Monday, 15 September 2014

Climate change: the Stern Review eight years on ............. ............. "Climate change is the greatest market failure the world has ever seen."

In October 2006, Nicholas Stern, the former chief economist to the World Bank, published his report commissioned by the UK government:
www.wwf.se/source.php/1169158/Stern Summary_of_Conclusions.pdf
Stern Review - Wikipedia, the free encyclopedia 

The question has to be: How far have we come since then?

Report's stark warning on climate

By Robert Peston 
Business Editor, BBC News
Sunday, 29 October 2006
Drax power station
Power firms have to cut emissions by 60-70%, the report says

The Stern Review says that climate change represents the greatest and widest-ranging market failure ever seen. And on the basis of this intellectually rigorous and thorough report, it is hard to disagree.

Sir Nicholas Stern, a distinguished development economist and former chief economist at the World Bank, is not a man given to hyperbole. Yet he says "our actions over the coming few decades could create risks of major disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th Century".

His report gives prescriptions for how to minimise this economic and social disruption. His central argument is that spending large sums of money now on measures to reduce carbon emissions will bring dividends on a colossal scale. It would be wholly irrational, therefore, not to spend this money.

However, he warns that we are too late to prevent any deleterious consequences from climate change. The prospects are worst for Africa and developing countries, so the richer nations must provide them with financial and technological help to prepare and adapt.

Tough decisions

He believes it is practical to aim for a stabilisation of greenhouse gas levels in the atmosphere of 500 to 550 parts per million of carbon dioxide equivalent by 2050 - which is double pre-industrial levels and compares with 430ppm today. Carbon dioxide itself stands at about 380ppm, but Sir Nicholas has used the higher figure of 430 which incorporates other greenhouse gases such as methane. But even stabilising at that level will probably mean significant climate change. 

 For 150 years, we've pumped carbon into the atmosphere - whether through energy or transport - as if it had no price 
David Miliband, Environment Secretary
Even to stabilise at that level, emissions per unit of gross domestic product (GDP) would need to be cut by an average of three-quarters by 2050 - a frightening statistic. As well as decarbonising the power sector by 60%-70%, there will also have to be an end to deforestation - emissions from deforestation are estimated at more than 18% of global emissions, more than transport. And there will have to be deep cuts in emissions from transport.

The costs of these changes should be around 1% of global GDP by 2050 - in other words the world would be 1% poorer than we would otherwise have been, which would be significant but far from prohibitive. To be clear, this does not mean we would be 1% poorer than we are today, but that global growth will be slower. The way to look at this 1% is as an investment. Because the costs of not taking this action are mind-bogglingly large.

Rising estimates

Sir Nicholas Stern's start point is economic modelling carried out in other studies showing that a scenario of 2-3 degrees of warming would lead to a permanent loss of up to 3% in global world output, compared to what would have happened without climate change. But he says those estimates are too low. He believes 5-6 degrees of warming is a "real possibility" for the next century.

Family flee floods in India
Sir Nicholas warns the world will face more floods and droughts
Having fed the probabilities of the various different degrees of global warming into his economic model, he estimates that "business as usual" would lead to a permanent reduction in global per-capita consumption of at least 5%. But, that estimate does not include the financial cost of the direct impact on human health and the environment from global warming, or the disproportionate costs on poor regions of the world. It also ignores so-called "feedback mechanisms", which may mean that as the stock of greenhouse gases increases there is a disproportionate rise in warming with each new increment in emissions.

Unfair burden

Putting all these factors together, he comes up with the stark conclusion that if we do nothing to stem climate change, there could be a permanent reduction in consumption per head of 20%. In other words, everyone in the world would be a fifth poorer than they would otherwise have been. Even worse, these costs will not be shared evenly. There will be a disproportionate burden on the poorest countries.

So here's the winning formula: Stern says spend 1% of world GDP to be 20% richer than we will otherwise be. It looks like a no-brainer.

There is another way of presenting this analysis of benefits versus costs. Stern says that if you take the present value (the value in today's money) of the benefits over the coming years of taking action to stabilise greenhouse gases by 2050, then deduct the costs, you end up with a "profit" of $2.5 trillion (£1.32 trillion). Any way you look at it, the financial case for tackling climate change looks watertight.


That said, there are great impediments to harvesting this dividend. One is the obvious problem, which is that it requires collective, coordinated action by most of the world's governments - and securing the requisite consensus on the way forward will not be simple.

 We should prepare for a whole series of shocks from the effects of climate change that are already unavoidable 
Robert Peston, BBC Business Editor
In the interests of fairness, Stern argues that the richer countries should take responsibility for between 60% and 80% of reductions in emissions from 1990 levels by 2050.

But assuming that consensus is reached, what is the best way to correct the grotesque market failure that is currently taking us on a path to poverty? How do we start to pay a price for carbon that reflects its true economic and social costs, or a price that includes the present value of future climate change?

