A Stern warning on global warming

Britain’s landmark review of the economics of climate change is clear: act now or pay a far higher price later. Maryann Bird highlights Nicholas Stern’s findings.

“The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response.”

That blunt, no-nonsense sentence begins the executive summary of a nearly 600-page independent British review of the economics of climate change released on 30 October 2006. (Because of its global import, a short summary has also been produced in Chinese and several other languages.) Known as the Stern Review, the long-awaited study by former World Bank chief economist Nicholas Stern considers the economic costs of the impacts of climate change, along with the costs and benefits of action to reduce emissions of the greenhouse gases (GHG) linked to that change.

Commissioned in July 2005 by Gordon Brown, Britain’s chancellor of the exchequer, the report asserts that “the benefits of strong, early action on climate change outweigh the costs.” Taking a global and long-range perspective, it states: “What we do now can have only a limited effect on the climate over the next 40 or 50 years. On the other hand, what we do in the next 10 or 20 years can have a profound effect on the climate in the second half of this century and in the next.”

“There is still time to avoid the worst impacts of climate change, if we act now and act internationally,” Stern said in releasing what he termed an “essentially optimistic” review in London. “Governments, businesses and individuals all need to work together to respond to the challenge. Strong, deliberate policy choices by governments are essential to motivate change. But the task is urgent. Delaying action, even by a decade or two, will take us into dangerous territory. We must not let this window of opportunity close.”

In summary, the Stern Review concluded:

There is still time to avoid the worst impacts of climate change, if we take strong action now.

“Climate change,” the study says, “will affect the basic elements of life for people around the world – access to water, food production, health and the environment. Hundreds of millions of people could suffer hunger, water shortages and coastal flooding as the world warms.”

Based on formal economic models, Stern estimates that, without action, “the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP each year, now and forever.” It adds, ominously, that if a wider range of risks and impacts were included, “the estimates of damage could rise by 20% of GDP or more.” In contrast, however, the costs of action (reducing GHG emissions to avoid climate change’s worst impacts) “can be limited to around 1% of global GDP each year.”

“Our actions now and over the coming decades could create risks of major disruption to economic and social activity, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century. And it will be difficult or impossible to reverse these changes.”

The response, says Stern, must be prompt, strong and international. It also needs to be based on “a shared vision of long-term goals and agreement on frameworks that will accelerate action”, and it must build on “mutually reinforcing approaches” at regional, national and international levels.

Climate change could have very serious impacts on growth and development.

GHG concentrations could reach twice pre-industrial levels as early as 2035 if no action is taken to reduce them, “virtually committing us to a global average temperature rise of over 2ºC” and more than a 50% longer-term chance that the rise would exceed 5ºC.

“This rise would be very dangerous indeed,” says the report, as it would be “equivalent to the change in average temperatures from the last ice age to today.” It would lead to radical changes in where and how people live: “human geography”. Even at more moderate warming levels, serious impacts on world output, human life and the environment would occur. These changes – including floods, droughts and storms –already are occurring, and would affect all countries. “The most vulnerable – the poorest countries and populations – will suffer earliest and most, even though they have contributed least to the causes of climate change.”

Stern makes clear that while it is no longer possible to prevent the climate change that will take place over the next 20 to 30 years, adaptation is essential. “[I]t is still possible to protect our societies and economies from its impacts to some extent – for example, by providing better information, improved planning and more climate resilient crops and infrastructure.” While these efforts “will put still further pressure on already scarce resources,” they should be accelerated. In developing countries alone, the price-tag for adaptation will be tens of billions of US dollars a year.

The costs of stabilising the climate are significant but manageable; delay would be dangerous and much more costly.

Climate change’s worst impact-risks can be greatly reduced if GHG levels can be stabilised between 450 and 550 parts per million of carbon dioxide equivalent (CO2e). The level is now at 430 ppm and rising by over 2 ppm annually. Such stabilisation would require that emissions be reduced by at least 25% below current levels by 2050 – and ultimately to more than 80% below current levels.

