Yahoo Finance Presents: Sec. John Kerry

On this episode of Yahoo Finance Presents, former U.S. Secretary of State John Kerry sat down with Yahoo Finance's Editor-in-chief Andy Serwer to discuss a new clean energy ETF, KRBN, as well as the fight against climate change, natural disasters, and the upcoming election.

Video Transcript

[MUSIC PLAYING]

ANDY SERWER: Welcome to Yahoo Finance Presents. I'm Andy Serwer joined by Former Secretary of State John Kerry, who is also an advisor to an exchange-traded fund that tracks the market for carbon credits, which is seen as a way to reduce carbon emissions.

Mr. Secretary, thanks for joining us.

JOHN KERRY: Happy to be with you. Thanks, Andy.

ANDY SERWER: Can you talk about what this ETF is, how it works, and how do you hope it will influence carbon emissions pricing?

JOHN KERRY: OK, I'd be delighted to. Well, I mean exchange-traded funds are no stranger to the exchange, obviously. And this is one, however, which is new in that it is index based on three marketplaces currently in existence for the trading of carbon.

One is the California-Canadian trading region, the Northwest, if you will. The other is Reggie, which is New England-- a number of the New England states who've come together and Canada. And then finally, Europe. The European market is the largest of those markets to date, but China is reportedly going to be coming online with their own trading market by the end of the year.

So increasingly, people are realizing there is going to be major initiative with respect to climate over the next months. Just today it was announced that some 60-plus leaders in Europe have come together, President Macron, Prime Minister Boris Johnson, the Chancellor of Germany, they've all come together to commit to major initiatives on climate. And the Green Deal in Europe is going to be passed.

So what's going to happen is inevitably more and more governments are going to get involved in setting up regulations with respect to carbon, and that is going to push people in the marketplace to find the price equilibrium. Now, most experts will tell you that to really have an effect on carbon and on the marketplace, you're going to have to have $100-plus per ton of carbon. But that's why this is interesting, because right now the market-- I don't know what it is today, but it was around $20, $22, and that's going to go up, and people are going to look for a way to manage their companies.

If they're producing more carbon than is acceptable, they will be able to buy the credits and trade those credits, and this will be indexed to that trading. So it is a way, in effect, to be able to take advantage of the ESG and the develop-- the sustainable development goals of the UN, which everybody is signed up to, and people are looking for ways to actually implement.

ANDY SERWER: What is the name of the ETF, Mr. Secretary? And we've been talking about this for a while, cap and trade is not new. Is it taking a little longer than you thought?

JOHN KERRY: Well, we've gone through-- well, the name is Carbon, K-R--B-N, that's the ticker. And it's a product of KraneShares and CLIFI, Climate Finance Group. And I think it's a terrific idea. I think this is ahead of its time. People will come to it.

But we're not ahead of the time-- ahead of our time in terms of the mandate to reduce carbon and to begin to price it. And by the way, this is bipartisan. You have people like George Shultz, former secretary of treasury and secretary of state. You have Jim Baker, former treasury chief of staff of the White House with Ronald Reagan and George HW Bush and secretary of state. They're arguing we have to price carbon, as are many economists.

So I think this-- you know, this fund is ahead of its time in that sense. But the reason it's taken so long to be doing what we need to be doing is because we have this massive school of denial that has seized people around the world. And there are various things, by the way, not just on climate.

But we've had denial on COVID-19. The president of the United States was one of the fundamental denialists. We've had denial on nicotine, cigarettes, with the old RJ Reynolds episode. We had denial of Rachel Carson who was telling people that DDT actually caused cancer. We've had denial on acid rain. We've had denial on any number of lifesaving measures we could have taken.

So this is part of a larger confrontation that we have with reality versus sort of your own reality, created reality, alternative facts, whatever you want to call them. But I think this is going to happen. Carbon is going to be priced in various marketplaces, ultimately, I think, globally. This index is way ahead by pulling from the three different existing markets. And I think it's a terrific place for people to invest to be able to begin to put their money where their mouth is on ESG and deal with the sustainable goals and be ahead of the curve, because the price of carbon will ultimately rise.

ANDY SERWER: You were one of the architects of the Paris Accords, and I'm wondering if this is also connected in any way to World War Zero, which is a coalition that you founded to fight climate change?

JOHN KERRY: Well, Andy, the truth is we're wait-- look, I'm not somebody who runs around trying to be, quote, "an alarmist." And I'm not trying to generate people's activity by being an alarmist. But there's a distinction between alarmism that is for the sake of raising alarm and alarmism that is the reaction to the reality which ought to give you a sense of alarm.

