The Economics of Climate Change

By Jonas Hagen
UN Cronicle online

The Stern Review concludes that the cost of acting to decrease global emissions of greenhouse gases is far less than the cost of dealing with the effects of climate change if no mitigation efforts are made.

However, Mr. Stern warned that "even if we are sensible about climate change and get the emissions down, the climate is going to change still more than it has".

While the world was currently experiencing the effects of an increase in global temperatures of 0.7 degrees Celsius, he said that "even if we act strongly to decrease emissions, we've got another 1.5 to 2.0 degrees centigrade to come. So we've seen maybe a quarter or a third of temperature increase we're going to have to cope with. St. Petersburg, New York, London, Cairo, Cape Town, Shanghai, Bombay, Calcutta, Dhaka-they're all under threat from sea-level rise, and many parts of the world will be under threat from hurricanes, typhoons, droughts and floods."

Mr. Stern also warned that the heatwaves that killed thousands of people in Europe in 2003 "will probably be standard by the time we get to 2050", and the Nile river, which ten countries depend on, could drop to one half of current water levels in the second half of this century.

However, the "business as usual" scenario-where no action is taken to reduce emissions- would lead to changes in the earth's climate, he said, "that we don't really understand, absolutely unprecedented and earth-transforming--the difference between where we are now and the last ice age".

Climate change also highlights global inequities, according to Mr. Stern. "All countries in the world will be affected; we're all in this together, but it is the poor that will be hit earliest and hardest. You just have to look at the effects of Katrina in New Orleans, or the effects of the typhoon that hit Bombay a couple of years ago [in July 2005]."

Global security is affected by climate change and "could cause conflict within and across countries", he said, adding that most African leaders he met with at the African Union Summit in Addis Ababa in January 2007 attributed the humanitarian crisis in Darfur to the climate problem-pushed out of their traditional lands by drought, and pastoralists were forced to move and came into conflict with settled farmers.

To reduce emissions, Mr. Stern suggested a range of solutions, which included taxes on emission-producing activities, the development and deployment of low-emission technologies, investing in energy efficiency, and preserving forests around the world.

Time is of the essence, he said. "Even though this is a long-term problem, we've got to start now. We've left it very late. If we had gotten our heads around this problem 20 years ago, it would have been much simpler and much cheaper. If we wait another 20 years, it will be still more difficult and expensive."

Rich countries must take responsibility for a problem they have caused, Mr. Stern said, suggesting emission reductions of 60 to 80 per cent for developed nations. He noted that France had set the goal of a 75 per cent reduction by 2050, the United Kingdom at 60 per cent and the State of California in the United States aimed at 80 per cent.

Developing countries, he added, must understand that they can continue to expand their economies and achieve progress on the Millennium Development Goals-eight targets for human development that UN Member States agreed upon to reach by 2015.

Mr. Stern cited the progressive policy in China, which is "reforesting, not deforesting". The country hoped to make energy production 20 per cent more efficient as part of its 11th five-year plan, which is already underway, he reported, adding that an $8,000 tax was established on sports utility vehicles (SUVs) in Beijing.

"I'm much more optimistic six or nine months ago about where the world is moving", he said.

He called on the international community to "act strongly and on the right kind of scale", stating further that the United Nations is "a place we can really take that forward in a very powerful way".

Mr. Sachs agreed that "we have to move quickly and urgently on this issue. That means setting in place a full century of transition, with much of the transition being completed by 2050."

Some 40 or 50 years from today, energy sources should be very different from what they are today, he said. Supplying significant amounts of energy from nuclear power and coal-fired plants that used carbon sequestration technology, where carbon produced by the burning coal is pumped back into the earth, is "within reach", he noted.

Such plants must be built quickly in China or India, in order to see if they are viable as sources of clean energy. "Once those plants are done, everything is going to become a lot clearer and less hypothetical than it is now", Mr. Sachs pointed out.