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Global deal on climate change outlined at LSE

Lord Nicholas Stern has published a set of proposals for a global deal on climate change at the London School of Economics and Political Science.

The document, Key Elements of a Global Deal, has several contributors, with participants from HSBC, IdeaCarbon, Judge Business School at Cambridge University, Lehman Brothers and McKinsey and Company and has been inspired by a number of discussions with international policymakers, financiers and academics.

It suggests a comprehensive and coherent set of proposals to advance the climate change debate on the road to the United Nations Framework Convention on Climate Change 15th Conference of the Parties in Copenhagen in December 2009.

The report analyses the implications of the commitment to cut global greenhouse gas emissions in half by 2050 (taken at the G8 summit in Heiligendamm in June 2007). This reduction implies a very large fall in the probabilities of dangerous temperature increases. This commitment implies reducing carbon emissions to an average of approximately two tonnes per person by 2050.

It recommends that responsibility must be shared between developed countries and the developing world (which will have 8 billion of the world's 9 billion population by 2050). Developed countries must demonstrate the way forward by taking on ambitious binding national targets immediately and proving that low carbon growth is possible, that carbon markets will develop substantial financial flows to developing countries and that technology will be made available and shared.

Developing countries must, subject to developed countries' performance, commit by 2020 to targets which will take their per capita emissions to the global average by 2050. Binding national quotas negotiated now with developing countries risk being too high in relation to long-term targets. Given their inevitable central role in action, developing countries should be at the heart of the process of designing a global deal.

Underlying the document's recommendations are three guiding principles:

  • Effectiveness - the ability to reduce greenhouse gases to an acceptable level
  • Efficiency - controlling overall costs
  • Equity - accounting for relative living standards, historical responsibilities and aspirations for growth and development

On the basis of these principles, the document lays out the key elements of a global deal to meet this challenge. It includes key proposals on the following elements:
1. Emissions targets globally and for rich countries.
2. The role of developing countries in mitigation and trading.
3. International emissions trading.
4. Financing emissions reductions from deforestation.
5. Technology.
6. Adaptation in developing countries
It concludes with discussion of implementation and institutions and sets out an agenda for next steps.

The story is one of collaboration in which countries continue to take on the challenges of growth, development and poverty reduction. It is a story of low carbon growth, and a cleaner, safer, more bio-diverse world. It is not a story of low growth. Ignoring climate change on the other hand will eventually undermine growth in both the developed and developing world with severe risk of large movements of population and of conflict.

Key Elements of a Global Deal was introduced by a high-level panel from government, academia and industry chaired by Lord Adair Turner, the Chair of the UK's Committee on Climate Change.

Lord Stern said: 'This publication marks the beginning of a work programme on the economics of climate change for LSE's Grantham Institute on Climate Change and the Environment, and ESRC Centre for Climate Change Economics and Policy. The urgent challenge is to build analytical foundations for discussions of a global deal so that a coherent, effective, efficient and equitable agreement can be reached in Copenhagen in December 2009. This paper is a contribution to that task. It offers a sense of direction and a basis for discussion and further work, rather than attempting a very formal description of a global deal. '

Howard Davies, LSE Director, said: 'While the broad outline of what needs to be done to stabilize and reduce carbon emissions is now well understood, the details are much harder, and crucial. The paper launched today offers a clear framework for debate. With our new Grantham Institute the LSE is well placed to make a significant contribution to understanding the economics of policies designed to address climate change. Today's launch is the first product of the work Nick Stern will be leading here'.

Anders Fogh Rasmussen, Prime Minister of Denmark, said: 'The Bali meeting in December 2007 defined the challenge. The Copenhagen Conference is set to present solutions in December 2009. Now is the time to discuss how we can meet the challenge and turn it into an opportunity. In this context, I welcome the important contribution of Nicholas Stern and his continued engagement in the analysis of the economics of climate change.'

Robert B. Zoellick, World Bank Group President, said: 'Climate change is not only an immense environmental threat, it is a core development challenge. No global negotiation will be successful on this issue without particular focus on the interests and voice of developing countries. The World Bank Group is committed to building on the work initiated in the UNFCCC meeting in Bali in 2007. This report is a welcome contribution to that critical work.'

Dr Rajendra Kumar Pachauri, Chair of the Intergovernmental Panel on Climate Change and Director General of the Energy and Resources Institute said: 'The IPCC Fourth Assessment Report brings out in extensive detail the serious impacts of unmitigated climate change as well as the modest costs of reducing greenhouse gas emissions, which in most cases would provide significant co-benefits. To launch a rational global response to the challenge of climate change, it is essential that the developed countries take determined and early steps as required in the Framework Convention on Climate Change. Given the likelihood of several negative impacts of climate change across the globe, particularly in the poorest and most vulnerable regions of the world, action to meet this challenge is urgent and essential. A global agreement, as envisaged at the Copenhagen Conference of the Parties in 2009, must be based on the scientific evidence before us and the need for an ethically sound, equitable and adequate response to solve the problem.'

Tony Blair, former Prime Minister of the United Kingdom, said: 'This is an excellent report. It is absolutely right to stress the urgency of the situation and that the concerted action necessary requires a new global deal. Copenhagen is only 18 months away. Every opportunity between now and then must be taken to put in place the core elements of the post-Kyoto framework. I believe we can and we must break the deadlock, starting with the discussions at this year's G8, which is why I intend to continue to work for a new global deal, and set out in June how that might be done.
Meanwhile, as ever, Nick Stern and his team have produced a compelling analysis and strong policy recommendations which should be compulsory reading.'

Stephen Green, Group Chairman of HSBC Holdings Plc. "Climate change is a long-term, global threat which requires us to act now. Alongside strong policy, business has an important role in shaping the market response and this report contributes to making the debate relevant to the private sector."


For more information contact the LSE press office on 020 7955 7440

Notes to Editors
1. Lord Stern of Brentford is IG Patel Professor of Economics and Government at LSE. After starting his teaching career at Oxford, he went on to hold chairs at Warwick University and as the Sir John Hicks Professor of Economics at LSE (1986-94). He became Chief Economist and Special Counsellor to the President at the European Bank for Reconstruction and Development (1994-99); then Chief Economist and Senior Vice President of the World Bank (2000-03). He was Head of the UK Government Economic Service from 2003 to 2007, and Director of Policy and Research for the Commission for Africa which reported in March 2005. He was knighted in 2004 for services to economics and appointed as a cross-bench peer in the House of Lords in 2007.
His books include works on economic development, public finance, tax reform, the theory of economic growth, and the role of the state. He recently led a Review of the Economics of Climate Change which was published in October 2006.

2. The London School of Economics and Political Science has received over £12 million from philanthropists Jeremy and Hannelore Grantham to establish the Grantham Research Institute on Climate Change and the Environment. The Institute will be chaired by Professor Lord Stern and bring together international expertise on economics, finance, geography, the environment, international development and political economy to establish a world-leading centre for policy-relevant research and training in climate change and the environment. It will act as an umbrella body for all climate-change research at LSE.

30 April 2008