View of a coal power plant against sun. (Shutterstock)
View of a coal power plant against sun. (Shutterstock)

Oh dear! The Wall Street radicals are at it again.

No, I am not referring to the Occupy Wall Street protestors.

Former U.S. Treasury Secretary and past CEO of Goldman Sachs (that well-known bastion of radical thought) Henry Paulson wrote a commentary on climate change in the New York Times, here. Paulson draws on the lessons of the global financial crisis to warn that ignoring the problem today will result in much higher costs tomorrow. As he puts it, we are on a climate change "bubble."

What makes the contribution so interesting is not the argument, but the author. Paulson is no wide-eyed fanatic of the environment. He is, rather, a pragmatist who, seeing the risks of a possible climate change tipping point (see earlier post, here) and balancing the costs of action against the costs of inaction, has called on business to mobilize in pursuit of enlightened self-interest.

To channel Shakespeare's Hamlet: Will his clarion call be heeded? Or will we move closer to a possible environmental tipping point. That is the question.

The release earlier this week of a bi-partisan report that details the projected costs associated with climate change might help. (Of course, there are those unwilling by reason of personal or corporate financial interests who will not be swayed. As Upton Sinclair observed, "It is difficult to get a man to understand something when his salary depends upon his not understanding it.") However, the Risky Business report, endorsed by three former Treasury Secretaries (including Robert Rubin, another Goldman Sachs alumnus -- could there be climate change cabal at Goldman Sachs?) documents the potential costs in terms of flooding in Florida and Louisiana and heat-related deaths in California, Texas and Florida. The costs include, for example, lower yields in the agricultural bread basket of the mid-west and lower labour productivity. And don’t forget the increased costs of cooling and heating in an environment characterized by greater fluctuations in temperatures.

In this respect, the underlying goal of the Paulson article and the Risky Business report is to change the way businesses view the climate change debate. Rather than pesky measures that can increase the cost of business, climate change mitigation should be viewed as an investment in reducing future costs. Of course, there is considerable uncertainty attached to the estimates of cost, as is the case with respect to any projection. But that does not negate the point that prudent managers, when encountering risks, take steps to mitigate losses.

If the Wall Street radicals succeed in spreading that message, there may be a step back from a possible climate change tipping point.

The opinions expressed in this article/multimedia are those of the author(s) and do not necessarily reflect the views of CIGI or its Board of Directors.
  • James A. Haley is a senior fellow at CIGI and a Canada Institute global fellow at the Woodrow Wilson Center for International Scholars in Washington, DC.