to the environment but it is the single biggest risk that exists to the economy today," Paulson said as he addressed the crowd. 

Climate change needs to be analyzed just like other risks and businesses need to incorporate the analysis into their decisions, he explained.  Paulson stressed that businesses need to be prepared since investors will increasingly demand disclosure and business leaders "need to get ahead of this." 

As for skeptics who see investing in climate change as a form of pampering, Paulson had strong words.  "Short-term is the enemy out there.  To begin with, when people say it doesn't make economic sense, I want to scream out bullshit."

He added, "[O]ne thing the government doesn't do very well, is focus on controversial issues, if they are longer term in nature.  If you don't take action there is a huge fiscal risk," Paulson said, noting we are going to have future "natural disasters, floodings and the Hurricane Sandys."

In all fairness, Paulson said he does not expect businesses to step-up without the help of government policies. "What [Denmark's] Prime Minister explained is magic; unleash the market state and a wave of innovation and bring down the cost of alternative energies and change consumer behavior."

The best way to get there is to put a price on carbon said Paulson.  "If you want to avoid the very worst outcomes, you need policy measures that are incentives for new clean-tech technologies." The tax would allow market forces to put a price on allocating resources toward or away from addressing the problem, Paulson explained. 

Since 1990, Denmark has reduced its greenhouse emissions by 14% and they are projected to fall by 23% in 2035.

"There should be no reason to think that confronting climate challenges doesn't make for good economics," said Denmark's Prime Minister Thorning-Schmidt.  

"We continue to have growth and create jobs without producing carbon emissions," she said. How do you successfully do that she questioned? "You need to set the target and you have to have stakeholders understand that you are setting these targets." 

"Ten percent of our export now is green tech export, it has grown to be a major business in my country," she said. 

Thorning-Schmidt added that Copenhagen has ambitious plans to be completely fossil-free by 2025.  "You have to find smart solutions and the good news is the smart solutions are there - now we have to adopt and use them." 


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By Daniela Cambone of Kitco News; dcambone@kitco.com
Follow Daniela Cambone on Twitter @DanielaCambone

 

 

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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