“They’ll have to prove that it’s more economical to fix climate change than to live with it,” says Valvo, whose group is financed by Charles and David Koch, the billionaire brothers who head Koch Industries Inc., the commodities conglomerate based in Wichita, Kansas.
The plan to measure economic impacts only in the U.S. is flawed, Valvo says, because climate change is caused by global emissions and affects every country on the planet. Demand for coal, the dirtiest power source, will jump about 17 percent worldwide over the next four years, according to the International Energy Agency, as China and India burn more of the fuel.
“Climate change is the most complicated issue there is because of the extraterritorial impacts,” Valvo says. “It’s not like dealing with acid rain or smog.” The U.S. Environmental Protection Agency and state agencies were able to address those two air-quality problems by regulating local pollution sources.
Deep Conflicts
Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science, counters that making a fiscal case for regulating carbon may be the best way to break through the resistance on the issue. That’s imperative, he says, with scientists predicting the atmosphere may warm another 5 degrees by 2100.
“We are already seeing what can happen with a 0.8 degree increase in temperature, and we are looking at a high probability of a 3-degree to 5-degree increase, which would cause major changes in rivers, a collapse of the monsoon cycle in Asia, and trigger deep conflicts,” says Stern, whose institute is supported by fund manager Jeremy Grantham. “This is a staggering creation of risk, and an analysis of this risk is fundamental.”
Stern, a former chief economist at the World Bank, led a review for the U.K. government in 2006 that concluded a 5-degree rise in temperature by the end of the century could totally choke off global economic growth. Paulson and Steyer each consulted Stern separately last spring as they formulated their thinking on the issue.
Paulson and Steyer make an odd couple. The former cabinet official, who worked under President George W. Bush through the height of the financial crisis, is a reserved Republican. He returned to his family farm in Illinois after leaving government. Steyer is a gregarious Democratic Party fund-raiser who used to live with his family in San Francisco’s Haight- Ashbury neighborhood, the cradle of the counterculture in the 1960s.
They have two things in common. One is Goldman Sachs. Steyer began his career at the investment bank in the early 1980s on the risk arbitrage desk run by Rubin, who went on to become the firm’s co-chairman, from 1990 to 1992. The other is a conviction that Americans will get serious about climate change if they understand how much it’s going to cost.
Jobs Versus the Environment