Stern Review – commentary for 012809 (LONG VERSION)

(short one coming...)

“The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response.”

~ Immediately I’m thinking of the mantra of the environmental movement “Think Globally, Act locally.” This persists throughout the document.

“Climate change is global in its causes and consequences, and international collective action will be critical in driving an effective, efficient and international collective action will be critical in driving an effective, efficient and equitable response on the scale required.”

~It may take disaster to show just how tightly we are all connected. The dynamics of weather and the butterfly effect demonstrate this – small things create big things – this thought will be reiterated.

“Climate change presents a unique challenge for economics: it is the greatest and widest-ranging market failure ever seen. The economics analysis must therefore be global, deal with long time horizons, have the economics of risk and uncertainty at centre stage …. [para] this will look at important areas of economics…”

~ My key theme from this is the connection between economics, ecosystems, and ecology. Often seen as being at odds – they share the same root and it seems it takes a looming crisis to weave them back together.
Some definitions:
• Economy: “household management” from the Greek – “oikonomia” – household management. Oikos=house. Nomos=managing. An economist is a “household manager.”
• Ecology: Also from “oikos” = “house, dwelling place, habitation” “logia” = study of. Hence, the study of the interrelationship of organisms and their environments.
• Ecosystem: a “house” “system” – consists of everything living in the house and the house itself, thus the ecosystem is the living organisms and the nonliving physical factors that make up their environment, all interdependent on each other.
An economics that takes into account the interdependence of all its units is one that has to think about the environment and the cost of human actions on it – and how those effects can come back around and effect humans.

“The effects of our actions now on future changes in the climate have long lead times. What we do now can only have a limited effect on the climate over the next 40 or 50 years. On the other hand what we do in the next 10 or 20 years can have a profound effect on the climate in the second half of this century and in the next.”

~Again, “think global, act local” – let’s apply this to time. Global is the long view, local is short action. Small changes now over time can have great effect. Butterfly effect in action. Small things lead to big things.

“Mitigation – taking strong action to reduce emissions – must be viewed as an investment, a cost incurred now and in the coming few decades to avoid the risks of very severe consequences in the future.”

Three ways of considering the economic costs of impacts of climate change and costs and benefits of action to reduce the emissions of greenhouse gases:
1) Disaggregated techniques – that is considering the physical impacts of climate change on the economy, human life, and on the environment.
2) Using economic models – estimate economic impacts of climate change and transition to low-carbon energy systems on economy
3) Comparisons of current and project “social cost of carbon” with marginal abatement costs.
His conclusion: the benefits of strong, early action considerably outweigh the costs.

“The scientific evidence points to increasing risks of serious, irreversible impacts from climate change associated with business-as-usual (BAU) paths for emissions.”

~ “Business-as-usual?” Suggests definite need to reconstruct what BAU means.

Mention of “dynamic feedbacks” – part of climate change – also of economic systems. Current greenhouse gases in atmosphere 430 ppm CO2, only 280ppm before the Industrial Revolution. World has already warmed more than half a degree Celsius. Another half a degree projected over the next few decades.

Talking of temperature increases of up to 5 degree Celsius: “Such changes would transform the physical geography of the world.” To say that this would have a significant effect on human lives is a huge understatement – it changes where we live, how we live, everything. Want to live on Mars, on Venus – exaggerations, sure, but the conditions for which human life survives is a tiny slice of a range. We’re a goldilocks species, too much, too little, too hot, too cold – we’re out of luck…

“Warming will have many severe impacts, often mediated through water” Continues on to talk of flood risks and eventual reduction of water supplies. Then crop yields, spread of diseases, loss of coastal cities, huge extinction of species with only 2 degree Celsius of warming. And more….

“The impacts of climate change are not evenly distributed – the poorest countries and people will suffer the earliest and most. And if and when the damages appear it will be too late to reverse the process. Thus we are forced to look a long way ahead.”
Discussion this statement – developing regions tend to be warmer already as it is. These areas are dependent on agriculture – which will be hit heavily. Low incomes already don’t help either. Exacerbate differences between rich and poor still further as a result.

Whatever benefits of warming for cold weather latitudes, offset by other losses.
“The monetary impacts of climate change are now expected to be more serious than many earlier studies suggested, not least because those studies tended to exclude some of the most uncertain but potentially most damaging impacts.”

