The climate change industry always needs a fresh angle, and the latest is that carbon emissions are an economic threat akin to mortgage-backed securities before the financial panic. The analogy comes from Hank Paulson—and if he has spotted a bubble this time, we guess one out of two is an improvement on zero out of one.
With the travelling billionaire wilburys of Tom Steyer and Michael Bloomberg, the former Treasury Secretary put out a 197-page study last week that predicts the costs of a warming catastrophe. Their "Risky Business" project is meant to awaken the green conscience of business leaders, and President Obama's endorsement was inevitable: Even George W. Bush's money man agrees . ..

The report reads like a prospectus, except with years of "investments" in fossil fuels returning damage across industries and regions. The authors estimate storms along the eastern seaboard and Gulf of Mexico will cost $2 billion to $3.5 billion more, while they also look at so-called "tail risks," or worst-case crises with a 1-in-100 chance of happening: New York City could be 6.8 feet underwater by century's end, crops could wither in heat waves by 42%, and so forth.
Mr. Paulson's particular contribution has been to summon the apparitions of the 2008 crash. He recently mused that his career in business and government taught him that "it is time to act before problems become too big to manage." The "climate bubble," as he puts it, is like the housing excesses that built up in the global financial markets and could lead to contagion.
CEOs might reasonably question Mr. Paulson's skills as a risk manager, given that as Treasury chief he went along with the Beltway flow and assured the public that Fannie and Freddie were in good shape until it was too late. And are there even amateur investors who are unaware that climate change is a matter of some political interest? Many public companies already embed a proxy cost of carbon when they invest and disclose material risks that climate change may or may not pose to their balance sheets.
"Risky Business" endorses a carbon tax, and that option really does share something with subprime loans and exotic financial instruments: Choosing to ration carbon today is a bet about the future—and one likely to end no better.
The world saw modest warming over the 20th century but temperatures have plateaued over the last 15 years or so, a pause the climate models did not predict and cannot explain. The climateers say the warming must be taking place deep in the ocean, which could be right but for which they have little evidence. There will always be inherent scientific uncertainty regarding a phenomenon as dynamic and complex as the Earth's climate, but the climateers admit to no uncertainty other than that the apocalypse might be worse.
As a business proposition, Mr. Paulson wants to gamble on new taxes and regulation to prevent even unlikely dangers—regardless of the costs and however minor the gains of U.S. decarbonization may turn out to be in practice. Yet China and the rest of the world will continue to rely on fossil fuels for decades as populations grow, economies expand and living standards rise.
Turning over the U.S. economy to the green central planners may expose the country to even greater climate harms, to the extent that their ministrations impede economic progress. A wealthier future society will be better able to adapt and mitigate harm over time if Mr. Paulson's side of the bet is right.
U.S. emissions have fallen to 1994 levels in large part because of the unconventional natural gas revolution, which burns cleaner than coal. That revolution might never have happened in a world of heavy carbon taxes. And the capital necessary to finance this and other innovation will be less available in a less prosperous country.
Speculators like Mr. Paulson are actually inflating a climate regulation bubble—and the real danger isn't that the problem is too big to manage. It's their supposed solution.