Nicholas Stern finds stronger case for low-carbon growth and argues for more demanding greenhouse gas target
The economic case for low-carbon growth is even stronger than when the Stern Review was published in 2006, according to a paper by Nicholas Stern published today (22 July 2015) by the Royal Society, to mark his election as a Fellow.
In the 10 years since the Stern Review was commissioned by the British government in 2005, the key finding of the report – that the costs of inaction on climate change greatly exceed the costs of action – is now even more significant.
The paper states: “The latest research and results show that the case for avoiding the risks of dangerous climate change through the transition to low-carbon economic development and growth is still stronger than when the Stern Review was published.”
It adds: “The 10 years since the Stern Review have both deepened and broadened my understanding of the economics of climate change. However, the basic insights of the Review were sound: the costs of inaction are much greater than the costs of action, on any sensible examination. And the ‘greatest market failure the world has seen’ does require strong policy.”
The Stern Review likely understated the consequences of climate change, the new paper argues. Greenhouse gas emissions have continued to grow significantly, there is evidence that the impacts of climate change are happening faster than expected, and the risks of conflict from mass migration look increasingly severe.
Lord Stern’s paper also points out that evidence is growing about the devastating consequences of air pollution from burning fossil fuels, which likely kills millions around the world each year. It states: “There is increasing recognition that many of the measures and policies to mitigate climate change by reducing greenhouse gas emissions have multiple economic co-benefits, beyond avoided climate change impacts, that have not been formally accounted for in the estimates of costs by the Stern Review and the IPCC [Intergovernmental Panel on Climate Change]. Perhaps the most important of these is the benefits of reducing local air pollution from emissions of fossil fuels, such as coal and diesel.”
The paper highlights growing opportunities for low-carbon technology through innovation and research, with costs already falling rapidly. It states: “The rate at which some clean energy technologies have been developing is much quicker than the Stern Review expected. An excellent example of the dynamism of this kind of structural change is the progress made in solar photovoltaic (PV) energy installations.”
The paper suggests that the Stern Review’s recommendation about stabilising greenhouse gas concentrations in the atmosphere should have been more ambitious. It states: “The Stern Review estimated that stabilization of atmospheric concentrations of greenhouse gases at between 500 and 550 ppm of carbon-dioxide-equivalent would cost the equivalent of about 1% of global GDP per year. However, allowing concentrations to reach 550 ppm now seems to be too dangerous, and it is desirable to set a limit of no more than 500 ppm to have a reasonable chance of avoiding a rise in global average temperature of more than 2°C. I believe that meeting this more demanding target could be achieved for an equivalent annual investment of no more than 2% of global GDP, and possibly for much less.”
The paper concludes that urgent action is now needed to promote low-carbon growth because “the risks of unmanaged climate change are immense”. It finds that investment in a low-carbon economy would cause further rapid technological advancement that would also deliver many benefits in addition to lower risks of climate change, such as reduced air pollution.
Building on his work over many decades on the drivers of growth and poverty reduction, Lord Stern argues: “The transition to a low-carbon economy looks to be a path of development and growth that is very attractive in its own right: cleaner, quieter, more efficient, less congested, less polluted, more bio-diverse and so on. And in addition, and fundamentally, it carries much less climate risk. It does require investment and change. It will involve some dislocation. But it seems a very sound and attractive strategy.”
NOTES FOR EDITORS
- Lord Stern is chair of the Grantham Research Institute on Climate Change and the Environment and the ESRC Centre for Climate Change Economics and Policy and the Grantham Research Institute on Climate Change and the Environment, as well as 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. Baron Stern of Brentford was introduced in December 2007 to the House of Lords, where he sits on the independent cross-benches. He was recommended as a non-party-political life peer by the UK House of Lords Appointments Commission in October 2007.
- The ESRC Centre for Climate Change Economics and Policy (http://www.cccep.ac.uk/) 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 (http://www.esrc.ac.uk/). The Centre’s mission is to advance public and private action on climate change through rigorous, innovative research.
- The Grantham Research Institute on Climate Change and the Environment (http://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 (http://www.granthamfoundation.org/).The ESRC Centre for Climate Change Economics and Policy (http://www.cccep.ac.uk/) 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 (http://www.esrc.ac.uk/). The Centre’s mission is to advance public and private action on climate change through rigorous, innovative research.