April 28th, 2015


Former United States Secretary of the Treasury


Hank Paulson believes that climate change is the biggest risk we face, and not just because of the environment.  “It’s the biggest economic risk we face,” says the former treasury secretary and co-chair of the Risky Business Project.

But unlike the financial crisis of 2008, he warns, the government won’t be able to bail us out of global warming at the last minute.  “We tend to deal with issues nationally when there's an immediate crisis, rather than a longer-term issue,” Paulson points out. “And the terrible thing about climate change risk is that carbon emissions, essentially for all practical purposes stay up there forever, so it’s accumulative. The longer you wait here, the more costly and the more difficult it's going to be to avoid the worst outcomes.”

Climate change was just one of the topics Paulson touched on while visiting The Commonwealth Club to talk about his new book, “Dealing with China.” The title is apt -- as chairman and CEO of Goldman Sachs, Paulson spent much of the 1990’s doing just that. It was a time of great economic and political reform for the country, and Paulson was allowed rare access on his many visits.  He brought the Climate One audience up to date on a wide range of issues, from China’s economy and government leadership to its evolving stances on human rights, the environment and US-China relations.  

“I believe that this is the most important bilateral relationship we have in the world,” says Paulson.  Despite – or perhaps, because of – the fact that China is becoming our biggest competitor, Paulson believes that working together is the only way to solve the world’s problems.

“So we’re partnering with them in some things and competing in others,” he continues.  One issue both countries have publicly agreed on is the need to address climate change.  “There, it’s impossible to avoid the worst outcomes if major developing countries, and particularly China, the largest emitters of greenhouse gases, aren’t taking the necessary actions.  And they, more than any other of the developing nations, understand the problem and are committed.”

China’s leaders, says Paulson, are focused on air pollution big time. But can China hope to reduce its carbon footprint while struggling to lift the majority of its citizens out of poverty?  In other words, is it possible to balance economic growth with environmental responsibility?

“I have always believed that the two go together,” Paulson asserts. “No growth is going to be sustainable, no prosperity is going to be sustainable, if we don’t have a clean, healthy environment.  And unless you have a certain amount of economic success, it’s going to be hard to have the ability to do the things you need to do.  

“So these are the opposite sides of the same coin, rather than being in conflict.”

Paulson predicts that urban growth, and its attendant environmental hazards, will be a major issue for China, as millions of rural poor flock to its cities. “This country produces and consumes half of the cement, half of the steel, half of the coal -- half of all new buildings on earth go up in China.  And the urbanization model they have right now doesn’t work, they know it. They built cities for cars, not people.”

The Beijing arm of the Paulson Institute is helping to address some of those issues, by partnering with China’s cities to introduce more sustainable and energy efficient building practices.

But it’s not just a one-way street – there’s plenty that we can learn from the Chinese as well, Paulson notes.  “I would cite one in particular: these leaders are very, very pragmatic. They look everywhere in the world for the best practices and then they look to implement them.  And…they’re very candid about their problems.  

He recalls a conversation in which one Chinese mayor cited his admiration for Reagonomics, to Paulson’s surprise.  “I thought, I can’t imagine a US mayor being aware of what the Chinese problems were -- and having some views on how to fix them.  That’s to me the biggest positive - a practical, pragmatic leadership that recognizes that they’ve got problems, and is going to look everywhere and move to solve them.”

Recognizing their country’s challenges and addressing them head-on has led to visible improvement in the lives of China’s citizens, says Paulson.  He has even seen progress in the politically charged area of human rights.

“I view economic issues, I view environmental issues, there’s a whole set of issues that are human rights issues,” he told the audience. “And you have to acknowledge that in the time I’ve been going to China, the living conditions, the lifestyles, the basic rights that the Chinese have, in terms of traveling internally, externally, have just improved dramatically.”  

There was one aspect of ‘dealing with China’ that teetotaler Paulson never embraced – the drinking of maotai, a notoriously potent Chinese liquor. How did he sidestep the social pressure to imbibe with his hosts?

“I had a ‘designated drinker,’” he laughs. “I’ve never tasted maotai, and I’m glad I haven’t!”


Related Links:

The Paulson Institute

Risky Business: The Economic Risks of Climate Change

NY Times: The Coming Climate Crash


- Anny Celsi
April 28, 2015
The Commonwealth Club of California
Photos by Ed Ritger