Former Treasury Chief Sounds Alarm on Another 'Cruel and Dangerous Crisis'

In interviews with Greenwire and in a much-circulated op-ed column he published in June in The New York Times, Paulson talked about a growing "climate bubble," which threatens both the environment and the world economy.

"The definition of a bubble is that it's not fully understood by the markets until it bursts," Paulson said.  Like the mortgage bubble, he said, the climate bubble is quietly growing as a result of excesses in the market -- in this case, the carbon dioxide that has been pouring into the Earth's atmosphere for generations from sources that paid no penalty.

In both the financial and the climate change crises, Paulson said, flawed government policies were a "root cause" -- offering incentives to borrow on the one hand, imposing no disincentives to pollute and providing tax advantages for fossil fuels use on the other.

But Paulson said he has had second thoughts about the bubble analogy as it relates to climate change, because it will never "burst."

"There's a huge difference that makes the climate change crisis a much more cruel and dangerous crisis," he said.  "And that is that greenhouse gases stay in the atmosphere for centuries, and they're cumulative."

Greenhouse gases dating back to the start of the Industrial Revolution are already driving warming -- the investment banker calls them "nature's way of charging us compound interest" -- and as they accumulate further, there will be fewer and fewer opportunities left to right the ship.

So in contrast to the financial crisis, "there's no opportunity for the government to come in at the last minute and avert the worst outcomes," he said.  That means society must take action now despite uncertainties about the severity and timing of the threat -- or face the consequences.

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