Henry Paulson Jr. was the treasury secretary who presided over the financial collapse of 2008 and the emergency measures put in place to prevent an even worse collapse. Whatever degree of credibility he has been able to maintain following those events, it is clear, at least, that he is on intimate terms with folly and disaster.
That’s why the oped piece he wrote for The New York Times on Sunday was so interesting. He likened the financial collapse to climate change: In the financial crisis, the failure correctly to perceive risk brought with it enormous costs; in the case of climate change, there is enormous risk in doing nothing.
It is a sign of the times that it’s significant news when a prominent Republican admits that climate change, caused by humans, is a reality. Paulson counts as a prominent Republican: a former Wall Street titan who served in the cabinet of President George W. Bush. That makes his understanding of the climate crisis significant, even if most fellow Republicans view his position as a heresy that must be dismissed out of hand.
Paulson is joining with Michael Bloomberg, former mayor of New York, and Tom Steyer, retired hedge fund manager and activist Democrat, to form what they call the Risky Business project to raise awareness of the need for a carbon tax to curb carbon emissions.
As columnist Paul Krugman of The New York Times argues, a carbon tax is the most obvious, elegant and potentially effective solution to the problem of carbon emissions, but it stands little chance of adoption by a Congress where Republicans have virtual veto power. For that reason, Krugman is urging Paulson and others to get real about a variety of second-best choices, such as the Environmental Protection Agency’s regulations about emissions from power plants and fuel-efficiency standards. It’s easy to be for a proposal that stands little likelihood of approval.
But before dismissing the carbon tax out of hand, it’s worth thinking about why it is an elegant solution. The carbon tax is based on basic economics and the mechanisms of the marketplace. At present the price of fossil fuels is artificially low because consumers do not have to shoulder its full costs. Rather, the cost of the damage caused by consumption of fossil fuels is passed along to the society as a whole, and the Earth. It is like the factory that leaves behind poisonous, polluted land without paying for its cleanup, instead leaving that job to the government. Waste from the consumption of fossil fuels is ending up in the atmosphere, and we will all pay a price for that.
Every time we buy gasoline, we are encouraging the warming of the planet. But if the price of fossil fuels were higher, a number of things would happen. There would be market pressure to make more efficient vehicles and to produce electricity from alternative fuels. The cycle of innovation that has already brought down the price of solar energy would speed up, and solar technology would become even more effective and affordable. Whole new industries would crop up, as they have already.
Republicans can be counted on to oppose all tax increases, even one with effects as beneficial as a carbon tax. Supporters of the carbon tax say that the burden on ordinary citizens could be eased by using revenue from the carbon tax for rebates, which would be especially useful if they were rebates that paid for energy innovation.
Republicans in Congress are lined up to do the bidding of the fossil fuel industries, and heretical words from Paulson are not likely to change their loyalties. But for Paulson to take a stand on climate change is an indicator that the business community is less and less a solid bloc. The Koch brothers are the notorious billionaire climate change deniers who have been funding a campaign of resistance and disinformation. Paulson, Bloomberg and Steyer are showing us that there are others within the business community who are more reality-based.
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