Stern review joy?
The last post’s comments touched on economics and the environment. Here we are told how the Stern review begins to seriously question economic short-termism by showing how we can invest now to save later.
Is this basic economic principle (its quite similar to R&D expenses) cause for optimism?
I remind you I am fresh out of An Inconvenient Truth and suggest you all see the film.
NB- Click ‘read more’
Stern review offers counsel of hope
Published: October 31 2006 02:00 | Last updated: October 31 2006 02:00
The science on global warming is now incontrovertible: the climate is changing, man is helping to make that happen, and the damage could be irreversible. But the contest over the economics of what to do about this is open, or at least was until the UK government published its big study chaired by Sir Nicholas Stern. This report rebuts any fatalistic notion that the world would do better to spend its economic resources just adapting to inevitable climate change, a counsel of despair. Instead, the Stern review suggests that the economic benefits of early action to curb greenhouse gases would far outweigh the costs - by eventually as much as $2.5 trillion a year.
So for the first time we have, spelt out in copious detail over some 600 pages, an economic rationale for action on climate change. It bills itself somewhat optimistically as "a pro-growth strategy", when in fact it is more a strategy to protect growth from the catastrophic fall it could eventually suffer from higher temperatures around the world. But the report will serve a valuable purpose if it can convince the US, China and India - the three big economies that lie outside the Kyoto protocol on climate change - that growth is compatible with international action to cut carbon emissions. It is by its effect on these three countries particularly that the Stern review must finally be judged.
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Key to the Stern review is a relatively pessimistic assumption of eventual climate change damage on unchanged policies, and a relatively optimistic view of what early investment to mitigate climate chance can achieve. On the former, it is gloomier than most previous studies because it differs from them in assuming the possibility of a higher temperature rise (based on more recent data); in incorporating harder-to-measure impacts such as declining human health; and in adding in negative feedback such as melting ice caps releasing methane. As a result, it suggests that the eventual reduction in world gross domestic product could be anywhere from five to 20 per cent a year. However, this is just an estimate of the present value of possible climate damage far into the future, and is an average that could conceal a far greater impact on certain countries, particularly poorer, developing ones.
On the issue of mitigation costs, the review comes up with a relatively modest figure of one per cent of world GDP that would, it believes, stabilise carbon dioxide emissions at 550 parts per million. The relative caution in this estimate lies, in part, in assumptions that much can be done with relatively little economic pain: for instance, improving energy efficiency, halting deforestation and "decarbonising" the power sector.
One per cent of GDP is not a heavy price for the world to pay, just the equivalent of a one per cent rise in its price level. But stabilising emissions at 550ppm - twice the level of the pre-industrial world - might not be enough to ward off serious damage. So the Stern review admits that mitigation costs could rise as 3.5 per cent of GDP.
Crucially, keeping mitigation costs as low as one per cent of GDP depends on the world agreeing to cut emissions far quicker and faster than at present. And here is the rub. For amid all the uncertainty about climate change one thing we know is it will take a very uneven toll on the nations of the world, and that the poorer developing countries will suffer most. One reason why the US, or at least the Bush administration, remains infuriatingly relaxed about climate change is that the US mainland is likely to remain relatively untouched by rising sea levels.
For their part, the big developing countries may concede the problem, but they have immediate priorities of poverty to deal with. Moreover, they can argue that it is the industrialised countries that got the world into this mess, and must get it out of that mess. Indeed. But while the industrialised world must set a lead, in the end developing counties must accept the need to follow. For as Tony Blair, the prime minister, points out, if Britain were to cease all its emissions overnight, the beneficial effect for the planet would be wiped out just by the growth in China's emissions in two years.
How can more countries be persuaded to join in fighting climate change?
