Nicholas Stern "globally spend 1% GDP on Carbon Dioxide limitation"

Chris Street edits in bold
Fred Pearce
15:02 30 October 2006

Nicholas Stern one of the world’s top economists today warned of a global recession that could cut between 5% and 20% from the world’s wealth later this century – unless the world invests now in the technologies needed to create a global low-carbon economy.

The cost of investment would be trivial by comparison with the possible damage, says Sir Nicholas Stern, former chief economist at the World Bank and an adviser to the British chancellor Gordon Brown, who commissioned the 600-page report.

Stern calls for a global investment of about 1% per year of global GDP over the next 50 years. He says that we should stabilise greenhouse gas concentrations at the equivalent of 500-550 parts per million of carbon dioxide, 25% above current levels. This is a level he regards as “high but acceptable”.

“Economically speaking, mitigation – taking strong action to reduce emissions – is a very good deal,” he says. “A 1% increase in prices is very marginal. We can continue to grow. But if we don’t [invest], the kind of changes that would happen will derail growth.”

Green benefit

Stern warns that climate change risks causing economic consequences “on a scale similar to those associated with the great wars and the economic depression of the first half of the 20^th century”. But in the long run we would all benefit from the cleaner, greener energy technologies.

His year-long investigation has not added to the scientific knowledge about the risks of climate change, he says, adding that evidence from international groups like the Intergovernmental Panel on Climate Change is “overwhelming”. But he has interpreted the implications of the scientists’ warnings for the world economy.

“There isn’t scientific certainty,” he says. “But the risks are very big.”

He forecasts huge disruption to African economies in particular as drought hits food production; up to a billion people losing water supplies as mountain glaciers disappear; hundreds of millions losing their homes and land to sea level rise; and potentially big increases in damage from hurricanes. The economic cost of failing to act could approach $4 trillion by the end of the century, he says.

Drastic cuts

Substantial climate change is now inevitable, Stern says. But the worst could be prevented if global emissions can be stabilised within 20 years and thereafter reduced by around 2% per year. “What we do in the next 10 or 20 years can have a profound effect on the climate in the second half of the century and in the next.”

Stern says the primary responsibility for action to cut greenhouse gas emissions lies with the rich industrialised world, which continues to produce most of the world’s emissions.

In response to the report, Gordon Brown has called for industrialised countries to cut their emissions by 30% by 2020 and at least 60% by 2050. Such drastic cuts are needed because CO₂, the main greenhouse gas responsible for climate change, accumulates in the atmosphere, lasting for hundreds of years before it is absorbed slowly by the oceans.

Chasm closed

Stern’s findings contradict some past claims by economists that the world would do better adapting to climate change than trying to halt it. Meanwhile, some scientists say the emissions cuts called for by Stern would not be enough to stave off dangerous climate change.

But Michael Grubb, a climate and energy analyst at of Imperial College London, UK, said: “The Stern Review finally closes a chasm that has existed for 15 years between the precautionary concerns of scientists and the cost-benefit views of many economists.”

London’s Mayor, Ken Livingstone, agreed: “For too long, necessary action to prevent catastrophic climate change has been delayed by fears that this would damage economic growth. Stern's report nails this myth – it is failure to take action on climate change that would be the real threat to future economic prosperity."

Livingstone continued: "I welcome Stern's call for an international carbon market and I look forward to working with him, Gordon Brown and indeed Al Gore on how London – a world centre for financial markets, energy companies and high tech industries – can play a leading role in this and the other measures he proposes.”