“The benefits of strong, early action on climate change outweigh the costs.”
The Stern Review on the Economics of Climate Change, the most comprehensive review of the economics of climate change, was released yesterday. The review was commissioned by the UK Chancellor and was undertaken by Sir Nicholas Stern, Head of the Government Economic Service and former World Bank Chief Economist. Stern said of the report,
“The conclusion of the Review is essentially optimistic. There is still time to avoid the worst impacts of climate change, if we act now and act internationally. 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.”
The Review consider(s) more recent scientific evidence (for example, of the risks that greenhouse gases will be released naturally as the permafrost melts), the economic effects on human life and the environment, and approaches to modelling that ensure the impacts that affect poor people are weighted appropriately. Taking these together, the Review estimates that the dangers could be equivalent to 20% of GDP or more.
In contrast, the costs of action to reduce greenhouse gas emissions to avoid the worst impacts of climate change can be limited to around 1% of global GDP each year. People would pay a little more for carbon-intensive goods, but our economies could continue to grow strongly.
If we take no action to control emissions, each tonne of CO2 that we emit now is causing damage worth at least $85 – but these costs are not included when investors and consumers make decisions about how to spend their money. Emerging schemes that allow people to trade reductions in CO2 have demonstrated that there are many opportunities to cut emissions for less than $25 a tonne. In other words, reducing emissions will make us better off. According to one measure, the benefits over time of actions to shift the world onto a low-carbon path could be in the order of $2.5 trillion each year.
The shift to a low-carbon economy will also bring huge opportunities. Markets for low-carbon technologies will be worth at least $500bn, and perhaps much more, by 2050 if the world acts on the scale required.
Tackling climate change is the pro-growth strategy; ignoring it will ultimately undermine economic growth. (Press release)
The Stern Review on the Economics of Climate Change has been added to the Library catalogue. Just do a title search for ‘Stern Review’ and click on the link to connect to the online report.