Earlier this summer, the unlikely trio Michael Bloomberg, Hank Paulson, and Thomas Steyer helped launch a new study entitled, “Risky Business,” which discussed potential impacts of climate change in different regions of the United States. These men were chosen to co-chair the study not because of their expertise in climate modeling—obviously—but rather because they all hail from the intersection of Big Government and Big Finance. Since the new spin of “Risky Business” is to get policymakers and business leaders all on board the party line concerning climate change, these three men were perfect for the role.

In our original post here at IER responding to the study, we pointed out some of the rhetorical and technical problems in “Risky Business.” Now in the present post, we’ll zoom in on the study’s central flaw: An inconsistent flip-flopping between micro-adaptation and macro-mitigation policies. Specifically, most of what is discussed in “Risky Business” is, at best, useful information for business owners and investors to keep in mind.

Even if the reader took the scary scenarios in “Risky Business” at face value—which the reader shouldn’t—there still would be no justification for government policies to reduce U.S. emissions. Yet the rhetorical purpose of the study clearly is to bring business leaders on board with the government-activism “consensus” on climate change. Thus “Risky Business” is flawed at its very core: It tries to build a coalition with arguments that don’t work, even on their own terms.

Responding to “Risky Business,” Part 1

When the study was first released, we here at IER remarked on the hypocrisy of Hank Paulson now lecturing Americans on the importance of risk management. It was Paulson, remember, who in his role as Treasury Secretary in the Bush Administration had been upbeat about the U.S. economy in a July 2008 appearance on “Face the Nation,” a mere two months before the crisis hit. Then after Lehman failed and the financial world was in panic, Paulson suddenly wanted to give hundreds of billions of tax dollars to the very institutions that had mismanaged risk for years during the housing bubble.

In our earlier post, we also pointed out examples of how the “Risky Business” report misled readers on the severity of particular climate change risks: the report raises alarm bells on certain topics that are not consistent with, say, the latest IPCC report on the physical science of climate change.

But in the present post, we will explain a more fundamental problem with “Risky Business”: It seeks to build a coalition between political and business leaders on climate change, and yet nothing in the report even comes close to an argument for government intervention in this arena.

The Central Flaw With “Risky Business”

The fundamental flip-flopping in “Risky Business” can be illustrated by two back-to-back quotations from “Risk Committee members” that the report puts in huge font at the top of their respective pages. The first quote comes from Robert Rubin on page 44:

“I think we have to begin by recognizing the reality and severity of this threat to our economies, both United States and globally, and really to life on earth more broadly as we know it. We also have to recognize that this problem needs to be dealt with now. We cannot wait because greenhouse gases in the atmosphere, once they’re there, remain there for centuries so that every year is greater and more severe in terms of greenhouse gas emissions cumulatively than had been the case the year before.” – Risk Committee member Robert E. Rubin

Rubin is here clearly referring to the (alleged) crisis of continued greenhouse gas emissions, and how humanity must take immediate steps to severely reduce such emissions in order to avoid impending catastrophe. He actually describes it as a threat to “life on earth…as we know it.” This isn’t an issue of some Floridians having to water-proof their beach houses.

So in light of Rubin’s quotation—and the fact that it takes up the whole top half of page 44 in the report, because it is displayed in such large font—the reader must think that the “Risky Business” report is advocating a carbon tax or similar policy implemented by governments around the world.

Yet on the contrary, the “Risky Business” report is very coy. It claims not to offer any particular recommendations. It actually lulls the reader into thinking that it is mostly equipping business leaders and regional government officials with the information they need to make on-the-ground decisions.  For example, on the very next page (p. 45) of the report, the section is headed with the following quotation from another Risk Committee member, former Senator Olympia Snowe:

“If we were told—in any sphere—that we had at least a 90% chance of averting a disaster through changes we ourselves could make, wouldn’t we take action?” – Risky Business Committee member Olympia Snowe

Thus we see the fundamental flip-flop: Rubin’s long quotation from page 44 can only make sense if the Report is urging a globally-coordinated government crackdown on carbon emissions. Yet on the very next page, Snowe claims that “we” (which presumably means the Americans reading the report, which focuses on regional U.S. impacts) have the power to avert this catastrophe.

These two claims do not fit together. Even if policymakers took Rubin’s advice to “act now” and immediately halted all further U.S. carbon dioxide emissions forever, this draconian move would only make global temperatures one-tenth of a degree Celsius cooler in the year 2100 than they would otherwise be, if the U.S. government took no action.

