THE ECONOMICS OF CLIMATE CHANGE. THE STERN REVIEW

THE ECONOMICS OF CLIMATE CHANGE.  THE STERN REVIEW.  

Author: Nicholas Stern   Date Published: 01-07.

http://en.wikipedia.org/wiki/Stern_Review#cite_note-36

Main thesis: “The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response”.  http://members.iinet.net.au/~glrmc/World%20Economics%20-%20Stern%20Review,%20Part%201.pdf

“There is now clear scientific evidence that emissions from economic activity, particularly the burning of fossil fuels for energy, are causing changes to the Earth's climate.”  http://www.webcitation.org/5nCeyEYJr 

According to Wikipedia: “The Stern Review on the Economics of Climate Change is a 700-page report released for the British government on 30 October 2006 by economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and also chair of the Centre for Climate Change Economics and Policy (CCCEP) at Leeds University and LSE. The report discusses the effect of global warming on the world economy. Although not the first economic report on climate change, it is significant as the largest and most widely known and discussed report of its kind”. http://en.wikipedia.org/wiki/Stern_Review

Wikipedia continues: The Review states that climate change is the greatest and widest-ranging market failure ever seen, presenting a unique challenge for economics.^[2] The Review provides prescriptions including environmental taxes to minimise the economic and social disruptions. The Stern Review's main conclusion is that the benefits of strong, early action on climate change far outweigh the costs of not acting.^[3] The Review points to the potential impacts of climate change on water resources, food production, health, and the environment.  

SUMMARY OF THE REVIEW'S MAIN CONCLUSIONS (Wikipedia above)

The executive summary^[2] states:

• The benefits of strong, early action on climate change outweigh the costs.
• The scientific evidence points to increasing risks of serious, irreversible impacts from climate change associated with business-as-usual (BAU) paths for emissions.
• Climate change threatens the basic elements of life for people around the world – access to water, food production, health, and use of land and the environment.
• The impacts of climate change are not evenly distributed – the poorest countries and people will suffer earliest and most. And if and when the damages appear it will be too late to reverse the process. Thus we are forced to look a long way ahead.
• Climate change may initially have small positive effects for a few developed countries, but it is likely to be very damaging for the much higher temperature increases expected by mid-to-late century under BAU scenarios.
• Integrated assessment modelling provides a tool for estimating the total impact on the economy; our estimates suggest that this is likely to be higher than previously suggested.
• Emissions have been, and continue to be, driven by economic growth; yet stabilisation of greenhouse gas concentration in the atmosphere is feasible and consistent with continued growth.
• 'Central estimates of the annual costs of achieving stabilisation between 500 and 550ppm CO₂e are around 1% of global GDP, if we start to take strong action now. [...] It would already be very difficult and costly to aim to stabilise at 450ppm CO₂e. If we delay, the opportunity to stabilise at 500-550ppm CO₂e may slip away.'^[3]
• The transition to a low-carbon economy will bring challenges for competitiveness but also opportunities for growth. Policies to support the development of a range of low-carbon and high-efficiency technologies are required urgently.
• Establishing a carbon price, through tax, trading or regulation, is an essential foundation for climate change policy. 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.
• Adaptation policy is crucial for dealing with the unavoidable impacts of climate change, but it has been under-emphasised in many countries.
• An effective response to climate change will depend on creating the conditions for international collective action.
• There is still time to avoid the worst impacts of climate change if strong collective action starts now.

According to the Review, without action, the overall costs of climate change will be equivalent to losing at least 5% of global gross domestic product (GDP) each year, now and forever. Including a wider range of risks and impacts could increase this to 20% of GDP or more, also indefinitely. Stern believes that 5–6 degrees of temperature increase is "a real possibility.

The Review proposes that one percent of global GDP per annum is required to be invested to avoid the worst effects of climate change. In June 2008, Stern increased the estimate to 2% of GDP to account for faster than expected climate change. 

THIS REPORT GOT MANY SUPPORTS AND ONE SEVERE CRITIQUE, the one from  Byatt, I. et al. (2006)  ["The Stern Review: A Dual Critique, Part II. Economic Aspects". World Economics 7 (4): 199–225.] who describe the review as deeply flawed.  This critique didn’t receive much attention.  It was the critique of Carter the one that breaks  a kind of consensus on this issue.  See:  Carter, R.M. et al (October–December 2006). "The Stern Review: A Dual Critique, Part I: The Science".  Published in World Economics 7 (4). Retrieved 5 September 2009.  You can read Carter et.al  work in :  http://members.iinet.net.au/~glrmc/World%20Economics%20-%20Stern%20Review,%20Part%201.pdf . 

A summary of this work was published in TEN FACTS and TEN MYTHS. See:  http://nd-hugoadan.blogspot.com/2013/11/global-warming-ten-facts-and-ten-myths.html . 

