Stern Commission Review
The 2006 UK government commissioned Stern Commission Review on the Economics of Climate Change is still the best complete appraisal of global climate change economics.
The review broke new ground on climate change assessment in a number of ways. It made headlines by concluding that avoiding global climate change catastrophe was almost beyond our grasp.
It also found that the costs of ignoring global climate change could be as great as the Great Depression and the two World Wars combined.
The review was (still is) in fact a very good assessment of global climate change, which inferred in 2006 that the situation was a global emergency.The Review estimated that the global climate change costs could be equivalent to 20 per cent of GDP or more.In contrast, the costs of actions to reduce greenhouse gas emissions to avoid the worst impacts of climate change could be limited to around 1 per cent of global GDP each year. Each tonne of CO2 that is being emitted was found to be causing damage worth at least $85 - but these costs are not included when investors and consumers make decisions about how to spend their money. In economics these unaccounted costs are called an externalities. The Stern report called this the greatest and most far reaching market failure ever because it would cause massive societal damage and by calling costs externalities the polluting industries were avoiding the costs of their pollution. The other socio-environmental economic perversity with respect to the future impacts of continued atmospheric greenhouse gas pollution that the commission addressed worse future deferral costs. The economic review explained that economics and recognize that in this current situation an ethical element of economic correction was appropriate, and the Stern commission in its economic cost benefit calculation apply a very low future discounting. Some economists pointed out that the global climate change there should be no future discounting i.e zero.The Commission advised three strands to policy: all are required. "First, we must establish a carbon price via tax, trade and regulation – without this price there is no incentive to de- carbonize. Second, we must promote technology: through research and development. Further, private sector investors need confidence that there will be markets for their products: that is why deployment policy also makes sense. And third we must deal with market failure; for example problems in property and capital markets inhibit investments for energy-efficiency. Further, the sticks and carrots of incentives, rightly emphasized by we economists, need to be supported by information. And still further, greater understanding of the issues can itself change the behavior of individuals and firms."The Stern report also recommended stopping deforestation and a comprehensive public education and persuasion program. "Governments can be a catalyst for dialogue through evidence, education, persuasion and discussion. Educating those currently at school about climate change will help to shape and sustain future policy-making, and a broad public and international debate will support today’s policy-makers in taking strong action now.
Establishing a carbon price, through tax, trading or regulation, is an essential foundation for climate-change policy. Stern like most economists said the best pricing method is carbon tax.
Policies are required to support the development of a range of low-carbon and high-efficiency technologies on an urgent timescale.
The removal of barriers to behavioral change is a third essential element, one that is particularly important in encouraging the take-up of opportunities for energy efficiency.
Adaptation policy is crucial for dealing with the unavoidable impacts of climate change, but it has been under-emphazised in many countries.
An effective response to climate change will depend on creating the conditions for international collective action.
Creating a broadly similar carbon price signal around the world, and using
Carbon finance to accelerate action in developing countries, are urgent priorities for international co-operation.
Scaling up flows of carbon finance to developing countries to support effective policies and programs for reducing emissions would accelerate the transition to a low-carbon economy.
Curbing deforestation is a highly cost-effective way of reducing greenhouse gas emissions.
Adaptation efforts in developing countries must be accelerated and supported, including through international development assistance."
Since the report was published in 2006 Nicholas Stern has said that new evidence showed the costs of global climate change were underestimated probably by half, and that the mitigation required is far more stringent than recommended in 2006. The report recommended atmospheric the greenhouse gas stabilization target of 550 ppm CO2e, world today in science shows the target has to be below 450 ppm CO2e (350 ppm CO2).
CLIMATE EMERGENCY INSTITUTE
The Health and Human Rights Approach to Climate Change