Cost of tackling global climate change has doubled, warns Stern
· Author of landmark report says 2% of GDP is needed
· Inaction would mean far greater economic damage
by Juliette Jowet and Patrick Wintour
The author of an influential British government report arguing the world needed
to spend just 1% of its wealth tackling climate change has warned that the cost
of averting disaster has now doubled.
Lord Stern of Brentford made headlines in 2006 with a report that said countries
needed to spend 1% of their GDP to stop greenhouse gases rising to dangerous levels.
Failure to do this would lead to damage costing much more, the report warned –
at least 5% and perhaps more than 20% of global GDP.
But speaking yesterday in London, Stern said evidence that climate change was
happening faster than had been previously thought meant that emissions needed
to be reduced even more sharply.
This meant the concentration of greenhouse gases in the atmosphere would have
to be kept below 500 parts per million, said Stern. In 2006, he set a figure of
450-550ppm. “I now think the appropriate thing would be in the middle of that
range,” he said. “To get below 500ppm … would cost around 2% of GDP.”
In a recent report for the London School of Economics, Stern acknowledged that
even 1% of GDP was “not a trivial amount”. For the UK it is equivalent to £14bn
a year. But he argue that it was a fraction of annual economic growth, and much
less than the 8-14% that was spent, for example, on health by industrialised countries.
His reassessment of the cost of battling climate change comes at a sensitive
time, the day before Gordon Brown makes a major speech setting out a £100bn strategy
for ensuring that 15% of all energy used in the UK will come from renewable sources
The government has come under pressure from the Tories, whose statements on the
environment include effectively banning new coal power stations and opposing a
third runway at Heathrow.
Ministers are already under political pressure to row back on environmental taxes,
such as increases in fuel duty and vehicle excise duty. Downing Street aides
admit government policy is ahead of public opinion and that its proposals are
on the margins of what the electorate will tolerate at a time of escalating oil
prices and falling house prices.
Brown will highlight that as many as 160,000 green jobs will be created by his
climate change measures.
Speaking yesterday at the launch of the Carbon Rating Agency, the world’s first
ratings agency for carbon offsetting projects, Stern warned that the 2% estimate
required governments to act quickly. “All this depends on good policy and well
functioning [carbon] markets. There are many ways to mess this up, many ways
of acting to make it more costly,” he said.
The Stern review in October 2006 called for global emissions to be cut by 25%
by 2050 and to be stopped from rising above the equivalent of 550ppm of CO2,
a measure that combines the effect of all the greenhouse gases. The current level
is 430ppm, and is rising by 2ppm a year.
Yesterday, Stern, a former World Bank chief economist and head of the UK government
economic service, said he now believed the limit should be 500ppm. This would
reduce the risk from a 50% chance to a 3% chance that the global average temperature
would rise by 5C above pre-industrial levels, he said, pointing out that the last
time this happened, 35-55m years ago, alligators lived near the north pole. “These
kind of temperature changes transform the word,” he said.
His new comments follow a speech in April in which he said that the latest research
showed climate change was more of a threat, and called for global emissions to
halve by 2050, including cuts of 80% in the UK and 90% in the US.
The Department for Environment said the case for cutting global emissions was
still strong: “We cannot afford inaction on climate change. Even at the upper
range of the estimates, the cost of avoiding dangerous climate change is much
lower than even the most conservative estimates of inaction.”
The Confederation of British Industry said Stern’s latest figures should add
to pressure for government and businesses to act quickly to avoid the costs rising
“This only reaffirms the need to tackle climate change as an immediate priority
and highlights both the benefits of early action and the cost of inaction,” said
Neil Bentley, CBI Director of Business Environment.
Caroline Lucas, the Green Party’s principal speaker and an MEP, said during a
recession concerted action to invest in efficiency and clean energy could “kick-start”
the economy in a similar way to the New Deal in the US in the 1930s.
“What we need is a similar injection of capital but into green technology,” said
Lucas. “For example the aspiration of making every home energy efficient: that
will cost money but at the same time provide a huge number of jobs and save people
money on their fuel bills.”
On Wednesday, a report from HSBC also showed shares in companies taking action
to reduce emissions and develop products and services to cut pollution were outperforming
short Executive Summary of the 2006 Stern Review
and more documents including the full Stern Review link
Stern launches independent carbon credit ratings service
By Richard Harris 25 June 2008 (CityWire)
The world’s first independent carbon credit ratings service, which aims to provide
the equivalent of standard credit ratings for carbon offset assets, was launched
today by the Carbon Ratings Agency.
The agency will provide ratings to market participants both on a mandated basis,
whereby project owners or investors commission the agency to rate carbon assets,
and through the agency’s market initiated ratings service, which will give subscribers
access to a representative range of carbon asset ratings on an ongoing basis.
The ratings will range from AAA to D, in similar fashion to existing credit rating
systems, according to how likely a project is to deliver its anticipated certified
emission reductions (CERs).
According to IDEAcarbon, the company behind the Carbon Ratings Agency, the Carbon trading market could be as large as €1 trillion by 2020, with project-based carbon offsets
contributing at least €200 billion. However the market needs substantial improvements
in transparency and risk management in order to reach this level, the company
Lord Nicholas Stern said, at the launch at the London Stock Exchange this morning,
that for carbon markets to work efficiently to make global emission reduction
targets realistic, it was necessary for investors in carbon assets to know what
they were buying. ‘At the root of many of the things that go wrong with markets
is information,’ he said.
Stern, author of the 2005 Stern Review on the economics of climate change and
vice chairman of IDEAglobal which incorporates IDEAcarbon, said: ‘Ratings have
to be done by people who understand what they’re doing, and people who are analytical
and thoughtful about what they’re doing.’
http://www.exchange-handbook.co.uk/index.cfm?section=news&action=detail&id=75465 on the Carbon Ratings
Economic Effects of Climate Change
In addition you can find more info on climate change and it’s effects on world economies:
Impact, Vulnerabilities and Adaptation on Developing Countries
The Economics of Global Climate Change
The Impact of Climate Change on the Development Prospect of the Least Developed Countries and Small Island Developing States