Chances improve for a Kyoto successor
Sunday, 8 July 2007
Fiona Harvey and Ed Crooks
FOR most of the past year, Sir Nicholas Stern has been touring the world to talk about climate change. His "rock star" tour, as the UK's environment secretary David Miliband terms it, came after the publication of his landmark report on the economics of climate change. The biggest report of its kind when it was published last October, the Stern Review concluded that it was cheaper to tackle climate change by cutting emissions today than to leave the cuts for later.
Moreover, the economic cost of the cuts in greenhouse gas emissions needed was relatively modest. The report estimated the cost of reducing emissions at 1.0 per cent of global gross domestic product and the cost of inaction at 5.0 to 20 per cent.
Sir Nicholas, who was chief economist at the World Bank before joining the UK's Treasury, took his report to the US, where he was consulted by leading Democrats on the framing of emissions reduction legislation there; to Nairobi, where the United Nations was meeting to discuss the Kyoto protocol; to China, which is about to overtake the US as the world's biggest emitter; to India, where his message was greeted with some scepticism; and to other nations in Asia, Europe and Africa.
When we meet, he has just returned from Indonesia, where the UN will gather later this year, in Bali, to discuss the future of the Kyoto treaty. Although the UN meets every year for this purpose, this year's meeting will be the most important since the protocol was negotiated in 1997 because of an agreement by the US at the Group of Eight industrialised nations last month that the meeting would discuss for the first time a successor to the treaty, the main provisions of which expire in 2012.
He has high hopes of the meeting, although he cautions that people should not set too much store in forging a treaty: "I'm convinced, as a result of experience of looking at what individual countries are doing, that a treaty might be something at the end of this. In other words, people are doing things because they think it is the right thing to do, not because they've signed up to a treaty, and they're terrified of the sanctions that this treaty is going to break."
He explains: "People taking on their own responsibilities, as they see responsible behaviour, in the light of understanding what others are doing -- I think we're already seeing that there's a chance of moving forward quite strongly."
Though Sir Nicholas modestly says only that his report has had "an effect", many observers credit his conclusions with an important role in helping to create the shift in opinion around global warming that has taken place over the past year. When he made his report last year, the UN meeting at Nairobi was mired in stalemate, with the pro-Kyoto countries such as those in the European Union unable to persuade Kyoto sceptics such as the US to agree to begin talks on a successor. Few people held out much hope that this year's meeting would be any different.
But much has changed since then. In an attempt to influence politicans, businesses and individuals have been calling for more action on emissions than before, and they appear to have been heard. George W Bush, having spent his years in office resisting pressure to limit greenhouse gas emissions, startled the world last month when he promised action on climate change within the auspices of the UN.
China also promised action in its first national plan on the climate, while European nations moved forward with plans for the second phase of their emissions trading scheme. Japan and Canada also joined calls for negotiations on a new Kyoto at the Bali conference.
Sir Nicholas's conclusions were also endorsed and amplified when the Intergovernmental Panel on Climate Change, by a completely separate process, concluded in May that reducing emissions enough to ensure temperatures did not exceed what scientists consider acceptable would amount to no more than cutting 0.12 percentage points a year from the world's GDP by 2030.
The IPCC also estimated that $20,000bn must be spent by 2030 on the world's energy infrastructure which, if used in ways that help to reduce emissions, would help defray the costs.
It was the third part of a landmark report, the most authoritative yet on climate change, from the IPCC, a body made up of the world's leading climate scientists convened by the UN. They sifted through the work of more than 2,500 scientists to draw their conclusions, which were then agreed to word-for-word by all of the governments involved in the UN process, including the US, India and China. Their conclusions, including a warning that emissions should peak by 2020 in order to avoid the worst effects of climate change, have been used by several governments to urge much more urgent action on the climate.
Yet although Sir Nicholas's conclusions were verified by such an august source, his report has been the subject of harsh criticism. Sir Nicholas has been forced to defend his study frequently: he has even compiled an appendix to his review of the "30 most common mistakes" made in criticisms of the work.
