Tony Blair today said that the world was facing "nothing more serious, more urgent, or more demanding of leadership" than climate change...
The chancellor, Gordon Brown, who commissioned the review, said climate change was "the world's biggest market failure"...I realize there's not much new in those kinds of statements, but it highlights what I think are two of the most important aspects of this challenge: the need for leadership, and the need to improve and update our thinking on markets - what free-markets were, what they are, and what they ought to be (of course, this brings us back to leadership)...
Publication of the Stern Review on the Economics of Climate change30 October 2006
The most comprehensive review ever carried out on the economics of climate change was published today.
The Review, which reports to the Prime Minister and Chancellor, was commissioned by the Chancellor in July last year. It has been carried out by Sir Nicholas Stern, Head of the Government Economic Service and former World Bank Chief Economist.
Sir Nicholas said today:
“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 emphasises 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.
One of our external lecturers at the MSLS programme, Christian Azar, did a simliar analysis back in 2002, also finding how small the costs of mitigating our emissions are compared to "baseline" GDP forecasts -- (of course, these are measurements wrought with flawed assumptions in that we talking about 'business as usual' and using GDP as if it were a measure of success or well-being -- still, it makes a point):
On a percentage basis the difference between the BAU and the stablization at 350 PPM up around the $200 trillion mark in 2100 is tiny - what the graph doesn't show is the huge costs associated with impacts if anything close to the BAU scenario were to occur.