Not Stern Enough

7th May 2008
By Fiona Harvey

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The Stern review painted a grim picture of the future of the world under climate change — the economic impacts, on which the report focused, would be the equivalent of the worst depression the markets had ever seen. Poverty would deepen, healthy economies would falter, and by the middle of the century, recovery would be much longer and harder than if the world had set out to tackle climate change in the first two decades of the third millennium.

But Lord Stern today no longer takes that view. The former World Bank chief economist and chief of the government’s economic service now believes he was mistaken — he was far too optimistic.

At a conference on energy and environmental issues in London on April 16, held by the energy information provider IHS, he told a surprised audience that he would have been presented a much grimmer prognosis if he were writing the report today.

‘We underestimated the risks,’ he said simply. ‘We underestimated some of the effects.’

He goes on: ‘I think the damage associated with high temperature increases was underestimated.’

All of the data that has since become available on the potential damages from climate change was not there when Lord Stern was writing his report, and this has led him to reconsider some of his predictions.

He explains: ‘The damage risks are bigger than I would have argued. Things like the damages associated with five degree celsius temperature increases are enormous. We could not be precise about what would happen to the world, what it would look like, but we can say that it would be a transformation. The last time we had temperatures like that, we had a world of swampy forests.’

He said that the review ‘underestimated the probabilities of temperature increases’. This was partly because the world’s greenhouse gas emissions are likely to be greater than he predicted, but also because the earth has ‘greater sensitivity’ to climatic changes. ‘The capacity of the earth to absorb carbon dioxide is lower than we thought,’ he said.

As a result, he thinks the report, if he were writing it today, would take a much harder line on the consequences of climate change, which in 2006 were estimated at a cost of between five per cent and 20 per cent of global gross domestic product. That harder line would imply much stronger policies were needed to abate carbon dioxide emissions.

One aspect of the report that he would not revise, however, is his estimate of the cost of taking action on climate change. In the review, this was pegged at about one per cent of global GDP. Early action was found to be much cheaper than waiting to take action in the future.

These estimates were broadly correct, Lord Stern said. He pointed to several studies that had been undertaken since the Stern review, including the IPCC reports, a study by the International Energy Agency, and a much-reported study by McKinsey, the consultancy. ‘On costs, subsequent reports have pointed to the costs of action being roughly in the right ballpark. Nothing in that has led me to revise the cost of taking action,’ he said.

But he added that he would, if writing the report today, have highlighted the policy changes needed. ‘I probably would have emphasised the importance of good policy. Bad policy puts up the costs of taking action,’ he said.

One example of bad policy was that on biofuels, Lord Stern said. ‘The current generation of biofuels is very worrying, particularly those that are grain or sugar based. They directly compete with food. We should be very cautious about pushing them until we understand them better,’ he warned.

But he added that there were some signs of promise in biofuels. ‘I think we should move very quickly to second generation biofuels using waste,’ he said. These could include making biofuels from straw or residues that are often burned at present. He also pointed to the possibility of growing biofuel plants such as jatropha on marginal land, unsuited to normal agriculture. ‘That’s very promising,’ he said.

Lord Stern also had a message for businesses, some of which may be more reluctant to take action on green issues if there is an economic slowdown. He urged them to take a long-term view: ‘This problem will be tackled over decades. There will be many investment cycles while this is playing out.’

He said: ‘I don’t think the current slowdown will make a very big difference.’ In fact, he argued, businesses could save money if they looked to energy efficiencies, which are the easiest way of cutting greenhouse gas emissions.

Lord Stern urged businesses and individuals to look at similar ways of being green and saving money — from better insulation to ensuring that vehicle tyres are pumped up, which saves on fuel.

He concluded: ‘Energy efficiency is certainly an area that people should be looking at much more seriously.’

In the eighteeen months since the Stern review on climate change was published on 31 October 2006, much more scientific knowledge has become available. Last year, the Intergovernmental Panel on Climate Change (IPCC) produced the most comprehensive study on climate change yet published.

Drawing on the work of thousands of scientists over six years, the IPCC report found that a warming of three degrees Celsius was the most likely scenario if swift action was not taken on greenhouse gas emissions.

Such warming, the scientists concluded in a ‘summary for policymakers’, would have devastating results: droughts, floods and storms would become more intense and frequent in many places, and hundreds of millions of people would face food shortages.

The IPCC was awarded the Nobel peace prize last year jointly with Al Gore, the former vice president of the US, in recognition of its achievement in producing the landmark report. The summary for policymakers was the key scientific text that informed the discussions held by ministers and officials from around the world at Bali last year, where the UK was represented by Hilary Benn.

It will also inform the next eighteen months of negotiations set out in the ‘Bali Roadmap’, by which the United Nations hopes to forge and agree a successor to the Kyoto protocol by the end of 2009 — enough time to allow governments to ratify a new treaty before the current provisions of the protocol expire in 2012.

But since the IPCC study was written, more scientific evidence for global climate change has been published. The IPCC only produces its reports every five to six years, so it is inevitable that some of its findings are quickly superseded by new research.

Among the new research since last year has been a report from the Arctic: the ice there shrank to its lowest recorded extent last summer, and the loss of ice has progressed at three times its previous rate.  This has led some scientists to bring forward drastically their estimates of when the Arctic will become ice-free in summer — from late this century to within the next two decades.

This in turn led governments surrounding the Arctic, such as Russia and Canada, to reinforce their territorial claims to the region, which is thought to hold up to a quarter of the world’s oil and gas reserves — but that’s another story.

Lord Stern has followed scientific developments on climate change with interest. After his review was published, he embarked on a tour of dozens of the world’s governments, to explain his findings and answer questions on how they should shape their climate change policies.

Having finished his travels last spring, he gave up his post as chief of the government’s economic service and resumed his academic career, rejoining the London School of Economics, where he is now the first holder of the IG Patel chair.

He was ennobled, to Baron Stern of Brentford, late last year and sits as a cross-bench peer in the House of Lords. He has also retained some of his governmental role on climate change, working with Julia King on a set of recommendations on how to tackle greenhouse gas emissions from the transport sector. 

Filed Under: Stern, Climate Change,
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