The most forceful criticism was about the study's use of a very low discount rate, which is used to translate the probable costs and benefits of climate change decades ahead into a value for today.
His answer to these comments was that to use a higher discount rate, such as those more commonly used in economic modelling of future costs and benefits, would not properly reflect the costs of climate change to future generations. He argued that the lives of children born 20 to 50 years from now should be given the same value as those living today, which would imply the kind of very low discount rate he used.
Sir Nicholas says: "I felt it was a poor commentary on economics that all their focus was on one chapter which did aggregate modelling, when actually the interesting arguments were: 'would you pay 1.0 per cent of GDP to avoid these kinds of risks?' "
The kinds of risks he is talking about were outlined in his report, and predicted in great detail in two parts of the IPCC report this year. Sir Nicholas sums them up: "Very big effects on African agriculture, monsoons disturbed, water stress . . . the retreat of the glaciers and the snows." He argues: "Given that these kinds of things could happen, and we now know that if we go on as business as usual, there are serious risks of temperature increases of 5.0 degrees celsius and above, some time in the next century, this is absolutely the world transforming. When we were five degrees celsius below where we are now, there was a mile of ice covering most of California and the whole of Europe, so that transformed that." Such a transformation defies economic modelling, because the effects would be so wide-ranging, so in drawing up his report he was forced to simplify the models he used. But he insists the important conclusions were sound.
"We can't really quantify in any serious way the kinds of conflicts that will arise [if the predictions of catastrophic climate change come to pass], but we can answer the question, 'would you pay 1.0 per cent of your GDP to avoid this kind of thing?' And, I think most policy makers who are using commonsense would feel that that question is well enough formulated for them to answer," he says.
The world tour over, Sir Nicholas is to return to academia at the London School of Economics. But he expects to continue with his interests in climate change. "It is just a subject that's so important and so interesting, you've got everything in there, even the ethics, the economics of risk, all sorts of industrial economics, detailed public economics of what you do in a perfect economy, you've got game theory, expansion trade and development, everything, financial structures, there's hardly any part of economics that's not there. It is absolutely fascinating, so I will stay involved with that."
FT Syndication Service
FOR most of the past year, Sir Nicholas Stern has been touring the world to talk about climate change. His "rock star" tour, as the UK's environment secretary David Miliband terms it, came after the publication of his landmark report on the economics of climate change. The biggest report of its kind when it was published last October, the Stern Review concluded that it was cheaper to tackle climate change by cutting emissions today than to leave the cuts for later.
Moreover, the economic cost of the cuts in greenhouse gas emissions needed was relatively modest. The report estimated the cost of reducing emissions at 1.0 per cent of global gross domestic product and the cost of inaction at 5.0 to 20 per cent.
Sir Nicholas, who was chief economist at the World Bank before joining the UK's Treasury, took his report to the US, where he was consulted by leading Democrats on the framing of emissions reduction legislation there; to Nairobi, where the United Nations was meeting to discuss the Kyoto protocol; to China, which is about to overtake the US as the world's biggest emitter; to India, where his message was greeted with some scepticism; and to other nations in Asia, Europe and Africa.
When we meet, he has just returned from Indonesia, where the UN will gather later this year, in Bali, to discuss the future of the Kyoto treaty. Although the UN meets every year for this purpose, this year's meeting will be the most important since the protocol was negotiated in 1997 because of an agreement by the US at the Group of Eight industrialised nations last month that the meeting would discuss for the first time a successor to the treaty, the main provisions of which expire in 2012.
He has high hopes of the meeting, although he cautions that people should not set too much store in forging a treaty: "I'm convinced, as a result of experience of looking at what individual countries are doing, that a treaty might be something at the end of this. In other words, people are doing things because they think it is the right thing to do, not because they've signed up to a treaty, and they're terrified of the sanctions that this treaty is going to break."
He explains: "People taking on their own responsibilities, as they see responsible behaviour, in the light of understanding what others are doing -- I think we're already seeing that there's a chance of moving forward quite strongly."