And the truth is that the scientists for years have been telling us what is going to happen. It's happening. We spent $265 billion two years ago on three storms-- Harvey, Irma, and Maria. Harvey had more rain dropped on Houston in five days than goes over Niagara falls in a year. Irma had the first sustained measured winds of 185 miles an hour for a sustained 24-hour period. And we all know what Maria did to Puerto Rico.

So you know, does it make sense to spend $265 billion just to clean up after the storm? Or do you want to take measures to prevent them, to get ahead of them? Look at the fires in California. Every scientist will tell you they are related to the warming of the temperature, the drought that has taken place, and the different cycles of wind that we get as a consequence of what's happening with greater intensity.

You also have refugees around the world now moving because they can't live where they've lived. It was 130 degrees in a Pakistan community last summer, this summer. It was 130 degrees in Death Valley. In fact, in the Antarctic, it was 70 degrees Fahrenheit on several days in February this year.

So this is profoundly affecting the safety and security of people. It is going to affect property and property values. It affects ports up and down the East Coast. And we are not doing what we need to do to really be ready for this.

ANDY SERWER: And yet I can hear President Trump, Mr. Secretary, pooh-poohing pretty much everything you just said, saying it's fake. It's a coincidence. It's not real. It's an aberration. Does he make these sorts of initiative that much harder?

JOHN KERRY: Yes. Absolutely. Makes it much harder, because there are people who listen to the president and who follow him, I hope less and less as they discover how fraudulent he has been with them and with Americans. I mean, you look at his tax returns today, I mean, $75,000 deduction for haircuts and-- and hair management, I guess you call it, and $750 paid in taxes.

He claims to be a multi-billionaire. There's no evidence that he really is. He's been good at losing money in his businesses. That's really what his business does. And he avoids paying taxes accordingly.

But I know how it works. I was on the Finance Committee, and I've written some of our tax laws. So I have no illusions about the reality. And I'm not claiming illegality. I'm claiming impropriety and something that is obviously not the mark of somebody who's a skilled businessperson.

But looking beyond that on climate, the president is making it more expensive for Americans, and he is costing lives. People have died in these floods. They die in the fires. They die in the mudslides. Just as they have died of COVID when they didn't have to because of the lack of adequate response by this president.

ANDY SERWER: One more question about the president's finances from that blockbuster "New York Times" story that you referenced, Mr. Secretary. And Nancy Pelosi-- and Speaker Pelosi called his $421 million in debt a national security concern. Do you agree with that? And do you think his creditors should be made public?

JOHN KERRY: Absolutely. Unquestionably they should be made public, the creditors of any president of the United States. When I was in the Senate, we had a full disclosure every year of any changes in our financial situation. We had to fully disclose our worth. We had to disclose where our assets were. When I was secretary of state and went through a full vetting on all of that, I had to recuse myself on one or two things, because I mean, those-- that's the reality.

This president has completely broken down that system which was set up to establish trust with the American people. And because of it, with $421 billion of liabilities, some country can hold him hostage. And there's evidence, obviously, it is a known fact that some-- a considerable amount of money-- excuse me-- comes from abroad.

And we have watched the president's behavior with respect to Russia and President Putin, and it raises very serious questions about the nature of Deutsche Bank loans and other money that has been funneled. And in fact, Donald Trump Jr. himself is quoted in several articles as having bragged a number of years ago about how much money was pouring in to their golf courses from Russia.

ANDY SERWER: Final question, Mr. Secretary, how sanguine are you about Joe Biden winning the election in November, or maybe not November, but we hope this fall, hope that the election is resolved this fall, I should say? What do you think his chances are? It looks pretty close at this point.

JOHN KERRY: Well, let me tell you something. I was-- I was allegedly winning, and our polls showed that I was winning in the last week until an Osama bin Laden tape appeared on Friday before the election. So am I sanguine? No, not in the least, and nor is he.

Nobody in the Biden campaign is taking anything for granted. They don't watch the polls day-to-day. They're-- they're going to go full speed ahead to the last day and last moment.

And that's the only way to campaign today, and I think Joe understands that. But I think his campaign is well-funded now. I think he has a great sense of why he's running. And I think in the debate tomorrow people will get a great sense of Joe Biden.

ANDY SERWER: Former Secretary of State John Kerry, thanks so much for your time.

JOHN KERRY: My great pleasure to be with you. Thank you very much. Take care.