Since the publication of the Stern report on the economics of climate change on 30 October 2006, several things about climate change have come into much sharper focus. We know what the world has to do to avoid the risk of fundamentally undermining our prosperity and security. We know how to do it. We know we can afford the cost. We have the technology and the capital we need to guarantee climate security. What we do not know is how to mobilise that technology and capital on the scale and with the urgency required by the inexorable laws of physics, chemistry and biology. In other words: it's the politics, stupid.
When Kofi Annan addressed the climate-change conference in Nairobi on 15 November, he pointed to "the frightening lack of leadership" from the world's politicians. There is a yawning gap between what the science of climate change requires if we are to maintain climate security and the pace at which either national or global action is taking place.
Tom Burke is a visiting professor at Imperial and University Colleges, London and a co-founder of Third Generation Environmentalism (E3G)
Also by Tom Burke on openDemocracy:
"Three pinches of salt" (6 September 2001) – a critique of Bjorn Lomborg
"Masters of the universe? " (10 April 2003) – part of a roundtable on corporate power and responsibility
"Climate change and global security" (17 May 2005) – with John Ashton
"The G8 and climate change: a campaigners' scorecard" (13 July 2005) – a roundtable on the outcome of the G8 summit in Gleneagles
"Capitalism, the environment, and sustainable development" (6 December 2005) – a roundtable on Jonathon Porritt's book Capitalism As If the World Matters
"Climate change: time to get real"
(26 September 2006)
The Stern report pointed out that if the concentration of greenhouse gases in the atmosphere doubles from its pre-industrial levels, the odds are even that the rise in global temperature by the end of the 21st century will be some 30C. This is well past the point at which the irreversible melting of the Greenland ice-sheet will have begun, and very near the point at which the Amazon rainforest could begin to collapse. If greenhouse-gas concentrations continue to rise at their current rate, that doubling will occur in less than four decades.
Nicholas Stern's estimate of the possible cost to the economy of damage on this scale was a loss of 5%- 20% of global GDP: enough, he pointed out, to "derail the economy". Strangely, the response of many economists was to criticise his estimate simply because it was out of line with the 2%-3% more common in literature on climate economics. Many scientists thought he had erred in the other direction and greatly underestimated the actual costs of a rapidly changing climate.
The cost of failure
This is one indication of a wider trend: that there is little by way of a systematic conversation between the scientific and economic communities on climate change and much of the economic analysis remains poorly informed by the science.
A single example will serve to illustrate just how difficult this is. We know that the rising concentration of greenhouse gases is affecting the temperature, salinity and pH of the oceans. We also know that all three factors greatly affect the productivity of marine ecosystems. But our knowledge of marine ecosystems is still so underdeveloped that no one could say with any confidence what this means for the productivity of either coastal or pelagic fisheries, except that no one thinks it is likely to improve it. You have to be very brave to attach a monetary cost to an impact you cannot yet describe.
Stern's central estimate of the cost of dealing with climate change is 1% of global GDP. In his analysis this means keeping the concentration of greenhouse gases to less than 550 parts per million (ppm) carbon-dioxide equivalent (CO2e). [Carbon dioxide equivalent is the measured concentration of carbon dioxide (currently 380 ppm) plus the warming effect of all the other greenhouse gases expressed as their equivalent in carbon dioxide (currently 45ppm)].
Stern's 1% figure is actually his best guess from a range of estimates that runs from -2% to +5%. What the actual cost will be is determined crucially by the speed and manner with which we act. If we act soon and intelligently, the cost will be a lot lower than if we act later and clumsily. Furthermore, were governments to act quickly and cleverly, tackling climate change could actually grow the economy.
An arcane debate is likely to rage for some time in the economic literature over whether Stern got his numbers right. This will matter little. The analytic tools economists are bringing to this issue are still so immature that it will be some time before the numbers mean much. The enduring significance of the Stern findings is that the cost of failing to tackle climate change will so vastly outweigh the cost of succeeding that further refinement of the precise difference will be interesting but largely irrelevant to the political choices we must now make.
The most important implication of Stern's synthesis of the current science of climate change is that the world's energy system must become carbon neutral by the middle of this century. Currently we add more than 10 billion tonnes of carbon (10GtC) to the atmosphere each year. Most of this - some 7GtC - comes from our energy use, the rest is a product of agriculture and deforestation. The oceans and vegetation absorb approximately the amount of carbon arising from agriculture and deforestation. Since this is effectively impossible to reduce significantly, maintaining climate security leaves us no choice but to eliminate the carbon burden of the energy system.
