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In a new op-ed in the New York Times, Paulson says he's seeing the same stresses that nearly brought down the banking system, and which led to the Great Recession, are playing out in climate.
Looking back at the dark days of the financial crisis in 2008, it is easy to see the similarities between the financial crisis and the climate challenge we now face.
We are building up excesses (debt in 2008, greenhouse gas emissions that are trapping heat now). Our government policies are flawed (incentivizing us to borrow too much to finance homes then, and encouraging the overuse of carbon-based fuels now). Our experts (financial experts then, climate scientists now) try to understand what they see and to model possible futures. And the outsize risks have the potential to be tremendously damaging (to a globalized economy then, and the global climate now).
To start addressing the situation, Paulson calls for the creation of a carbon tax, which he argues is actually a "conservative" solution, since it allows market forces to put a price on allocating resources toward or away from addressing the problem.
"A tax on carbon emissions will unleash a wave of innovation to develop technologies, lower the costs of clean energy and create jobs as we and other nations develop new energy products and infrastructure," he says. "This would strengthen national security by reducing the world's dependence on governments like Russia and Iran.
Paulson acknowledges that the U.S. alone can't address the situation - but that no one else will be moved to do so if it doesn't take the lead. And he takes his own Republican Party to task for not taking the crisis seriously, saying that the short term economic consequences will be swamped by the long-term ones that would come from doing nothing and allowing the crisis to build.
"Republicans must not shrink from this issue," he writes. "Risk management is a conservative principle, as is preserving our natural environment for future generations. We are, after all, the party of Teddy Roosevelt."
This week, he says, the Risky Business project, a climate change-focused group Paulson co-created last fall with Michael Bloomberg and retired hedge fund manager Tom Steyer, will will put out a financial analysis on the costs of inaction across regions and economic sectors most imperiled.