Taking the economics of climate change seriously - at last

Too much of the debate about climate change has centred on the science and politics; too little on the economics. But not for much longer. On Monday the UK government publishes a massive 700 page report on the economics of climate change, the results of over a year's effort by former World Bank chief economist Sir Nicholas Stern and his team.

The Stern Review's earlier discussion paper, What is the Economics of Climate Change? (PFD), gives a preview. It argues climate change is a serious and urgent problem, global in its cause and consequences. Current actions are not enough "if we are to stabilise greenhouse gases at any acceptable level". The "economic challenges are complex", and will require a long-term international collaboration to tackle them.

Today's Observer front page leads with a story emphasising the likely costs: £3.68 trillion: The price of failing to act on climate change

...the most authoritative report on global warming warns it will cost the world up to £3.68 trillion unless it is tackled within a decade. The review by Sir Nicholas Stern, commissioned by the Chancellor of the Exchequer and published tomorrow, marks a crucial point in the debate by underlining how failure to act would trigger a catastrophic global recession. Unchecked climate change would turn 200 million people into refugees, the largest migration in modern history, as their homes succumbed to drought or flood.

Stern also warns that a successor to the Kyoto agreement on cutting greenhouse gas emissions should be signed next year, not by 2010/11 as planned. He forecasts that the world needs to spend 1 per cent of global GDP - equivalent to about £184bn - dealing with climate change now, or face a bill between five and 20 times higher for damage caused by letting it continue. Unchecked climate change could thus cost as much as £566 for every man, woman and child now on the planet - roughly 6.5 billion people.

...Stern's forecast cost of 1 per cent of global GDP is roughly the same amount as is spent worldwide on advertising, and half what the World Bank estimates a full-blown flu pandemic would cost. Without early intervention, he estimates the cost would be 5-20 per cent of GDP, some paid by governments, some by the private sector.

This report will be of such weight it cannot be dismissed, as others have. The Observer piece says:

Downing Street and the Treasury believe that the report marks a decisive moment in international politics. Stern's is the first heavyweight contribution by an economist rather than a scientist and senior officials believe he will make what might seem a hopelessly ambitious timetable credible. 'This will give us an argument to make,' said a Whitehall source. 'I think we are at a tipping point in terms of the debate, as we were at a tipping point in 2004/05 in terms of the science.'

For more previews, see Will Hutton's Observer piece At last - a map to lead us out of catastrophe, and Reuters: No climate action may spark economic crisis - report

In a related story on green taxes, the Mail on Sunday reports that Secret green tax blitz planned for cars, air travel and consumer goods. They suggest that the government is eying a raft of green measures to help combat climate change, including higher taxes on cars, air travel, fuel, lighting and consumer electronics.

The letter to Mr Brown, marked 'Restricted', demands urgent and radical action in next month's public-spending review and next year's Budget. Changing people's behaviour can be achieved only by 'market forces and price signals', it says, adding: 'Market-based instruments, including taxes, need to play a substantial role. As our understandings of climate change increases, it is clear more needs to be done.'

The Government must 'increase the pace of existing tax measures, broaden them into sectors where incentives to cut carbon emissions are weak and identify new instruments to drive progress in tackling greenhouse gas'.

This debate will run and run. What makes the UK debate interesting is that both opposition parties have supported various green taxes. One hopes we might see a more informed and less polarised debate than is usual on tax matters.

Along with the discussion paper, Stern's lecture/presentation in January to the Oxford Institute of Economic Policy, and his World Economy piece and rebuttal are also worth reading. They are available on Treasury's Stern Review website.

Comments

[Robert Metcalfe]

It will be interesting to see what Stern proposes for the sucession of the Kyoto agreement. A flat tax across of nations would not be fair since it will assume developing countries are at the same economic stage as developed ones. The permits offer the best approach but it will take some time to get that in order - and there will also be problems in terms of the allocation of permits (or would there be an auction?).