Also in openDemocracy on the politics of global climate change – from the Stern review to the Nairobi conference and after:
Simon Zadek, "Accountability: the other climate change" (31 October 2006
Andrew Simms, "The climate-change choice" (1 November 2006)
John Elkington, "After Stern: fixing the climate machine"
(2 November 2006)
Saleemul Huq & Camilla Toulmin, "Climate change: from science and economics to human rights"
(7 November 2006)
Simon Retallack, "Climate change: the global test"
(10 November 2006)
Adam Poole, "Nairobi fallout: the climate-change future" (22 November 2006)
Ian Bray, "Nairobi's missed chance"
(29 November 2006)
This presents us with a two-phase problem. In the first phase the priority is a massive technology transition from carbon-intensive to low-carbon technologies for delivering electricity, heating and cooling, and movement in order to drive the carbon out of the energy system very rapidly. The second phase requires us then to keep the carbon out of the economy effectively for ever.
This is no small task. The principal policy tools to accomplish it are setting a price on carbon through the development of carbon markets or the use of taxation; the setting of technology standards for energy technologies; and the creation of incentives for investment in low-carbon technologies. Success will require the use of all three tools, but the mix will vary with time and place.
No turning back
Much faith is currently being placed on putting a price on carbon. While this is undoubtedly essential, the theory offers more than the practice. In part this is due to the particular nature of the climate problem and in part to the difference between the behaviour of economic models and the real world.
The latter point has been convincingly demonstrated by the price of oil since the beginning of the century. If you had entered a tax sufficient to raise the price of oil by 400% into any economic model running in 2000 it would have projected a very rapid and vicious global recession. In fact, when a combination of factors raised the price of oil by 400%, the real economy, to much surprise, continued to grow rapidly. This phenomenon makes it very difficult to advise governments on what price they need to set for carbon in order to achieve a carbon-neutral energy system.
This is where the earlier point about the nature of the climate problem kicks in. Climate change is irreversible, at least on human timescales. Once we pass any given concentration of greenhouse gases we are committed to the climate they drive and whatever consequences for human wellbeing that brings. There is no rewind button. Unlike any other area of government action, policy failure cannot be corrected later.
Relying too heavily on the use of the somewhat brittle tool of a carbon price to deliver climate security would certainly be a triumph of hope over experience. This means we will need to hear a lot more in the coming year of the part that must be played by the other two tools in our toolkit, technology standards and investment incentives.
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aubrey.meyer said:
Fri, 2006-12-22 19:28
The willingness of 'experts' like Burke to rely on Stern's marginal approach to what Stern rightly calls the biggest market failure in history shows how far credulity has to be stretched for experts to accommodate this market-based phantasy
If it is that extent of failure already, it is impossible to quantify what it will have become as we follow Stern's suggested course to 550ppmv e.
Stern's report can be better understood in the light of the analysis that follows - Burke and Stern avoid this because they just avoid dealing with the non-marginal gaps in Stern's scenario where two repeats of the entirety [by weight of carbon to 450 ppmv], is surrendered in favour of three repeats [to equal 550 ppmv] and at minimum 3 degrees Celsius extra warming if we are lucky.
We won't be - positive feedback will take that amount of extra atmopsheric carbon towards 1000 ppmv with temperature and damages running out of control.
The necessary approach reads more like this. A little less corporate free-lunch and a cold bath would do Tom Burke a power of good.
To avoid dangerous rates of climate change, we have to solve the problem faster than we create it. Though this is a simple and obvious test, it
is a great challenge as rates of change towards an increasingly adverse climate are already now well established.
Like others before it, Sir Nicholas Stern's recent report recognises the challenge but does not rise to it. Rising to it means showing that we are collectively organising to do enough soon enough globally to avoid dangerous rates of climate change. In other words success requires that
all the new investment needed must be governed - as Al Gore rightly says - by prevention and not by an aimless trade-off between mitigation and
adaptation. Stern's Report avoids the test and loiters in the trade-off.
Prevention requires a global framework that demonstrates we all understand, take and pass the test we're now faced with. To avoid dangerous rates of climate change, we must contract our overall future greenhouse gas emissions to the global atmosphere to nearly zero within the next half a century sharing the available entitlements to emit equally per capita, in other words constitutionally.
This constitution is "Contraction and Convergence" (C&C) and it already has huge support: - www.gci.org.uk/briefings/ICE.pdf
There is no other conceivable way for success. Any other basis for sharing the task of contraction requires a random continuation of the inequality that will keep us locked into this deepening crisis. In total and sharing the rights equally, we must emit not more than once the amount we have emitted already, in other words about a total of a
quarter of a trillion tonnes of carbon to match the total so far. More than this raises the risk of runaway climate change, and any excess must
be neutralised through carbon sequestration. Doing this within a global framework that demonstrates this and to which we are all legally committed and bound is sine-qua-non.
The Stern report correctly recognises that the economic externality of climate change is the greatest example of market failure in history. He
also says that we are now in a situation of appalling global inequity where the poorest, who are the majority and the least responsible for
causing climate change, are also the most vulnerable to its lethal effects and are already bearing the heaviest brunt of the damages.
