Weak economic arguments are being used to delay action on climate change, warns Nicholas Stern
Weak economic arguments against reducing emissions of greenhouse gases are being used to slow down the transition to low-carbon economic growth and development, Nicholas Stern will tell a public audience at London School of Economics and Political Science today (23 February 2012).
Delivering the last of the Lionel Robbins Memorial Lectures 2012 on ‘Climate Change and the New Industrial Revolution’, Professor Lord Stern of Brentford will warn that current international commitments to cut global emissions are unlikely to be enough to stop a potential rise in global temperatures of more than 3°C, and will call for stronger action to avoid “a catastrophic re-write of the relationship between humans and the planet within the lifetimes of those being born today”.
Lord Stern, chair of the Grantham Research Institute on Climate Change and the Environment, will say:
“The arguments against strong action on climate change at national level are often very confused and fail to understand the basic economics of market failure, starting from the fact that the price we pay for goods and services that involve emissions of greenhouse gases do not fully reflect the costs they create through climate change. Policies for reducing emissions represent action to overcome this market failure, and are thus pro-market. But the market failures do not stop there. Policies have to include the fostering of research, development and deployment, networks such as electricity grids and public transport, long-term risk capital, and information. Careful economic analysis points us to the specifics of policy, including the role of regulatory standards, new financial institutions such as the Green Investment Bank, the promotion of research and innovation through bodies such as the European Institute of Technology, and the role of community organisations.”
“Some also suggest that we cannot afford to take action to ‘save the planet’. But low-carbon growth will be full of discovery and the costs of many green technologies are falling fast. Past industrial revolutions involved transformations that drove two or more decades of strong innovation and growth, with investment flowing to the pioneers. Low-carbon is the growth story of the next two decades. Countries that choose to get left behind will suffer not only from weak technology but also from the risk of having ‘dirty’ goods shut out of markets.”
Lord Stern will add:
“Some warn that companies might migrate to ‘dirty’ countries to escape climate change policies. But there is only weak evidence that the cost of reducing emissions is a decisive factor in causing a company to relocate elsewhere. Instead we should look ahead to a competition among companies to ‘get greener’. And those who claim that the UK should not show leadership on climate change because other countries are ‘doing nothing’ are simply wrong. The more environmentally conscious countries in northern Europe have shown stronger economic performance in recent years. The world is changing, and it is time to be more aware of what is happening in countries like China.”
Lord Stern will conclude:
“There is growing optimism about what can be done to manage the risks of climate change, and many signs of progress towards the low-carbon economy, at all levels, including companies, towns, cities, provinces, countries and regions. This is an exciting story of investment, opportunity and growth, as well as the protection of the natural world. But it will involve substantial increases in investment, strong and credible policy, and some dislocation of existing high-carbon industries. Clarity of analysis and political will are vital, and we cannot be confident that the necessary action will take place on the scale required.”
“But the evidence from the science looks ever more worrying, and on the basis of current commitments to reduce emissions, we are heading for a likely rise in global temperature of more than 3 or 4°C, with the strong possibility of even greater warming. This would cause a catastrophic re-write of the relationship between humans and the planet within the lifetimes of those being born today.”
“Only strong action can allow us to rise to the two major challenges of our century: overcoming poverty and managing climate change. The prize for success is enormous, while failure would be devastating.”
Notes for Editors
- Nicholas Stern was Second Permanent Secretary at HM Treasury between 2003 and 2007. He also served as Head of the Government Economic Service, head of the review of economics of climate change (the results of which were published in ‘The Economics of Climate Change: The Stern Review’ in October 2006), and director of policy and research for the Commission for Africa. His previous posts included Senior Vice-President and Chief Economist at the World Bank, and Chief Economist and Special Counsellor to the President at the European Bank for Reconstruction and Development. He was recommended as a non-party-political life peer by the UK House of Lords Appointments Commission in October 2007. Baron Stern of Brentford was introduced in December 2007 to the House of Lords, where he sits on the independent cross-benches.
- The Grantham Research Institute on Climate Change and the Environment was launched at the London School of Economics and Political Science (LSE) in October 2008. It is funded by The Grantham Foundation for the Protection of the Environment.
- Lord Stern is also Chair of the Centre for Climate Change Economics and Policy, which is hosted by the University of Leeds and the London School of Economics and Political Science. It is funded by the UK Economic and Social Research Council and Munich Re. He is also I.G. Patel Professor of Economics and Government and Director of the India Observatory at London School of Economics and Political Science.
- The Lionel Robbins Memorial Lectures were introduced in 1988 to commemorate the life and work of the former head of the Economics Department at London School of Economics, who died in 1984. The first memorial lecture was delivered by Milton Friedman. Other previous lectures have been delivered by Jeffrey Sachs Paul Krugman and Adair Turner.