There are two main ways of achieving this. One is through taxation. The other is through rationing the amount of carbon emissions that any business - or any individual - can make, and then creating a proper global market.
Such a move would allow any business or institution that wants to emit more than its entitlement to buy that right, and any business that emits less than its entitlement to sell the unused portion of its entitlement - effectively carbon trading.

Another imperative for governments is to encourage research and development on low-carbon technologies.

Governments must also encourage "behavioural change", through regulation - such as imposing tighter standards on the energy efficiency of buildings - as well as educating the public about the true costs of wasting energy.

Trouble ahead

That said, we should prepare for a whole series of shocks from the effects of climate change that are already unavoidable. There will probably be both more droughts and more floods. An increased incidence of devastating storms is expected. And there is an increased risk of famine in the poorest countries. So we must start to get better at monitoring of climate conditions - and adapt ourselves for the new world.
Malnourished child at Niger medical centre
Poor countries are expected to be hit hardest by global warming

That means reinforcing buildings and infrastructure to make them sturdier in the face of extreme weather conditions, investment in new dykes, and support for financial markets so that it is possible to purchase insurance against climate-related disaster. It will all be very expensive, disproportionately so for developing countries. So Stern argues, and it's hard to disagree, that there is a strong moral obligation on the richer countries to help the poorest ones protect themselves against the very worst that may transpire. 

BBC NEWS | Business | Report's stark warning on climate

Nicholas Stern can hardly be called an 'anti-capitalist', but his report certainly sparked quite a debate about the 'economics of climate change' - which has continued to today: 
CCCEP - Centre for Climate Change Economics and Policy
Climate Economics

On the other hand, Naomi Klein is certainly not one to pull her punches... This is part one of five pages from the Nation, from a couple of years ago:

Capitalism vs. the Climate

There is a question from a gentleman in the fourth row.

He introduces himself as Richard Rothschild. He tells the crowd that he ran for county commissioner in Maryland’s Carroll County because he had come to the conclusion that policies to combat global warming were actually “an attack on middle-class American capitalism.” His question for the panelists, gathered in a Washington, DC, Marriott Hotel in late June, is this: “To what extent is this entire movement simply a green Trojan horse, whose belly is full with red Marxist socioeconomic doctrine?”

About the Author

Naomi Klein
Naomi Klein
Naomi Klein’s new book, This Changes Everything: Capitalism vs. the Climate, will be published this September by...

