future imperfect

The average surface temperature of earth has increased by almost 1 degree Celsius since 1900 and the rate of warming has been nearly three times the century average since 1970. This Saturday 4 November GetUp Australia are organising national street events to put pressure on politicians to take global warming seriously. Walk against Warming is taking place in all eight state and territory capitals as well as another 19 provincial venues. In Brisbane the event starts at 2pm at Queens Park in the city and marches to West End. Speakers include writer Sam Watson, Queensland Green party leader Drew Hutton and Democrat senator Andrew Bartlett. Details of the Brisbane event can be found here.

These events are timely with the high-profile release of the Stern Review this week. More correctly, the Stern Review on the Economics of Climate Change, it is a report on the effect of climate change and global warming on the world economy. The document was commissioned by the UK government is named for its author British economist and academic Sir Nicholas Stern. Stern was the chief economist and vice-president of the World Bank between 2000 and 2003 and is now an economic adviser for the British Government.

The report is significant because it is the first major study of climate change to be conducted by a trained economist rather an atmospheric scientist. As such, it is more difficult for climate change sceptics to criticise on the basis that it is not grounded in economic fact rather than ecological woolliness. The report is 900 pages long but the executive summary paints a stark picture. Stern states baldly there is an urgent problem to solve which he attributes to market failure. The world needs to reduce its annual carbon emissions by more than 80% below current levels by 2050 if we are to have any chance of avoiding total catastrophe. But he argues that “there is still time to avoid the worst impacts of climate change, if we take strong action now.”

If no action is taken to reduce emissions, the concentration of greenhouse gases in the atmosphere could reach double its pre-industrial level as early as 2035. This will result in a global temperature rise of 2 degrees. Stern proposes environmental taxes (ecotaxes) as the way forward to solve global warming problems. Ecotaxes can be fiscal policies designed to promote sustainability through economic incentives or can be so called Pigovian taxes. Named for the English economist Arthur Cecil Pigou, these taxes are levied to correct negative consequences (called “externalities”) of a market activity. These could be taxes on polluters which would be turned into funds to counteract the negative effects of the pollution.

Stern assessed a wide range of evidence on the impact of global warming and also attempted to cost of not acting. His central argument is that spending large sums of money now on measures to reduce carbon emissions will bring dividends on a colossal scale. If we do not act, the cost will be a reduction of 5% of global GDP each year. That is compared to the cost of action which he asserts can be limited to 1% of global GDP each year. However the true cost of not act may be even higher than Stern is predicting. It does not include the financial cost of the direct impact on human health and the environment from global warming, or the disproportionate costs on poor regions of the world. If these factors are taken into account, the true cost could be a permanent reduction in consumption per head of 20% which means everyone in the world would be a fifth poorer than they would otherwise have been. Stern argues too that the poorer countries will bear a disproportionate share of the problem. Stern argues that the richer countries should take responsibility for up to 80% of reductions in emissions from 1990 levels by 2050.

Stern acknowledges that securing the requisite international government consensus on the way forward will not be simple. As well as taxation Stern encourages research and development of low-carbon technologies and also regulation to enforce behavioural change. This is not music to the ears of those Western Governments who have unbounding faith in the markets to correct themselves. The White House issued a statement welcoming the Stern review as a contribution to the body of knowledge on climate changing, but did not address its calls for fundamental change in policy. In an e-mailed statement, the White House Council on Environmental Quality said, "The U.S. government has produced an abundance of economic analysis on the issue of climate change. The Stern Report is another contribution to that effort." The US remains opposed to mandatory caps on greenhouse gas emissions and the carbon trading scheme outlined in the Stern report. The US is the biggest single source of greenhouse gas emissions in the world, producing 25% of greenhouse gases from 5% of the global population.

Meanwhile fellow first world objector to the Kyoto Proposal Australia is also reacting cautiously to the report. Prime Minister John Howard warned his back bench not to be "mesmerised" by the report. He said climate change was a serious challenge but the report exaggerated when it suggested it could be worse than both world wars and the Great Depression. Howard refuses to ratify Kyoto while China and India are not included in the protocol.