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01/11/2006 | Global warming, economic cooling?

A.F.P.

A report on the economics of climate change is really about politics and the need to persuade America to offer leadership on the issue.

 

Sir Nicholas Stern, the head of the British Government Economic Service, has produced the world’s first big report on the economics of climate change. But his 700-page effort, although stuffed with figures, is not really about economics. It is about politics—the politics of getting America to lead a global effort to mitigate the effects of climate change.

The purpose of Sir Nicholas’s report—commissioned by Tony Blair—is to deal with the argument of people who accept that climate change is happening, but who say that trying to do anything about it would be a waste of money. This argument is heard occasionally in Europe and frequently in America, where, for added potency, it is combined with the notion that European attempts to tax carbon are part of a conspiracy by socialists determined to undermine the American way of life.

 

Sir Nicholas’s argument is that, far from undermining the American way of life, attempts to mitigate climate change may help preserve it. He argues this by setting the costs of allowing climate change to happen against the costs of mitigating climate change.

Previous estimates of the costs of climate change—as a result of more hurricanes, more floods and rising sea levels, for instance—have been somewhere between nothing and 2% of global GDP. But Sir Nicholas says those figures were wrong, for two reasons. First, the science has changed, and global warming seems to be happening faster than was previously believed. Second, those estimates have looked only at the likeliest outcomes from climate change, not at the outlying catastrophic possibilities. As a result, Sir Nicholas maintains that if greenhouse gas emissions go on increasing at their present rate, global output is likely to be between 5% and 20% lower over the next two centuries than it otherwise would have been.

Compared with those figures, the costs of mitigating climate change look quite moderate. Sir Nicholas reckons that stabilising concentrations of greenhouse gas equivalent at 550 parts per million (ppm) is a reasonable objective (current levels are at around 380ppm). He reckons that, partly because of falling alternative energy costs, the world could achieve that at a moderate cost. Global output is likely to be around 1% lower by 2050 than it otherwise would have been.

The choice does not look like a difficult one: costs of 5%-20% of global GDP versus costs of 1% of global GDP. Unfortunately, that’s not the difficult bit. The difficult bit is the politics. Climate change is an exceedingly hard issue. It is uncertain: nobody really knows how much it is going to cost. It crosses generations: this generation will have to bear some of the costs while the benefits will accrue to future generations. It crosses boundaries: no one country can solve the problem.

But there is one country towards which Sir Nicholas gestures when he writes of the need for “demonstrating leadership” and “working to build trust”, without which all efforts to deal with the problem will fail: America. (China may well become a bigger polluter than America, but persuading it to do something about climate change will be near impossible if America does not act first). Sir Nicholas does not explain how to solve the difficulty of getting America on board. But if he succeeds in persuading policymakers that the American way of life is better preserved by dealing with climate change than by ignoring it, he himself might be part of the solution.

The Economist (Reino Unido)

 



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