Also by the Author

The climate crisis has such bad timing, confronting it not only requires a new economy but a new way of thinking.
Some of big green's most powerful players still invest in energy companies.
Here at the Heartland Institute’s Sixth International Conference on Climate Change, the premier gathering for those dedicated to denying the overwhelming scientific consensus that human activity is warming the planet, this qualifies as a rhetorical question. Like asking a meeting of German central bankers if Greeks are untrustworthy. Still, the panelists aren’t going to pass up an opportunity to tell the questioner just how right he is.
Chris Horner, a senior fellow at the Competitive Enterprise Institute who specializes in harassing climate scientists with nuisance lawsuits and Freedom of Information fishing expeditions, angles the table mic over to his mouth. “You can believe this is about the climate,” he says darkly, “and many people do, but it’s not a reasonable belief.” Horner, whose prematurely silver hair makes him look like a right-wing Anderson Cooper, likes to invoke Saul Alinsky: “The issue isn’t the issue.” The issue, apparently, is that “no free society would do to itself what this agenda requires…. The first step to that is to remove these nagging freedoms that keep getting in the way.”
Claiming that climate change is a plot to steal American freedom is rather tame by Heartland standards. Over the course of this two-day conference, I will learn that Obama’s campaign promise to support locally owned biofuels refineries was really about “green communitarianism,” akin to the “Maoist” scheme to put “a pig iron furnace in everybody’s backyard” (the Cato Institute’s Patrick Michaels). That climate change is “a stalking horse for National Socialism” (former Republican senator and retired astronaut Harrison Schmitt). And that environmentalists are like Aztec priests, sacrificing countless people to appease the gods and change the weather (Marc Morano, editor of the denialists’ go-to website, ClimateDepot.com).
Most of all, however, I will hear versions of the opinion expressed by the county commissioner in the fourth row: that climate change is a Trojan horse designed to abolish capitalism and replace it with some kind of eco-socialism. As conference speaker Larry Bell succinctly puts it in his new book Climate of Corruption, climate change “has little to do with the state of the environment and much to do with shackling capitalism and transforming the American way of life in the interests of global wealth redistribution.”
Yes, sure, there is a pretense that the delegates’ rejection of climate science is rooted in serious disagreement about the data. And the organizers go to some lengths to mimic credible scientific conferences, calling the gathering “Restoring the Scientific Method” and even adopting the organizational acronym ICCC, a mere one letter off from the world’s leading authority on climate change, the Intergovernmental Panel on Climate Change (IPCC). But the scientific theories presented here are old and long discredited. And no attempt is made to explain why each speaker seems to contradict the next. (Is there no warming, or is there warming but it’s not a problem? And if there is no warming, then what’s all this talk about sunspots causing temperatures to rise?)
In truth, several members of the mostly elderly audience seem to doze off while the temperature graphs are projected. They come to life only when the rock stars of the movement take the stage—not the C-team scientists but the A-team ideological warriors like Morano and Horner. This is the true purpose of the gathering: providing a forum for die-hard denialists to collect the rhetorical baseball bats with which they will club environmentalists and climate scientists in the weeks and months to come. The talking points first tested here will jam the comment sections beneath every article and YouTube video that contains the phrase “climate change” or “global warming.” They will also exit the mouths of hundreds of right-wing commentators and politicians—from Republican presidential candidates like Rick Perry and Michele Bachmann all the way down to county commissioners like Richard Rothschild. In an interview outside the sessions, Joseph Bast, president of the Heartland Institute, proudly takes credit for “thousands of articles and op-eds and speeches…that were informed by or motivated by somebody attending one of these conferences.”
The Heartland Institute, a Chicago-based think tank devoted to “promoting free-market solutions,” has been holding these confabs since 2008, sometimes twice a year. And the strategy appears to be working. At the end of day one, Morano—whose claim to fame is having broken the Swift Boat Veterans for Truth story that sank John Kerry’s 2004 presidential campaign—leads the gathering through a series of victory laps. Cap and trade: dead! Obama at the Copenhagen summit: failure! The climate movement: suicidal! He even projects a couple of quotes from climate activists beating up on themselves (as progressives do so well) and exhorts the audience to “celebrate!”
There were no balloons or confetti descending from the rafters, but there may as well have been.
* * *
When public opinion on the big social and political issues changes, the trends tend to be relatively gradual. Abrupt shifts, when they come, are usually precipitated by dramatic events. Which is why pollsters are so surprised by what has happened to perceptions about climate change over a span of just four years. A 2007 Harris poll found that 71 percent of Americans believed that the continued burning of fossil fuels would cause the climate to change. By 2009 the figure had dropped to 51 percent. In June 2011 the number of Americans who agreed was down to 44 percent—well under half the population. According to Scott Keeter, director of survey research at the Pew Research Center for People and the Press, this is “among the largest shifts over a short period of time seen in recent public opinion history.”
Even more striking, this shift has occurred almost entirely at one end of the political spectrum. As recently as 2008 (the year Newt Gingrich did a climate change TV spot with Nancy Pelosi) the issue still had a veneer of bipartisan support in the United States. Those days are decidedly over. Today, 70–75 percent of self-identified Democrats and liberals believe humans are changing the climate—a level that has remained stable or risen slightly over the past decade. In sharp contrast, Republicans, particularly Tea Party members, have overwhelmingly chosen to reject the scientific consensus. In some regions, only about 20 percent of self-identified Republicans accept the science.
Equally significant has been a shift in emotional intensity. Climate change used to be something most everyone said they cared about—just not all that much. When Americans were asked to rank their political concerns in order of priority, climate change would reliably come in last.
But now there is a significant cohort of Republicans who care passionately, even obsessively, about climate change—though what they care about is exposing it as a “hoax” being perpetrated by liberals to force them to change their light bulbs, live in Soviet-style tenements and surrender their SUVs. For these right-wingers, opposition to climate change has become as central to their worldview as low taxes, gun ownership and opposition to abortion. Many climate scientists report receiving death threats, as do authors of articles on subjects as seemingly innocuous as energy conservation. (As one letter writer put it to Stan Cox, author of a book critical of air-conditioning, “You can pry my thermostat out of my cold dead hands.”)
This culture-war intensity is the worst news of all, because when you challenge a person’s position on an issue core to his or her identity, facts and arguments are seen as little more than further attacks, easily deflected. (The deniers have even found a way to dismiss a new study confirming the reality of global warming that was partially funded by the Koch brothers, and led by a scientist sympathetic to the “skeptic” position.)
The effects of this emotional intensity have been on full display in the race to lead the Republican Party. Days into his presidential campaign, with his home state literally burning up with wildfires, Texas Governor Rick Perry delighted the base by declaring that climate scientists were manipulating data “so that they will have dollars rolling into their projects.” Meanwhile, the only candidate to consistently defend climate science, Jon Huntsman, was dead on arrival. And part of what has rescued Mitt Romney’s campaign has been his flight from earlier statements supporting the scientific consensus on climate change.
Capitalism vs. the Climate | The Nation

See also:
Futures Forum: Climate change: the language of framing..."Climate change hysteria is really a feeling."
Futures Forum: Climate change: the language of framing... "Why Our Brains Are Wired to Ignore Climate Change"

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