Talks about even greater temperature increases – saying earlier estimates about warming may have been optimistic – these would take “us into territory unknown to human experience and involve radical changes in the world around us.” “With such possibilities on the horizon, it was clear that modeling framework used by this Review had to be built around the economics of risk.” Rather than averaging across possibilities – which conceals risks, which if they were to come true would be catastrophic.

~ Again, global/local – act now or pay later…. “Such a modeling framework has to take into account ethical judgments on the distribution of income and on how to treat future generations.”
This runs counter to GW Bush – saying it’s up to historians to judge how he did – why not think about future generations when we make decisions now. Think of the seventh generation as the native Americans did. We’ll return to that…

“The analysis should not focus only on narrow measures of income like GDP. The consequences of climate change for health and for the environment are likely to be severe. … Again, difficult conceptual, ethical, and measurement issues are involved, and the results have to be treated with due circumspection.”

Maintaining BAU, may have a greater impact than thought – taking into account impact on environment and human health, climate system may be more responsive to greenhouse-gas emissions than previously thought, and disproportionate effect on poor. … it’s difficult to make economic forecasts, just as it is to make climate change forecasts. “Much (but not all) of the risk can be reduced through a strong mitigation policy, and we argue that this can be achieved at a far lower cost than those calculated for the impacts. In this sense, mitigation is a highly productive investment.”
“Emissions have been, and continue to be, driven by economic growth; yet stabilization of greenhouse-gas concentrations in the atmosphere is feasible and consistent with continued growth.”

* “Yet despite the historical pattern and the BAU projections, the world does not need to choose between averting climate change and promoting growth and development.”

~ This is key – this means you can save the planet without having to stop doing business. Everyone wins.

“Overshoot” – allowing GHG to peak above stabilization level and then fall – unwise as it would mean reducing carbon emissions drastically and perhaps not feasibly – economically or practically.
4 ways to cut GHG emissions – reduce demand for emissions-intensive goods and services; increased efficiency; action on non-energy emissions (i.e. deforestation); switching to lower-carbon tech for power, heat and transport.

~ All of these again are little things – to create big things. All within reach, not difficult to achieve but their impact is great…

Goes on to estimate GDP cost of cutting carbon by 2050 – 1% of annual global.

~ Reduce is a necessary theme here – in building more efficient machines, in cutting down waste all along the way. Transport is hard to cut quickly, but ultimately necessary.

“Low-carbon economy brings challenges for competitiveness but also opportunities for growth.”
~ Obama’s inaugural speech spoke to the need to move in this sector – “Individual companies and countries should position themselves to take advantage of these opportunities.”

“Implementing climate policies may draw attention to money-saving opportunities” – again, this is local/global. Big theme here – marginal costs of abatement vs. the social cost of carbon. “Even if we have sensible policies in place, the social cost of carbon will also rise steadily over time, making more and more technological options for mitigation cost-effective.”

Key Paragraph: “The current evidence suggests aiming for stabilization somewhere within the range of 450-550ppm CO2e. Anything higher would substantially increase the risks of very harmful impacts while reducing the costs of mitigation by comparatively little. Aiming for the lower end of this range would mean the costs of mitigation would be likely to rise rapidly. Anything lower would certainly impose very high adjustment costs in the near term for small gains and might not even be feasible, not least because of past delays in taking strong action.” “Uncertainty is an argument for a more, not less, demanding goal, because of the size of the adverse climate-change impacts in the worst-case scenario.”

~ If we’re willing to pay a little today, we won’t be stuck with an unpayable bill tomorrow. It’s difficult to get people to see this, to see beyond the inconvenience of thinking beyond today. But there it is, if we don’t “sacrifice”, don’t cut back, address things now (and it may already be too late), tomorrow’s costs are out of this world – perhaps literally.

