Stern warning
On Monday the debate over climate change enters a new phase. Sir Nicholas Stern, who heads the Government Economic Service, will publish his review of the economics of climate change, which was commissioned by the Chancellor in July 2005. At last the debate on the environment will shift definitively towards the real choices facing the country and facing the world, and — we hope — away from the token gestures and feel-good rhetoric which have held sway thus far.
Until now, economics has been conspicuously absent from the climate change debate. We have heard a lot of science, much of it badly explained to the public. What we have not had is meaningful analysis of the economic consequences of climate change: what choices do we have to mitigate its effects and how much will these choices cost us; or, if we decide to do nothing, what will that cost us in terms of tackling sea-level rise and the spoiling of some agricultural land? On these points, debate has been conducted mostly at a banal level, guided by the weather in London. Global warming has become a device used by politicians to earn virtue points, or to deflect debate away from other issues which they find inconvenient: at the Johannesburg Earth Summit in 2002 Western leaders turned up for the debate — and photocall — on global warming, but skipped the days on which delegates discussed the effects of Western agricultural subsidies on the economies of developing nations.
We have a sense of what Sir Nicholas will conclude in his report because in January he gave a speech to the Oxford Institute for Economic Policy and simultaneously published a discussion document. One thing is for sure: he will not be arguing, as many have done, that the science of global warming is not sufficiently well proved to justify action on a scale which will impact upon the global economy. On the contrary, he declared that ‘there is now an overwhelming body of scientific evidence that human activity is increasing the concentrations of greenhouse gases in the atmosphere and causing warming’. He accepted the fore casts made by the Hadley Centre for Climate Change in 2004 that if the concentration of carbon dioxide (and other greenhouse gases) in the atmosphere reaches 550 parts per million by 2100, global temperatures will have risen by between 2.2°C and 3.6°C, and that this will have severe though not yet certain — effects on human societies.
As to what we should do about this prospect, Sir Nicholas has so far dropped a few hints, at the heart of which is the contention that it will be cheaper to act now than to act later. We can seek to reduce the burning of fossil fuels, which contribute 61 per cent of greenhouse gas emissions, or we can capture the carbon emitted by power plants and return it underground. We can seek to reverse deforestation, which contributes 18 per cent of greenhouse gas emissions, or we can seek to change agricultural methods such as farming cattle less prone to belching — which at present contribute 14 per cent of emissions. All are possible, but all have costs. Moreover, argues Sir Nicholas, the only way that any progress can be achieved is through global agreement. At present, developed countries are responsible for 79 per cent of greenhouse gas emissions, yet developing countries are advancing at such a rate that in as little as 25 years’ time they will be responsible for 70 per cent of emissions.
To persuade developing nations — which under the Kyoto treaty were set no carbon emission targets — to join in the effort to reduce carbon emissions will require carrots and sticks from the First World. One of the issues which needs to be addressed, suggests Sir Nicholas, is the deforestation of the Amazon basin — at present a net absorber of carbon dioxide, but one which could soon become a net releaser of carbon dioxide. To extrapolate from his argument: just how much are we prepared to pay Brazil not to grub up its forests for agricultural development — when Brazil can quite reasonably protest that the West is living off the proceeds of forests grubbed up centuries ago?
So far the government has made a lot of noise about global warming and the urgency with which we must act, and yet has in some cases pursued policies which are contradictory to reducing carbon emissions. For his first three years in office the Chancellor continued with the ‘fuel duty escalator’ introduced by Ken Clarke with the express object of cutting carbon emissions. Yet in the face of the petrol protests of 2000 he blinked and cut fuel duty — with the result that ‘green’ taxes now account for a lower proportion of the tax take than they did in 1997. Similarly, it is hard to see how the government’s policy on global warming squares with its commitment to satisfying growth in air travel, with three extra runways planned for the south-east. The airline industry is the fastest-growing source of carbon emissions. It is also the most potent symbol of 21st-century freedom, as millions of holidaymakers revel in the cheap flights that have transformed global mobility. Bold will be the politician who seeks to roll back this revolution. High-speed trains for domestic journeys are surely a better strategic objective than a wholesale attack on longer flights.
David Cameron deserves praise for persuading Conservatives to discuss climate change — an issue which some sections of the party would quite happily dismiss as a conspiracy by environmentalists against the public. But in the absence of any policy it has been too easy for his opponents to ridicule his daily bicycle journey (with his cases in a following car) and the windmill he wishes to install on his roof. It is possible that the microgeneration of electricity has a future, but not as a token gesture by the well-off. We need the figures: how much of the world’s electricity could be generated in this way, and what are the costs of doing so? At present, affluent home-owners are easing their consciences by installing solar panels at a cost of £3,000 a time — £400 of it in grants from the taxpayer. This is an extremely expensive way of cutting carbon emissions.
We do not dissent from the science of global warming, but there has been one thing missing until now: hard economics. We look forward to the extra momentum, and clarity, that will be provided by the entry of the ‘dismal’ science into the debate. It is, for all involved in the debate, time to get real.
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