Climate is bigger risk than budget crisis: Ex-Obama aide

The potential fallout decades from now from climate change poses a greater financial risk to the United States than underfunded entitlement programs such as Social Security and Medicare, former Obama administration budget director Peter Orszag said Tuesday.

"The risk of catastrophic climate change ... [is] the 10 percent or 20 percent chance that we will have no idea what will happen, and we're taking a massive risk," Orszag told CNBC's "Squawk Box." He spoke before President Barack Obama made his latest pitch to tackle global warming at a summit meeting in Paris.

Read MoreObama: Climate change is an economic imperative

After decades of struggling negotiations and the failure to come to an understanding at a summit in Copenhagen six years ago, some form of agreement — likely to be the strongest global climate pact yet — appears all but assured by mid-December.

"It's very simple: We need to tax carbon," said Orszag, currently vice chairman of corporate and investment banking at Citigroup. "You can't expect people to do it completely voluntarily."

Addressing a question about when coastal real estate or insurance premiums on those properties might reflect the risks of climate change, he said, "Financial markets are not very good at pricing risks that are two, three, four or five decades out."

Obama opened the climate summit Monday, contrasting the Nov. 13 terrorist attacks by the Islamic State terrorist group in Paris with efforts to combat climate change. "What greater rejection of those who would tear down our world than marshaling our best efforts to save it?"

French President Francois Hollande took it a step further, saying, "What is at stake with this climate conference is peace."

"The fight against terrorism and the fight against climate change are two major global challenges we must face," Hollande added.

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—Reuters contributed to this report.