“Policy to reduce emissions should be based on three essential elements: carbon pricing, technology policy, and removal of barriers to behavioral change.”
1) Carbon pricing is first. “people are faced with the full social cost of their actions.”
~ This leads me to think of the real price of things – i.e. a Styrofoam cup. It may cost nothing to us – it comes free from after dinner or getting takeout, or almost nothing to buy and since the makers of it can’t be doing it at a loss, presumably it costs them even less to make it. Yet what then becomes of it. What is the cost in oil needed to produce it, in how it decomposes or doesn’t, the landfill cost, and so on. If we start looking at the real costs of everything we use – it shifts our perspective. And if we start having to pay the real cost for such things – no doubt this would change our buying habits. We’d buy things that lasted, things that could be touched over and over again and not leave behind a toxic residue when finally they had to be put out to pasture.
2) Tech policies – from R&D to demonstration and deployment. Helping low-carbon tech get a leg up, as it costs more in startup than existing tech, with the idea that it will cost less as more of it is available. “The knowledge gained from r&d is a public good; companies may underinvest in projects with a big social payoff if they fear they will be unable to capture the full benefits. Thus there are good economic reasons to promote new tech. directly.”

~ Do people do the right thing for the right reasons? Probably not enough of us do. Therefore by converging economics and ecology – if people are given a new reason to do something, a reason that they can understand in terms of dollars, perhaps they do the right thing regardless. In this way we trade teaching about ecology to teaching about economics – and people listen.

3) The removal of barriers to social change.
All of this speaks to “fostering a shared understanding of the nature of climate change and its consequences.” Changing our understanding is key, and we’ll return to this.

“Adaptation policy is crucial for dealing with the unavoidable impacts of climate change, but it has been under-emphasized in many countries.”
~ Act local: “Unlike mitigation, adaptation will in most cases provide local benefits, realized without long lead times.”
Need “financial safety net” for poorest in society, likely most vulnerable to impact. “Adaptation action should be integrated into development policy and planning at every level.”

Key * “An effective response to climate change will depend on creating the conditions for international collective action.”
~ Act global. “A shared global perspective on the urgency of the problem and on the long-term goals for climate change policy, and an international approach based on multilateral frameworks and co-ordinated action, are essential to respond to the scale of the challenge.”
~ We’ve got to get it together, together. – “international cooperation” on all aspects of reducing emissions. “Cooperation can be encouraged and sustained by greater transparency and comparability of national action.”

~ Stern suggests connecting various existing carbon trading schemes and those in development together can be beneficial. Here it seems is a nod to ecosystems – everything is interdependent.

Continues to press the need for international collaboration, understanding and cooperation. – think Global, act global.
On a practical level – now – “curbing deforestation is a highly cost-effective way of reducing greenhouse gas emissions.” Again, tie this into the carbon markets.

Key * “Strong and early mitigation has a key role to play in limiting the long-run costs of adaptation. Without this, the cost of adaptation will rise dramatically.”
~ Think of cleaning a cut and putting on a band-aid, so it doesn’t get infected, prevents huge costs down the road. We can think of this in the organism that is ourselves, need to think about it in terms of the organism that is our planet, and as Stern suggests, organism that is our economy.

Key building block – “shared understanding, cooperation…
“Without a clear perspective on the long-term goals for stabilization of greenhouse gas concentrations in the atmosphere, it is unlikely that action will be sufficient to meet the objective.”
Action must include: mitigation, innovation, and adaptation.
“There is still time to avoid the worst impacts of climate change if strong collective action starts now.” “But it is already very clear that the economic risks of inaction in the face of climate change are very severe.”
“Above all, reducing the risks of climate change requires collective action. … Delay would be costly and dangerous.”
~ Shared understanding and see that “we’re in the same boat brother.” Need to think global and see that rocking one end has an effect on all of us….

As I typed this up, happened upon an interview in this week’s New Scientist with James Lovelock – who proposed the Gaia theory of the earth as an organism. Scarily, Lovelock suggests we may already be too late to avoid catastrophe. (Though he proposes one last ditch solution and bets we won’t do it.) That said, Lovelock seems unconcerned, as from the view of the earth as organism, less people isn’t a bad thing. Read it here if you’re interested: http://www.newscientist.com/article/mg20126921.500-one-last-chance-to-save-mankind.html

Also, did other reading about the Stern Report. Seems much debated. Conservatives bash it for chicken little “sky is falling” while environments bash it for not going far enough. Seems pretty well balanced in my view – and it clearly identifies the enormity of the issues and the way in which we need to think about the problems. If specifics are wrong, well, we’re always learning more. But as the report emphasizing, if the high end of the risks are realized, we’re in trouble, better to start paying attention and asking the right questions…