I read a nice piece by Byatt et al on the Stern report ( www.hm-treasury.gov.uk/media/278/84/correct.pdf ), who argue that the report is
"too confident and unqualified. What is said here about the scientific aspects gives insufficient weight to the pervasive uncertainties which still surround projections of climate change, largelybecause of the extraordinary complexity of the system under study. This complexity has been emphasised by the Intergovernmental Panel on Climate Change (IPCC) itself…We think that these uncertainties are underplayed in the (report, and)…it is in fact misleading to speak of ‘the science’, as though it were virtually settled".

[Bruce G Charlton]

A tough, but real, question: warmer or cooler?

The one thing that humans certainly cannot do is prevent climate _change_. Complex things like climate, ecosystems and human brains are always changing.

Climate is either getting warmer or cooler, by some amount or another.

How about this for a thought experiment: If we could choose, and we can't keep climate the same - then which change would we prefer: the world getting warmer or getting cooler?

[Lafayette]

Much ado about nothing?

May I remind you that there is NO definitive proof that this ecological change is not part of periodical changes that the earth has known over its entire history.

If this latter is the case, the Ice Age is coming back because its time is due - and there is not much that mankind can do about it. So, we should simply concentrate on getting people living in the very north and very south to warmer climates. Like Mars.

A bit of modesty, please. Homo sapiens occurred in a comparative "wink of the eye" as regards the history of this planet.

Stop the world, I wanna get off ...

[adrianne]

Lafayette, are you sure that it is time for this climate change and everything is normal? I wouldn't be that sure, especially because I cannot ignore our abuse on the planet's resources. Can you ignore naval war in the climate change process? Was it justified to have 2 world wars and expect no climate change? Read http://www.1ocean-1climate.com and maybe you will have a different opinion.

[Lafayette]

You're confusing everything. The wars you mentioned had no influence whatsoever on climate change.

Normal? What IS "normal"? Define it.

I reiterate my premise: Climate change has been an integral part of life on earth for hundreds of thousands of years. The recent up tick in the earth's temperature, over a comparatively miniscule period of time, is NOT YET statistically significant when one looks at the variations that have been noted throughout history (and they do not go back more than a couple of centuries). So, the climate Cassandras had better rethink their arguments.

This does not make me, however, any less an advocate for a change from the carbon-molecule to the hydrogen-molecule as a source of present or future energy needs. Or, for that matter, a renewed deployment of nuclear energy production.

I simply chose my arguments without being passionately headstrong about them. Now, you refute may them in the same manner.

When you next turn on your computer, THINK about where that electricity comes from and what the real alternatives are to choose from. For instance, 46% of electricity in the US is coal-fired generation and highly polluting of the atmosphere. Eighty-percent of electricity in France is generated by nuclear energy. So, it would seem intuitive that the US change to nuclear means for generating its energy needs. Well, this is not so, since new techniques are available to make coal a lot less polluting. And, it is, after all, a VERY abundant source of relatively inexpensive fuel. Ibid, natural gas.

There is no ONE magic solution for the world. The subject is very complex indeed.

NB: Along this line, I suggest HIGHLY that the article regarding Stanford Ovashinsky's work (in the latest edition of the Economist) be read.

[adrianne]

Are you sure war did no harm? Please check http://www.warchangesclimate.com/ and tell me what you think of it. I sure hope it will change your opinion.

[Lafayette]

Thank you for the site reference, but no it did not change my mind.

It simply regurgitates known facts. And, all it says is obvious: There are more people on earth so there is more pollution. Wow! Great discovery!

Quick solution: Assasinate every third person, and pollution will diminish over night.

The site is just another on a long list of "Climate Cassandras" that spew the same arguments about how awful the world has become because it is polluting spaceship earth. Mankind has been polluting the earth since we became bipeds.

Pollution is a "given", it is unavoidable. The question is how to mitigate its effects. And, population control is one VERY EFFECTIVE way to do so.

But, NO ONE is talking about THAT as a solution, are they?

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