CARTER et.al  CRITIQUE

Carter et.al critique focus on the following  points:  [subtitles only and full conclusion summary ]  “THE STERN REVIEW: A DUAL CRITIQUE”  Part 1 done by Robert M. Carter, C. R. de Freitas, Indur M. Goklany, David Holland & Richard S. Lindzen.

PART 1  THE SCIENCE

Introduction.  

 1. FLAWS IN THE ALARMIST PARADIGM.  The alarmist view of climate science.  Mishandling of uncertainty.   Climate prediction: is it a mature or a new science?.   Exaggerating warming trends.  Reinventing climate history.  Attribution studies: circular reasoning.  Carbon dioxide in perspective. 

2. OVERSTATING CLIMATE IMPACTS.  Hunger and agricultural productivity.  Ecosystems and extinction risks.  Water availability and water shortages.  Melting ice sheets.  General health impacts.  Malaria and dengue fever.  Extreme weather. 

3. THE ISSUE OF PROFESSIONAL STANDARDS.  The scandal of non-disclosure and poor archiving.  Inadequacies of peer review. 

4. CONCLUSION  We conclude that the Stern Review is biased and alarmist in its reading of the science. In particular, it displays:

• a failure to acknowledge the scope and scale of the knowledge gaps and

uncertainties in climate science

• credulous acceptance of hypothetical, model-based explanations of the

causality of climate phenomena

• massive overestimation of climate impacts through an implausible pop-

ulation scenario and one-sided treatment of the impacts literature,

including reliance on agenda-driven advocacy documents

• lack of due diligence in evaluating many pivotal research studies despite

the scandalous lack of disclosure of data and methods in these studies

• lack of concern for the defects and inadequacies of the peer review

process as a guarantor of quality or truth

These and other related problems arise because the Review has relied for

advice almost exclusively on a small number of people and organizations

that have a long history of unbalanced alarmism on the global warming

issue. Most of the research cited by the Review does not, on inspection,

make a convincing case that greenhouse warming constitutes a major

threat that justifies an immediate and radical policy response. Contrary

research is consistently ignored, as are basic observational facts showing

that alarm is unwarranted.

The Review fails to present an accurate picture of scientific under-

standing of climate change issues, and will reinforce ill-informed alarm

about climate change among the general public, the bureaucracy and the

body politic. HM Government will need to look elsewhere for a balanced,

impartial and authoritative review of the current climate change debate.

ANNEX to Part 1:  The Stern Review’s Mishandling of Basic Observational Data

--------------------- 

PART II: ECONOMIC ASPECTS 

By Ian Byatt, Ian Castles, Indur M. Goklany, David Henderson, Nigel Lawson, Ross McKitrick, Julian Morris, Alan Peacock, Colin Robinson and Robert Skidelsky,

Introduction.

1. VALUING POSSIBLE IMPACTS.  Biased alarmism. Model-based speculations. 

2. THE ESTIMATED COSTS OF MITIGATION.  Downward bias.  The revenue-cycling aspect. The domain of conjecture.  Weighing costs and benefits. 

3. DISCOUNTING AND INTERGENERATIONAL EQUITY.  Discounting the future.  Choosing parameters.  Weighing the present against the future.  The problem of dual standards. 

4. THE CHOICE OF POLICY INSTRUMENTS.  Prices versus quantities.  The optimal policy target.  The role of government. 

5. MISSING ELEMENTS. 

6. CONCLUSIONS: 

Our main conclusions coincide with, and serve to confirm and reinforce,

those reached by our scientific colleagues in Part I above. Like them, we

would emphasise in particular two interrelated features of the Stern

Review:

• it greatly understates the extent of uncertainty as to possible develop-

ments, in highly complex systems that are not well understood, over a

period of two centuries or more

• its treatment of sources and evidence is persistently selective and

biased.

These twin features have combined to make the Review a vehicle for

speculative alarmism.

We also endorse, from our own analysis, the judgement of our col-

leagues that the Review:

• mishandles data

• gives too little attention to actual observation and evidence, as distinct

from the results of model-based exercises

• takes no account of the failures of due disclosure, and the chronic limi-

tations of peer reviewing, that have been characteristic of work relating

to climate change which governments have commissioned and drawn on

As to specifically economic aspects, we have noted among other weak-

nesses that the Review:

• systematically overstates projected costs of climate change, partly

though by no means wholly as a result of its failure to acknowledge the

scope for long-term adaptation to possible global warming

• underestimates the likely cost—including to the world’s poor—of the

drastic global mitigation programme that it calls for

• proposes worldwide adoption of a specially low rate of interest for dis-

counting the costs and benefits of mitigation, on the basis of inadequate

analysis and without regard for the problems and risks that would result.

So far from being an authoritative guide to the economics of climate

change, the Review is deeply flawed. It does not provide a basis for

informed and responsible policies.

ANNEX  to Part 2  Economic Aspects

The Stern Review and the IPCC Scenarios 

References

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