Environment & the World

Sunday, November 5, 2006

Britain’s Chief Economist on Climate Change

Filed under: Climate Change, Economics — Cathy @ 12:01 pm

I’m taking a break from China today to write on some recent developments in England on the climate change front.  I just received a copy of the executive summary of the Stern Report, which came out on Monday.  This is a report written by Britain’s Chief Economist, Nicholas Stern, assessing the economics of taking action on climate change.

The report basically reiterates what many of us have known or suspected for a long time: that “the benefits of strong, early action on climate change outweigh the costs.”  Specifically, they estimate that following the “business as usual” emissions scenario would result in an average reduction in global per-capital consumption of at least 5%.  This number ignores non-market impacts on the environment and human health; including these factors would lead to an average reduction in consumption of 11%.  And, of course, the impacts would fall much more heavily on the global poor.   By contrast, the report estimates that the emissions cuts required to stabilize at 500-550ppm (reductions of 1-4% per year, depending on how soon they are
implemented) will cost about 1% of GDP by 2050 – “a level that is significant but manageable.”  This stabilization level is generally agreed to be the maximum concentration that can be achieved and still avoid a temperature rise of more than 2 degrees C.

British civic organizations are taking the message of the Stern report to heart.  Britain’s largest march on global warming was held today, with protestors demanding stronger action from their government.  Note that I say “civic groups” and not “environmental groups” because the rally was organized by a diverse coalition of 40 groups – environmental groups, outdoor sports’ groups, women’s groups, religious organizations, humanitarian aid groups, etc (http://www.stopclimatechaos.org/about_us/9.asp).  This widespread concern over climate change is reflected in the population as a whole, with more than half of those polled in a survey this week stating that they think their government should impose taxes on carbon emitting industries.

In the United States, the few remaining climate contrarians will no doubt be able to endlessly debate the assumptions that go into the economic calculations of the Stern report.  Climate change economics presents a classic problem in discounting, as well as a problem in risk analysis and valuing ecosystem services.  That is, how do we count the benefits (of uncertain magnitude) that will accrue in the future from less climate change and weigh them against current costs? If we do something now that has potentially catastrophic consequences in 300 years, some economic analyses would still recommend that action because, with current interest rates, the value of that future catastrophe is nearly worthless today.  Yet, nevertheless, I think most of us would recoil at the moral consequences of such an action. Perhaps this simply teaches us that economics isn’t everything. Economics provides one way – often a useful way – of looking at the world and making decisions.  But it isn’t the only way, and people too often forget that.



  1. Wow. The chief executive of Ryanair–a European airline–launched a harsh attack on the Stern Report.


    “If ‘eco nuts’ were really serious about tackling climate change they should support nuclear power and a clampdown on livestock farming which was responsible for more greenhouse gases than the airline industry, he said.”

    He also referred to the report as a bunch of lies and misinformation from ‘eco nuts’ and an idiot economist. In another sharp-tongued comment he suggested governments tax “‘fat and overfed’ business class travellers” if they insist to tax the airline industry.

    Hmm. Despite the acerbic criticism of the report and all, Ryanair seems to have done some good work in reducing its own emissions.

    Comment by Amir — Tuesday, November 7, 2006 @ 7:34 pm

  2. […] Britain’s Chief Economist on Climate Change […]

    Pingback by Is “Command and Control” Really so Bad? « Environment & the World — Sunday, November 26, 2006 @ 4:49 pm

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