First, they must accept a responsibility to act, but be allowed to choose their actions from a mix of taxes or the trading of permits. The latter has been pioneered by the European Union, but its current emissions trading scheme is in disarray. It needs to be fixed, and extended to other countries. Second, urgent negotiations are needed to prolong the Kyoto protocol beyond 2012; investors require the certainty of a longer term framework if they are to sink their money in low-carbon capital equipment that may last decades. Third, the Kyoto signatories need to secure firm commitments from big polluters outside that protocol.
Kyoto took five years to negotiate. But the world, and its atmosphere, cannot afford to wait that long again. The Stern review is not only a counsel of hope, it is a necessary call for action.
Copyright The Financial Times Limited 2006
Is this basic economic principle (its quite similar to R&D expenses) cause for optimism?
I remind you I am fresh out of An Inconvenient Truth and suggest you all see the film.
NB- Click ‘read more’
Stern review offers counsel of hope
Published: October 31 2006 02:00 | Last updated: October 31 2006 02:00
The science on global warming is now incontrovertible: the climate is changing, man is helping to make that happen, and the damage could be irreversible. But the contest over the economics of what to do about this is open, or at least was until the UK government published its big study chaired by Sir Nicholas Stern. This report rebuts any fatalistic notion that the world would do better to spend its economic resources just adapting to inevitable climate change, a counsel of despair. Instead, the Stern review suggests that the economic benefits of early action to curb greenhouse gases would far outweigh the costs - by eventually as much as $2.5 trillion a year.
So for the first time we have, spelt out in copious detail over some 600 pages, an economic rationale for action on climate change. It bills itself somewhat optimistically as "a pro-growth strategy", when in fact it is more a strategy to protect growth from the catastrophic fall it could eventually suffer from higher temperatures around the world. But the report will serve a valuable purpose if it can convince the US, China and India - the three big economies that lie outside the Kyoto protocol on climate change - that growth is compatible with international action to cut carbon emissions. It is by its effect on these three countries particularly that the Stern review must finally be judged.
ADVERTISEMENT
Key to the Stern review is a relatively pessimistic assumption of eventual climate change damage on unchanged policies, and a relatively optimistic view of what early investment to mitigate climate chance can achieve. On the former, it is gloomier than most previous studies because it differs from them in assuming the possibility of a higher temperature rise (based on more recent data); in incorporating harder-to-measure impacts such as declining human health; and in adding in negative feedback such as melting ice caps releasing methane. As a result, it suggests that the eventual reduction in world gross domestic product could be anywhere from five to 20 per cent a year. However, this is just an estimate of the present value of possible climate damage far into the future, and is an average that could conceal a far greater impact on certain countries, particularly poorer, developing ones.
On the issue of mitigation costs, the review comes up with a relatively modest figure of one per cent of world GDP that would, it believes, stabilise carbon dioxide emissions at 550 parts per million. The relative caution in this estimate lies, in part, in assumptions that much can be done with relatively little economic pain: for instance, improving energy efficiency, halting deforestation and "decarbonising" the power sector.
One per cent of GDP is not a heavy price for the world to pay, just the equivalent of a one per cent rise in its price level. But stabilising emissions at 550ppm - twice the level of the pre-industrial world - might not be enough to ward off serious damage. So the Stern review admits that mitigation costs could rise as 3.5 per cent of GDP.
Crucially, keeping mitigation costs as low as one per cent of GDP depends on the world agreeing to cut emissions far quicker and faster than at present. And here is the rub. For amid all the uncertainty about climate change one thing we know is it will take a very uneven toll on the nations of the world, and that the poorer developing countries will suffer most. One reason why the US, or at least the Bush administration, remains infuriatingly relaxed about climate change is that the US mainland is likely to remain relatively untouched by rising sea levels.
For their part, the big developing countries may concede the problem, but they have immediate priorities of poverty to deal with. Moreover, they can argue that it is the industrialised countries that got the world into this mess, and must get it out of that mess. Indeed. But while the industrialised world must set a lead, in the end developing counties must accept the need to follow. For as Tony Blair, the prime minister, points out, if Britain were to cease all its emissions overnight, the beneficial effect for the planet would be wiped out just by the growth in China's emissions in two years.