Though Sir Nicholas modestly says only that his report has had "an effect", many observers credit his conclusions with an important role in helping to create the shift in opinion around global warming that has taken place over the past year. When he made his report last year, the UN meeting at Nairobi was mired in stalemate, with the pro-Kyoto countries such as those in the European Union unable to persuade Kyoto sceptics such as the US to agree to begin talks on a successor. Few people held out much hope that this year's meeting would be any different.
But much has changed since then. In an attempt to influence politicans, businesses and individuals have been calling for more action on emissions than before, and they appear to have been heard. George W Bush, having spent his years in office resisting pressure to limit greenhouse gas emissions, startled the world last month when he promised action on climate change within the auspices of the UN.
China also promised action in its first national plan on the climate, while European nations moved forward with plans for the second phase of their emissions trading scheme. Japan and Canada also joined calls for negotiations on a new Kyoto at the Bali conference.
Sir Nicholas's conclusions were also endorsed and amplified when the Intergovernmental Panel on Climate Change, by a completely separate process, concluded in May that reducing emissions enough to ensure temperatures did not exceed what scientists consider acceptable would amount to no more than cutting 0.12 percentage points a year from the world's GDP by 2030.
The IPCC also estimated that $20,000bn must be spent by 2030 on the world's energy infrastructure which, if used in ways that help to reduce emissions, would help defray the costs.
It was the third part of a landmark report, the most authoritative yet on climate change, from the IPCC, a body made up of the world's leading climate scientists convened by the UN. They sifted through the work of more than 2,500 scientists to draw their conclusions, which were then agreed to word-for-word by all of the governments involved in the UN process, including the US, India and China. Their conclusions, including a warning that emissions should peak by 2020 in order to avoid the worst effects of climate change, have been used by several governments to urge much more urgent action on the climate.
Yet although Sir Nicholas's conclusions were verified by such an august source, his report has been the subject of harsh criticism. Sir Nicholas has been forced to defend his study frequently: he has even compiled an appendix to his review of the "30 most common mistakes" made in criticisms of the work.
The most forceful criticism was about the study's use of a very low discount rate, which is used to translate the probable costs and benefits of climate change decades ahead into a value for today.
His answer to these comments was that to use a higher discount rate, such as those more commonly used in economic modelling of future costs and benefits, would not properly reflect the costs of climate change to future generations. He argued that the lives of children born 20 to 50 years from now should be given the same value as those living today, which would imply the kind of very low discount rate he used.
Sir Nicholas says: "I felt it was a poor commentary on economics that all their focus was on one chapter which did aggregate modelling, when actually the interesting arguments were: 'would you pay 1.0 per cent of GDP to avoid these kinds of risks?' "
The kinds of risks he is talking about were outlined in his report, and predicted in great detail in two parts of the IPCC report this year. Sir Nicholas sums them up: "Very big effects on African agriculture, monsoons disturbed, water stress . . . the retreat of the glaciers and the snows." He argues: "Given that these kinds of things could happen, and we now know that if we go on as business as usual, there are serious risks of temperature increases of 5.0 degrees celsius and above, some time in the next century, this is absolutely the world transforming. When we were five degrees celsius below where we are now, there was a mile of ice covering most of California and the whole of Europe, so that transformed that." Such a transformation defies economic modelling, because the effects would be so wide-ranging, so in drawing up his report he was forced to simplify the models he used. But he insists the important conclusions were sound.
"We can't really quantify in any serious way the kinds of conflicts that will arise [if the predictions of catastrophic climate change come to pass], but we can answer the question, 'would you pay 1.0 per cent of your GDP to avoid this kind of thing?' And, I think most policy makers who are using commonsense would feel that that question is well enough formulated for them to answer," he says.
The world tour over, Sir Nicholas is to return to academia at the London School of Economics. But he expects to continue with his interests in climate change. "It is just a subject that's so important and so interesting, you've got everything in there, even the ethics, the economics of risk, all sorts of industrial economics, detailed public economics of what you do in a perfect economy, you've got game theory, expansion trade and development, everything, financial structures, there's hardly any part of economics that's not there. It is absolutely fascinating, so I will stay involved with that."
FT Syndication Service