Stern described C&C as 'an assertion' but allowed himself the luxury of asserting that C&C was unlikely to get support. Defending his stance at
a recent public meeting at the LSE he said that equal rights under these limits was, "too difficult to get your head around" before just taking for granted that the very unequal shares that he prescribes as being necessary to trade his un-quantified emissions entitlements, are so easy
to understand that they don't even require discussion let alone support.
Economic analysis as Stern says is at the margins and he notes that climate change is anything but a marginal problem. This admits head-on that economists work at the margins, can predict little and achieve and commit to nothing. This leaves only the politicians to make the decisions that deal with this massive structural failure and achieve the corrective success we all now desperately need. 25 of the world's most
powerful corporations wrote last year from the World Economic Forum in Davos demanding this leadership.
It is politicians who must give the leadership to deal with the enormous inequity of this great market failure to prevent the lethal trends it
has begat.
Unavoidably, a framework for this leadership is required. This framework must lay out how over a full, defined period from now until we achieve a safe and sustainable atmospheric concentration of CO2 we will all, on a global scale, actually achieve it. By definition such a framework needs to exist so exceptions can be tested.
At COP-12 UN General Secretary Kofi Annan found a 'terrifying lack of leadership' on climate change. The result of this is that the investment
community are faced with an appalling dilemma. Investors are urged to invest in what is obviously an inadequate 'market-based framework', when a full-term 'framework-based market' is urgently required so as to save ourselves. One must assume that rational investors will acknowledge the
primacy of such a framework, ahead of merely making short-term gains WHILE we don't solve the problem. Without such a framework, investors
face the double jeopardy of wasting money on random projects and inadequate arrangements, while also losing the money that is left to the
potentially limitless damages of a deepening market failure.
It is in this critical area where Sir Nicholas Stern's report is obviously weakest. His 'positioning-numbers' are aspirational and make
matters worse as they have no integrating rationale. They fail to resist the trends where we continue to cause the problem faster than we act to resolve it. This depends on people�s ignorance of the trends which is obviously ending and so won�t work. In 2000 the UNEP Financial Initiative published growth-trends of uninsured loss estimates due to 'un-natural weather related events' that were averaging over 6% per annum, in other words already these damage costs were seen to be progressing at twice the rate of the benefits of economic growth. UNEP also projected these trends for several decades to demonstrate that these losses WILL in due course negate the entirety of economic growth, unless drastic action to halt this race to market-oblivion is organised.
At COP-12 in Nairobi UNEPFI published a report which said that within 15 years the average annual insured losses would top one trillion dollars
per annum, while saying privately that they now have no choice but to withdraw insurance cover from parties who face these risks.
The contrast between this reality and projections in the Stern Report is all too apparent. Like Sir David King before him, Sir Nicholas Stern
acknowledges that while for reasons of climate safety we should be aiming to stabilise at 450 CO2 e ppmv, stabilising at 550 ppmv is the
aspirational best we can hope for and is achievable by spending merely 1% of GDP on mitigating ghg emissions. The idea that 1% of GDP bails us out of this, borders on the fantastical.
The difference between 450 and 550 ppmv as a concentration outcome is no mere 'margin of error'. It is the difference between repeating twice or three times the entire weight of emissions emitted in the first 200 years of the industrial revolution. To date we have emitted a quarter of a trillion tonnes carbon from mining and burning that much oil coal and gas. This has raised concentrations from below 280 ppmv CO2 to over 420 CO2 equivalent ppmv and temperature by nearly one degree over the last two hundred years. Stern's report now foresees emitting this again more than three times to a total of one and a quarter trillion tonnes of carbon equivalent over the next century, to the aggravated hazard of a
550 ppmv outcome because of another three quarters of a trillion tonnes of carbon-equivalent being pumped into the sky.
What makes Stern�s prognosis so unreliable is that no real recognition is given to increasing sink-failure. The average annual value for
concentrations has been accelerating in recent years. While greenhouse gas emissions from human sources are still increasing, the fraction of
these retained in the atmosphere has been increasing as well as, at the same time, the natural sinks for CO2 have started to fail. The odds are that progressively the entire weight of carbon from these emissions will be transferred to the atmosphere permanently. This risk is aggravated further by the interaction with other positive feedbacks to temperature rise such as methane release and albedo loss due to ice melt. On present trends, this value of 450 ppmv CO2 e will be exceeded within ten years and beyond then, investors will see mounting losses as global climate impacts rise out of control. Insurers won�t provide insurance AND investors won't invest.
Without the robust framework that C&C provides we will hit the rocks, like a ship with everything in place bar the rudder and the compass. The
resistance to such a framework, especially in the developed world is only explicable if one imagines governments to be in a state of self-delusion, fearful of cold, rational number crunching. This is cognitive dissonance on a suicidal scale, and at the very least one might ask that C&C should be examined in the COP-12 process � or demand
that a better be placed on the table. Unless this challenge is taken up, we will pursue a partial solution, which in climate change terms is not
solution at all.