Stern Review

Bhanu Mahajan (ar.bhanumahajan@gmail.com) Climate Change & Sustainable Development CEPT University

introduction • •

700-page report released for the British government on October 2006 by economist Nicholas Stern, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics.

This independent review contributes in assessing the evidence and building understanding of the economics of climate change.

1- EVIDENCE on Economic Impact

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2- Complex Policy Challenges

Climate change presents very serious global risks, and it requires an urgent global response.

It is the greatest and widest ranging market failure ever seen.

evidence / projections 2 •

Incresing risk of serious, irreversible impacts from climate change associated with business-as-usual (BAU) paths for emissions.

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The figure illustrates the types of impacts that could be experienced as the world comes into equilibrium with more greenhouse gases. The top panel shows the range of temperatures projected at stabilisation levels between 400ppm and 750ppm CO2e at equilibrium.

The bottom panel illustrates the range of impacts expected at different levels of warming.

impacts • • • • • • • • •

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Melting glaciers will initially increase flood risk and then strongly reduce water supplies.

Declining crop yields, could leave billions without the ability to produce or purchase sufficient food.

In higher latitudes, cold related deaths will decrease.

Increase in deaths from mal-nutrition and heat stress.

Rising sea levels with warming of 3-4 dgree will result in flooding of billions.

15-20% of species of ecosystems will face extintion.

Climate change may initially have small positive effects for a few developed countries, but is likely to be very damaging for the much higher temperatures increses.

The impacts are not evenly distributed – the poorest countries and people will suffer earliest and most.

With 5-6°C warming an estimate of average 5-10% loss in global GDP, with poor countries suffering 10% of GDP (20% if other factors are included – eq. weakening of carbon sinks) Emissions continue to be, driven by economic growth; yet stabilisation of greenhouse-gas concentrations is feasible and consistent with continued growth

economy

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The benefits of strong, early action on climate change outweigh the costs.

The earlier effective action is taken, less costly it will be.

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Mitigation must be viewed as an investment, to avoid risks of severe consequencies in future.

A broad range of modelling studies, which include exercises undertaken by the IMCP, EMF and USCCSP as well as the IPCC, show that costs for 2050 consistent with an emissions trajectory leading to stabilisation at around 500-550ppm CO2e are clustered in the range of

–4% to 15% of GDP, with an average around 1% of GDP. (In recent report in 2008, he mentioned average 2% GDP) • •

Stabilization at 450 ppm CO2e is already almost out of reach.

Costs rise significantly as mitigation efforts become more ambitious.

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mitigation • • • •

The transition to a low-carbon economy will bring challenges for competitiveness but also opportunities for growth.

Markets for low-carbon energy products are likely to be worth at least $500bn per year by 2050 Implementing strong mitigation policies, the net benefits would be of the order of $2.5 trillion.

Policy to reduce emissions should be based on three essential elements: carbon pricing, technology policy, and removal of barriers to behavioural change

Carbon pricing

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Technology policy

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Behavioural change

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Many low-carbon technologies are currently more expensive than the fossil-fuel alternatives, the costs of technologies fall with scale and experience

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Adaptation policy is crucial for dealing with the unavoidable impacts of climate change.

It is the only response available before mitigation measures can have an effect.

An effective response to climate change will depend on international collective action.

Curbing deforestation is a highly cost-effective way of reducing greenhouse gas emissions

negative response

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Some economists have argued that the Review overestimates the present value of the costs of climate change, and underestimates the costs of emission reduction.

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By contrast, some argue that the Review emission reduction targets are too weak, and that the climate change damage estimates in the Review are too small

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Some authorities on climate science say that the climate system is far too complex for modest reductions in one of the thousands of factors involved in climate change (i.e., carbon emissions) to have a predictable effect in magnitude, or even direction.

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Also climate is not driven primarily by human use of fossil fuels" and that the money to be spent is unlikely to have much effect: it would be better spent on the world's poor.

THERE IS STILL TIME TO AVOID THE WORST IMPACTS OF CLIMATE CHANGE IF STRONG COLLECTIVE ACTION STARTS NOW.

THANK YOU