Save The Economy By Protecting The Environment

Robert Rubin was a Secretary of the Treasury under Bill Clinton and a top executive on Wall Street.  He has become very concerned about climate change because we tend to think about it in the wrong way.  It is a mistake to think about climate change mitigation as a trade off between economic prosperity and the cost of mitigation.  He argues that the cost of inaction exceeds the cost of action.  Moreover, climate change is a present danger and not a future risk. For example,  the damages from Hurricane's Katrina and Sandy were $193 billion.  The carbon that we emit today has a long half live.  Some of the damages to the environment may become irreversible if we fail to take the necessary actions today.  In order to save our economy we need to protect the environment upon which the economy depends.

Rubin does not discuss the actions that need to be taken to protect the environment from climate change, but he argues that we need to change our accounting to recognize the costs of inaction.  He argues that the risks are not incorporated in most of our business plans.  The SEC suggests that they be included, but it is optional.  The SEC should mandate the inclusion of the risks from climate change in corporate business plans.  Government will have to spend large sums in response to the damages spawned by climate change.  These costs are not included in government budgets.  Paying for the damages from climate change will force governments to raise taxes or cut spending on other programs.  The costs from likely damages from climate change should be included in government budgets so that we can measure the cost of inaction.  Rubin also argues that we should alter the way in which we measure economic output.  We view GDP as the best available measure of the economy but it does not include the costs to society of the externalities associated with producing the output.  It includes the costs associated with extraction of raw materials from nature but it fails to account for the depletion of natural resources.  These resources are not infinite.