Thus we see the contradiction between the prominent quotations from Robert Rubin (p. 44) and Olympia Snowe (p. 45). When Rubin says that “this problem needs to be dealt with now,” he is referring to curbs on emissions, if we are to have any hope of rescuing “life on earth…as we know it.” Policies designed to curb emissions are known as mitigation in the technical literature.

Yet on the next page when Snowe claims that “we ourselves” can make the changes necessary to produce at least a “90% chance of averting a disaster,” then she obviously must be referring to steps that U.S. government and business leaders can take to prepare for coming climate changes. Such an approach is called adaptation in the technical literature.

Mitigation versus Adaptation

The defender of the “Risky Business” report would argue that it seeks both approaches, urging policymakers to engage in mitigation (i.e. reduce carbon emissions) and adaptation (i.e. prepare for inevitable climate changes). But to repeat, this rhetoric doesn’t add up. The U.S. acting unilaterally will be a proverbial drop in the bucket when it comes to global emissions and the long-run impact on global temperatures. Since the whole focus of the report is on regional impacts in the U.S., this vague allusion to a global solution—which necessarily involves the U.S. government acting in concert with all major governments around the world—is a huge omission from the report.

But things get even worse. It’s simply not true that federal, state, and local governments need to play any role in helping business leaders adapt to whatever ways the climate may change over the coming decades. For example, if certain regions of the country become warmer and drier (as “Risky Business” predicts), then the farmers in that region will naturally switch their crops and techniques accordingly. Farmers don’t need a government program to tell them to occasionally reevaluate what they’re doing, to see if a change in plans could make them more money at harvest.

The busybodies behind “Risky Business” have painted themselves into a rhetorical corner. They want to focus on regional impacts, to “make it personal” as it were. But again, by doing so they undercut the “market failure”-type arguments by which economists can try to justify government limits of emissions. When it comes to local adaptation to climate change, there is no reason to think government officials will have better information or wiser judgment than the businesses involved.

For example, consider the following quotation from Donna Shalala, yet another member of the Risk Committee:

“People in Florida really have thought through some of the consequences…to the extent that they can do some things themselves through their local governments, through the state, they certainly have stepped up to do many of those things…but it’s not enough. This is going to take a national investment.” – Donna Shalala, “Risky Business,” p. 46

Well isn’t that magnanimous of Ms. Shalala—she concedes that people in Florida “really have thought through some of the consequences.” It’s almost as if the owners of billions of dollars of coastal real estate might care as much about their property as Donna Shalala does.

When it comes to adapting to potential climate change—by considering sea level rise when building new hotels, or wondering how long the winters will be over the next few decades before building a new ski lodge—private business owners have the proper incentives to get their forecasts correct. If they guess wrong, they will lose their own money. In contrast, if Robert Rubin, Olympia Snowe, and Donna Shalala turn out to be wrong in their warnings to the public, nothing bad will happen to them.


In addition to drawing from personalities that are hardly neutral, the “Risky Business” project suffers from a fundamental flaw: It flip-flops between scaring the reader about global climate change and the need to “act now” to curb emissions, while at the same time analyzing various regions of the U.S. and telling the reader that “we” have the power to protect ourselves.

These two, competing rhetorical themes contradict each other. If the Report is indeed talking about the specter of rising carbon dioxide concentrations in the atmosphere, then “we” don’t have the power to do much at all about it—it would take a global crackdown by all major governments, something that is now even more unlikely since Australia repealed its carbon tax.

On the other hand, to the extent that “Risky Business” is merely providing information for business leaders to adapt to local conditions, then there is no role for government intervention. Businesses have incentives to forecast temperature and rainfall trends accurately; they will make mistakes, but fewer mistakes than “studies” with a political agenda.

In conclusion, the most that “Risky Business” can do is provide technical information to business leaders (and perhaps local government officials who must make infrastructure decisions) concerning the latest scientific studies of climate change. Yet these business leaders can hire consultants to provide them with this information already; it’s not as if Michael Bloomberg had a secret team of scientists working in a bunker.

No, the actual purpose of “Risky Business” is to build up support in the business world for government intervention in the name of fighting climate change. Yet this is the one thing that the various data and projections summarized in the Report don’t justify. By its very construction, “Risky Business” focuses on the U.S., and yet actions by the U.S. government (let alone state and local) won’t make a dent in global emissions of carbon dioxide. Thus the report suffers from a fatal internal contradiction.

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