Stern Reviewed, David Steven

David Steven — Tue, 11 Dec 2007 13:57:57 +0000

Sir Nicholas Stern - these days a minor deity in the international firmament - spoke at a debate this evening on the new UNDP report on climate change and development.

Stern (whose name is invoked an average of 3,421 times an hour around the Bali conference centre) has become an unrivalled oracle for what climate change will cost, both if fixed and if left unchecked.

But one fact seldom noted is that his report focuses on keeping greenhouse gases below a level of 550ppm - a target that now looks quite dated, with most commentators talking about 450ppm or even lower.

Stern has hardened up his rhetoric too, reacting to IPCC findings that came after his review was published. This was clear in the debate, when he asked what a global deal on climate should look like.

On targets, he is now committed to concentration levels well below 550ppm. Emissions need to be cut by 50%, he says, which would set an average per capita rate of 2-3 tonnes per capita in 2050.

That would leave Europe on the global average, if it can cut its emissions by 80%. A similar cut for the US would leave it well above the average.

But for all countries to aim for the same per capita emissions would be deeply unfair on the poorer ones. They have never had the benefit of higher emissions (this is the exact opposite of John Kerry's argument yesterday).

"It would be like a group of people drinking from the well for a very long time," he said. "And, when they begin to realise the well is running dry, they all agree to have a glass of the same size. It's a very weak notion of equity. 80% cuts for developed countries is the absolute minimum that equity demands."

But what are the economic implications of all this? There are two much cited figures from the Stern Review (chapter 10).

On the one hand, unchecked climate change will cost as much as two world wars and the intervening depression combined. On the other, that action will be cheap - a one off charge of around 1% of GDP to be spent between now and 2050. (Stern puts a 3% error on this, up or down, but fewer people remember this.)

Over a century, we'd lose less than 6 months of global growth.

But this is to stabilize at 550ppm. In the review, Stern reports that relatively little economic modelling has been done for levels below 500ppm, but what there is suggests that below 400ppm "unaffordable mitigation options [are] quickly exhausted."

A 400-450pppm target would cost three times as much as 500-550ppm, Stern estimates. That implies a charge in the region of 3% of GDP, again with a possible 3% error either way.

"The lesson here is to avoid doing too much, too fast, and to pace the flow of mitigation appropriately," he concludes. "Great uncertainty remains as to the costs of very deep reductions."

After the debate, I jostled through the throng for a fleeting audience with the much-in-demand economist.

openDemocracy: "Has your thinking moved on since the Stern Review on the costs of mitigation?"

Stern: "It was very clear from the Stern Review that 550ppm was the absolute upper limit. It would be really reckless to go above that. So we suggested targets of 500-550ppm. A lot of the scientists have now come in strongly to say it should be 400-450ppm.

"That will cost a bit more, but in my view that's also worth paying. We said 1% to get below 550ppm. I think it might cost 1 or 2% to get below 500.

"But the sooner we start, the cheaper it will be. You give yourself the time to renew capital equipment because it starts to be time to retire it. You give yourself more time to discover new technologies and different ways of doing things. You get more time to set up and demonstrate institutions like carbon trading that are going to play a big role."

oD: "Do we need more economic research on lower stabilization targets?"

Stern: "We certainly need more research. We also need more research country by country.

"But look at the analyses that came after the Stern Review was published in October 2006, the International Energy Agency published the 2006 World Energy Outlook about a month after we did. They came out with costs for mitigation that were quite similar or a bit lower than ours.

"A recent study by McKinsey has come out with numbers that were, on the whole, a bit lower than ours. The Human Development Report was also a little bit lower than ours.

"I think the numbers we came up with have been reinforced by later research. Maybe there are arguments that we were slightly on the high side."

open Democracy News Analysis - Stern Reviewed, David Steven - Comments

Stern Reviewed, David Steven