Nicholas Stern and Dimitri Zenghelis respond to publication of new climate change report

Commenting on the publication today (13 April) of the contribution of Working Group III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change, Nicholas Stern, Chair of the ESRC Centre for Climate Change Economics and Policy and the Grantham Research Institute on Climate Change and the Environment at London School of Economics and Political Science, and President of the British Academy, said:

“This comprehensive report shows that it will still be possible to achieve the target, agreed by countries at the United Nations climate change summit in Cancùn in 2010, of reducing greenhouse gas emissions to have a reasonable chance of avoiding global warming of more than 2 centigrade degrees. But we are in a worse position than we were seven years ago when the last IPCC report and the Stern Review were published, because annual emissions have continued to rise, pushing up atmospheric levels of greenhouse gases, mainly due to high-carbon economic growth. The evidence suggests that an investment of 1-3 per of global GDP each year over the next 4 or 5 decades could deliver about a 50-50 chance of avoiding global warming of more than 2 centigrade degrees.

“This report should have provided a much stronger warning about the dangers of delay and much clearer about the immense risks from unmanaged climate change. If we continue to delay strong action, it will become progressively more expensive to cut emissions enough to avoid global warming of more than 2 centigrade degrees, and more likely that we will become exposed to risks of potentially catastrophic climate change impacts. To achieve the transition to low-carbon growth, we need sound policies, such as a strong price on carbon, and much more investments in technologies to reduce emissions, including electricity storage, renewables, nuclear power, and carbon capture and storage. The transition to sustainable low-carbon economic development and growth is an opportunity not just to avoid potentially catastrophic climate risks, but also to reap other benefits from cleaner and more efficient technologies, such as reductions in local air pollution. If we embark on such a transition, we are likely to discover new technologies and ways of organising production, consumption and cities that would bring costs down radically, and indeed would provide a much more attractive way of living as well as substantially reducing the risks from climate change.”

Dimitri Zenghelis, Co-Head of Policy at the Grantham Research Institute on Climate Change and the Environment at London School of Economics and Political Science, said:

“The report highlights the need for urgent action by outlining the costs of delay. I estimate that a decade’s delay in reducing emissions will add approximately 1 per cent of global GDP to annual costs of reaching any given safe stabilisation temperature. That is around US$700 billion (US$700,000,000,000) every year. This is because greenhouse gasses stay in the atmosphere for decades. In order to stabilise the stock of these gases, the flow of emissions will have to fall faster, from a higher baseline, for every year that we delay. As we continue to lock in to high-carbon infrastructure and technologies, this means scrapping or retrofitting capital before it is ready to retire, using immature technologies that have not been fully tested, so unnecessarily adding to costs. The alternative of managing the transition by starting early, working with the investment cycle while investing in technologies to induce faster cost reductions as innovators learn from deploying and experimenting with new technologies is economically cost-effective. On the plus side, the costs of technologies have come down faster than expected. The most promising is solar, just one example of which, solar PV, has seen costs fall by more than half in just four years, from US$370/MWh in 2008 to US$144/MWh in 2012, but innovations are pushing down cost in a range of technologies from smart grids to batteries. These costs are likely to fall still further, but the extent to which they do so depends on the size and credibility of policy support offered to the sector. The UK Department for Business, Innovation and Skills values the green market at £3.4 trillion annually worldwide. But there is mounting evidence to suggest that the private sector is not investing as heavily as is economically desirable because of a lack of confidence in future returns in this policy-driven sector. So the most pressing challenges are not technological or economic, they are political and institutional. Muddled or mixed policy signals simply add to the costs of capital and prompt a collective waiting game that the global economy can ill afford.”

Notes to editors

1. Lord Stern is also I.G. Patel Professor of Economics and Government and Director of the Asia Research Centre, at London School of Economics and Political Science. Since July 2013, Lord Stern has been President of the British Academy for the humanities and social sciences. Lord Stern was Second Permanent Secretary at HM Treasury between 2003 and 2007. He also served as Head of the Government Economic Service, head of the review of economics of climate change (the results of which were published in ‘The Economics of Climate Change: The Stern Review’ in October 2006), and director of policy and research for the Commission for Africa. His previous posts included Senior Vice-President and Chief Economist at the World Bank, and Chief Economist and Special Counsellor to the President at the European Bank for Reconstruction and Development. He was recommended as a non-party-political life peer by the UK House of Lords Appointments Commission in October 2007, and Baron Stern of Brentford was introduced in December 2007 to the House of Lords, where he sits on the independent cross-benches.
2. The ESRC Centre for Climate Change Economics and Policy is hosted by the University of Leeds and the London School of Economics and Political Science. It is funded by the UK Economic and Social Research Council. The Centre’s mission is to advance public and private action on climate change through rigorous, innovative research.
3. The Grantham Research Institute on Climate Change and the Environment (https://www.lse.ac.uk/grantham) was launched at the London School of Economics and Political Science in October 2008. It is funded by The Grantham Foundation for the Protection of the Environment.