Oct 30: Being hailed as "the most comprehensive review ever carried out on the economics of climate change," the 700-page report known as The Stern Review, was released. The Review, which reports to the U.K. Prime Minister and Chancellor, was commissioned by the Chancellor in July last year and was conducted by Sir Nicholas Stern, Head of the Government Economic Service and former World Bank Chief Economist. The report was released the same day as the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat, released its annual report on the latest available data on GHG emissions indicating that in the period 1990–2004, the overall emissions of industrialized countries decreased by 3.3 percent [See WIMS 10/30/06].
On releasing the report, Stern said, “The conclusion of the Review is essentially optimistic. There is still time to avoid the worst impacts of climate change, if we act now and act internationally. Governments, businesses and individuals all need to work together to respond to the challenge. Strong, deliberate policy choices by governments are essential to motivate change. But the task is urgent. Delaying action, even by a decade or two, will take us into dangerous territory. We must not let this window of opportunity close.”
The first half of the Review focuses on the impacts and risks arising from uncontrolled climate change, and on the costs and opportunities associated with action to tackle it. A sound understanding of the economics of risk is critical here. The Review emphasizes that economic models over timescales of centuries do not offer precise forecasts – but they are an important way to illustrate the scale of effects we might see. The Review finds that all countries will be affected by climate change, but it is the poorest countries that will suffer earliest and most. Unabated climate change risks raising average temperatures by over 5°C from pre-industrial levels. Such changes would transform the physical geography of our planet, as well as the human geography – how and where we live our lives.
According to the report, "If we take no action to control emissions, each tonne of CO2 that we emit now is causing damage worth at least $85 -- but these costs are not included when investors and consumers make decisions about how to spend their money. Emerging schemes that allow people to trade reductions in CO2 have demonstrated that there are many opportunities to cut emissions for less than $25 a tonne. In other words, reducing emissions will make us better off. According to one measure, the benefits over time of actions to shift the world onto a low-carbon path could be in the order of $2.5 trillion each year. The shift to a low-carbon economy will also bring huge opportunities. Markets for low-carbon technologies will be worth at least $500bn, and perhaps much more, by 2050 if the world acts on the scale required [See WIMS 10/24/06]."
The second half of the Review examines the national and international policy challenges of moving to a low-carbon global economy. The report indicates that, "Climate change is the greatest market failure the world has seen. Three elements of policy are required for an effective response." (1) carbon pricing, through taxation, emissions trading or regulation, so that people are faced with the full social costs of their actions; (2) technology policy, to drive the development and deployment at scale of a range of low-carbon and high-efficiency products; and (3) removing barriers to energy efficiency, and to inform, educate and persuade individuals about what they can do to respond to climate change.
Access a release (click here). Access links to the complete report by chapters and two summaries (click here). Access additional links to Sir Nicholas Stern´s presentation and speaking notes, comments on the Stern Review by leading economists, background to the Review, and supporting commissioned research (click here). [*Climate]
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