How can more countries be persuaded to join in fighting climate change?
First, they must accept a responsibility to act, but be allowed to choose their actions from a mix of taxes or the trading of permits. The latter has been pioneered by the European Union, but its current emissions trading scheme is in disarray. It needs to be fixed, and extended to other countries. Second, urgent negotiations are needed to prolong the Kyoto protocol beyond 2012; investors require the certainty of a longer term framework if they are to sink their money in low-carbon capital equipment that may last decades. Third, the Kyoto signatories need to secure firm commitments from big polluters outside that protocol.
Kyoto took five years to negotiate. But the world, and its atmosphere, cannot afford to wait that long again. The Stern review is not only a counsel of hope, it is a necessary call for action.
Copyright The Financial Times Limited 2006
posted by Germain at 20:17
6 Comments:
I heard recently that the assumptions involved in this particular study are rather odd. For example, apparently the study assumed that if sea levels rise, Britain won't do anything to prevent the continuous flooding of coastal cities. Given the history of man, i.e. that we nearly always build breakwaters, dikes, levees, and other conduits, is that a reasonable assumption?
the Netherlands
So the best we can say is that we have some cases where we have adapted successfully and others where we haven't...no too reassuring. But at least you critique doesn't question the fact that sea levels will rise.
A study speaking half a century into the future about ecological changes and their relationships to human society is bound to make some assumptions. Just as you can never factor out human adaptability and intelligence you can not ignore human stubbornness and stupidity. Factoring these real but unpredictable elements into a study or a policy is never an easy task.
We can say far better than that we have some cases where adaptations succeed and others where they fail. Phrasing it thus is imprecise in that it fails to recognize that adaptation is the rule to which there are very few exceptions. Indeed, even in New Orleans the adaptations themselves weren't the problem, but rather the problem was the incompetence with which the adaptations were constructed (cough -- by the government).
Additionally, my complaint was not that the report made assumptions, for as you say all speculative reports will do so. My complaint was that I read that the report assumed as sea levels rise (should they rise), the English (for example) will not protect coastal cities by building fortifications. That's an asinine assumption, and because the people making the report aren't imbeciles, the most likely explanation is that the made such an assumption because doing so dramatically increased the cost estimates of not deploying the drastic prescriptions they recommend.
In other words, the damned thing is rigged.
I would contest your claim that "adaptation is the rule to which there are very few exceptions". However, one claim, like the other, being so difficult to prove, I will try to side-step this point.
Let’s say that if I had to take a bet, even if I ignore the odds and just consider possible outcomes, I would bet with the Stern report.
If we are, as most presume, an evolved species, than you are right and we have at least some capacity for adaptation (even if homo sapiens have not bee around for all that long in the scheme of things). The scientific method and scholarly work is therefore itself a result of adaptation, imperfect as both may remain. Ergo, the implementation of these adaptations is a plausible course of action.
Fine. The problem may be that if we do take the report seriously, we are adapting and if we do not take it seriously we are also adapting. The notion of adaptation loses all directive meaning ( or informational value).
If I trust science enough to let an aluminium cylinder rocket me across continents and oceans, I think the growing scientific consensus on the environment should draw my attention. Of course, we have been wrong before, the world was once flat and thunder was the anger of the gods. But is it worth the risk, considering we have been right before too?
I prefer to bet on a degree of misinformed anticipation than to bet on our ability for reactive adaptation.
G-man, you're making this needlessly complex. It's just this simple:
To assume, as has been reported the Stern report does, that the British will not spend a few billion BPS to build protection if seas and rivers rise and will, rather, let coastal cities and perhaps even London herself be repeatedly inundated (costing hundreds-of-billions of BPS) is either asinine or dishonest.
My entire point has been that I have heard this to be an example of the kind of assumptions necessary to produce a report in which taking drastic measures is economically sound. How many such assumptions are embodied in the report I do not know, but knowing about this one should make anyone very, very skeptical.
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