“This is a major challenge,” Stern acknowledges, “but sustained long-term action can achieve it at costs that are low in comparison to the risks of inaction. Central estimates of the annual costs of achieving stabilisation between 500 and 550 ppm CO2e are around 1% of global GDP, if we start to take action now.” Future costs, whether higher or lower, will depend on levels of efficiency gains, co-benefits such as air-pollution reduction, low-carbon technology innovations and economic instruments related to emissions cuts.

Says the report: “It would already be very difficult and costly to aim to stabilise at 450 ppm CO2e. If we delay, the opportunity to stabilise at 500-550 ppm CO2e may slip away.”

Action on climate change is required across all countries, and it need not cap the aspirations for growth of rich or poor countries.

The costs of acting are unevenly distributed across sectors and around the world. “Even if the rich world takes on responsibility for absolute cuts in emissions of 60-80% by 2050, developing countries must take significant action, too,” says the review. But developing countries will not have to bear the full costs of their action alone. Stern notes that carbon markets in rich countries already are starting to deliver finance routes – such as the Kyoto Protocol’s Clean Development Mechanism — to support low-carbon development. However, a “transformation of these flows is now required to support action on the scale required.”

As new markets in low-carbon technologies and goods and services spring up, actions on climate change will also create “significant” business opportunities. “The world does not need to choose between averting climate change and promoting growth and development,” the review says. “Changes if energy technologies and in the structure of economies have created opportunities to decouple growth from greenhouse gas emissions. Indeed, ignoring climate change will eventually damage economic growth.”

The pro-growth strategy for the longer term, Stern adds, is tackling climate change – which can be done in a way that does not cap any countries’ aspirations for growth.

A range of options exists to cut emissions; strong, deliberate policy action is required to motivate their take-up.

Increased energy efficiency, changes in energy demand, and adoption of clean power, heat and transport technologies all can help cut emissions. The global power sector, says the review, “would need to be at least 60% decarbonised by 2050 for atmospheric concentrations to stabilise at or below 550 ppm CO2e, and deep emissions cuts will also be required in the transport sector.”

Even with strong growth in the use of renewable energy and other low-carbon sources, “fossil fuels could still make up over half of global energy supply in 2050.” As coal will continue to be important in the world’s energy mix, however, “extensive carbon capture and storage will be necessary to allow the continued use of fossil fuels without damage to the atmosphere.” Reductions in non-energy emissions, as from deforestation, agriculture and industry, also are deemed essential. The economies of both developing and developed countries can grow as emissions are reduced and stabilised, provided that strong, deliberate policy choices are made.

“Climate change is the greatest market failure the world has ever seen,” says the review, “and it interacts with other market imperfections.” An effective global response requires: the pricing of carbon, implemented through tax, trading or regulation; policy to support innovation and deployment of low-carbon technologies; and action to remove energy-efficiency barriers and to educate individuals about their part in responding to climate change.

Climate change demands an international response, based on a shared understanding of long-term goals and agreement on frameworks for action.

Although countries and regions – including the China, the European Union and California – are taking action against GHG emissions now, and the UN Framework Convention on Climate Change, the Kyoto Protocol and other approaches and partnerships are providing a basis for international cooperation, more ambitious action is needed globally.

“Each country, however large, is just a part of the problem,” the review asserts. “It is essential to create a shared international vision of long-term goals, and to build the international frameworks that will help each country to play its part in meeting these common goals.”

Key elements of these future frameworks, Stern says, should include: expanding and linking emissions trading schemes around the world; greater technology cooperation, including a doubling of support for energy research and development, plus a near-quintupling of new low-carbon technologies; action to reduce deforestation, which contributes more to annual global emissions than the transport sector; and adaptation to climate change, including research into new, more resilient crop varieties and the integration of climate change into development assistance policies.

What Stern has done in his report is “remarkable,” wrote Michael McCarthy, environment editor of the Independent newspaper. “He has ripped up the last excuse for inaction. The scientific case to fight climate change has long been overwhelming, the moral case even more so. The last rational place where an opponent of acting to tackle global warming might take refuge has been the economic argument. No longer. If you oppose action now, you are simply burying your head in the sand.”


Maryann Bird is a London-based journalist with a special interest in environmental and human-rights issues. A writer and editor, she was previously a staff member at Time magazine (Europe), The Independent, the International Herald Tribune and The New York Times.