“Climate change looks far more threatening than it did six years ago” said Lord Nicholas Stern, a professor of economics and chairman of the Grantham Research Institute at the London School of Economics.
Stern, Chief economist for the Blair administration in the UK, World Bank Chief Economist, and author of the single most exhaustive evaluation of the solutions to climate change spoke at the International Monetary Fund headquarters in Washington, D.C., in early April as reported in an article in Scientific American on April 3.
The “Stern Report” in 2006 said that climate change would reduce the global gross domestic product (GDP) by 5 to 20 percent per year by the end of the century if not controlled. To clean up climate pollution and mitigate for impacts caused by climate change would cost about 1 percent of world GDP every year beginning today, or about $500 billion per year. This is a similar amount as we spend across the planet every year on the Clean Air Act, or the Clean Water Act (each one individually, not together) or in the U.S. alone on our military, not counting wars; or the same as we spend on advertising across the globe every year and the list goes on. So considering these things we do normally do every year, one percent GDP is definitely a reachable amount.
In 2009, Stern modified his 2006 report to where the solutions would costs 2 percent of global GDP stating that after just three years, inaction and increasing impacts were the reason for the change.
Stern has often been criticized for taking a modest stance on future monetary discounting. In other words, others argue his estimates are too low. The discount rate is fundamental to economics and even more so to climate change. Stern’s discount rate is 1.4%. Most other economist evaluations of other things not associated with the environment use a 3 or 4 or even 5 percent discount rate. A zero discount rate would mean that the future worth of something is the same in the future as it is today. Discounting diminishes the future worth of something because of many things like: we will be a wealthier society in the future so the relative value of things will be less and improved climate pollution treatment technology in the future will be cheaper. At a discount rate of 3 percent or more (per year of course), over a couple of decades the future benefit of doing anything about climate today is virtually zero.
This one simple argument, so prevalent in “traditional” economics, is the basis for what has been very considerable debate about Stern’s sentinel work. The challenge of course is that environmental services have no traditional price tags. Traditionally, our society has treated our environment as a throw away resource. Some changes were made in the 1970s with the Clean Water and Clean Air Acts, and the Pesticide Reform Act because air pollution was killing California and the rivers in Ohio were catching on fire.
The Dust Bowl was the previous sub continental scale environmental disaster that change the face of environmental resource conservation. The Dust Bowl was a man made disaster. American Expansionism allowed farmers to move into the Great Plains with wet region farming techniques in a dry region. The results was a sub continental scale drying feedback when most of the grass was stripped from the Great Plains. Because of this environmental catastrophe, soil conservation was basically invented and numerous government agencies were formed to assure that these techniques were used to prevent a recurrence of the Dust Bowl.
Now it looks as if this will have to happen to our planet with climate change on a global scale in order for climate pollution treatment to begin. Lord stern seems to believe that we are headed towards 4 degrees C of warming. This is about 8 degrees C of warming over land, because warming over land is about twice that over the ocean. To make an average global warming of 4 degrees, there’s got to be a lot more warming over land than water. So this four degrees C global average, most places where people live, will be about 14.5 degrees F. of warming.
Stern is of course (unfortunately) likely to be as conservative as the conservative consensus literature that her represents.
On the other side of the lake please do remember; even if the costs of the solutions to climate pollution are 2 percent of global GDP every year, this is still only half of what the U.S. alone has spent every years on average between 2000 and 2009 on health care. And 2009 was the year “before” Obamacare” went into effect.