by Tan Copsey
Below is an ever-so serious account of the Stern Review, an ever-so serious document dealing with the economics of climate change. Please excuse the fact that it’s written in a style inconsistent with the tone of this blog – it’s an issue I can’t help but take very seriously. Lame jokes about crabby journalists and being ‘assessed’ by the Foreign Secretary’s security at the press conference may follow in another post…
Today the Stern Review, "The most comprehensive review ever carried out on the economics of climate change," was published in London. Speaking at a press conference Sir Nicholas Stern outlined in a plain and simple language so often alien to economists that ‘we have no other choice’ but to reduce emissions. The review itself is abundantly clear in highlighting the economic necessity of acting now - demonstrating that the costs associated with combating climate change will be completely dwarfed by those imposed by the problem if business proceeds as usual.
As Stern notes we are already beginning to witness the negative economic impacts of an altered climate. Larger, more violent storms, encapsulate this menace - the massive costs they will impose are abundantly apparent in images of New Orleans under water. Similarly it takes no great leap of the imagination to realise that food production is going to be threatened. Modern policy discourse emphasises the importance of fuel in driving growth, what Stern emphasises is that climate change could cause a fuel crisis of an altogether more alarming sort. Hungry workers are, after all, not productive workers, and scarcity increases inflationary pressure on prices.
Until now all governments have been highly cautious in their approach to climate change, largely due to the fear of policy negatively impacting on economic growth. An obvious measure like incorporating the cost of carbon into transport for instance, has almost universally been presented as dangerous. So with the exception of the European Emissions trading scheme, efforts to produce a real ‘price’ for carbon, have been impeded.
Stern is important because it exposes old arguments about threats to the growth as completely short-sited. It emphasises that we have very little choice - we must alter patterns of production and consumption now, whilst simultaneously preparing for inevitable economic upheavals, likely on scale comparable to those produced by the two world wars, or the economic depression of the first half of the 20th century.
The review backs away from prescribing policy responses – arguably to the relief of Government Ministers present at the press conference. It does note that a combination of general methods will be necessary. These include: Reducing demand for emissions-intensive goods and services; increased efficiency; action on non-energy emissions; and switching to lower-carbon technologies.
It is not all gloom and doom though. Stern himself claimed to be optimistic about the possibility of keeping emissions within a set range, increasing the possibility of minimising global temperature increase to levels that might be non-catastrophic (alright when written down that doesn’t really sound so optimistic). A move towards cleaner technologies also creates incredible opportunities for new growth. Within the review it is noted that ‘All economies undergo continuous structural change; the most successful economies are those that have the flexibility and dynamism to embrace the change’, as one of the individual units that compose the global economy its time you did something then.
