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How much will it cost to save the world?

    Naturevolume 444pages67 (2006) | Download Citation

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    The Stern Review won't be the last word on the cost of global warming. But it has upped the stakes in the debate. Jim Giles reports.

    He's a highly respected researcher and a former chief economist at the World Bank. He had a year and the help of more than 20 of Britain's brightest civil servants and academics. His work was commissioned by Gordon Brown, who controls Britain's budget and is likely to be the country's next prime minister. So could Nicholas Stern settle the debate about the economic impact of climate change?

    No chance. The Stern Review on the Economics of Climate Change, released on 30 October, has been praised by many economists, who say it sets a new benchmark for quality and thoroughness. But its dramatic conclusions, including the claim that tackling climate change would cost 20 times less than doing nothing, were immediately attacked by right-wing commentators and other economists. Some add that the report covers such complex ground that it should be seen as a political rather than a scientific document (see Editorial, page 2). Just as arguments about the validity of climate science are dying down, it seems that a new battle is looming over how much the world should spend to tackle climate change.

    “In a sense it's neither here nor there whether you believe the numbers.”

    At first glance, Stern's review provides ammunition for those who advocate tough measures. Stern predicts that if greenhouse-gas emissions carry on as normal, between 5% and 20% could be wiped off the global gross domestic product (GDP) by the beginning of the next century. “This allows us to put a dollar number on the cost of climate change for the first time,” says Philip Clapp at the National Environment Trust, a not-for-profit group in Washington DC.

    Equally important, adds Clapp, Stern helps to counter campaigns by the oil and coal industries, which have highlighted the costs of tackling climate change. The review says that stabilizing greenhouse-gas concentrations at roughly double pre-industrial levels would cost a relatively paltry 1% of GDP, so it provides strong support for measures such as mandatory emission limits and public investment in green technologies. The key message is that acting now will cost far less than acting later.

    The report has prompted some alarmist headlines, with one British newspaper declaring “Act now or the world we know will be lost forever”. Yet the methodology used is first-rate, say supporters. Estimating costs over decades, and trying to factor in social and economic changes that will take place, is enormously tricky. But the report contains a comprehensive meta-analysis of existing studies on mitigation costs. It also includes new results from a model that builds on the handful of previous studies that have tried to calculate the impact on global GDP.

    Inevitable criticism

    The upper bound of 20% for loss of GDP, which is higher than previous estimates, is due to several factors. Stern generally uses low numbers for discount rates, the parameter used by economists to compare future and current costs. His team also considered a range of values for climate sensitivity — the global temperature rise caused by a given increase in greenhouse gas concentrations. Using a range leads to the higher upper limit for GDP reduction, but the results are more realistic.

    “This is unquestionably head and shoulders above previous economic assessments,” says Michael Grubb, an energy economist at Imperial College London, who contributed to the review. But others have homed in on the many assumptions that had to be made. Many right-wing commentators attacked the review on these grounds, some even starting work before publication. The use of one global development scenario, in which population reaches what demographers say is an unrealistic figure of 15 billion, attracted criticism.

    Economists were also quick off the mark. In a four-page critique compiled within hours of the review's publication, economist Richard Tol of Princeton University accused Stern of selective reporting: “For water, agriculture, health and insurance, the Stern Review consistently selects the most pessimistic study in the literature.”

    Money man: Nicholas Stern's review puts a price on climate change. Credit: A. GRANT

    On sea-level rise, for example, Tol says the review underplays the role of better coastal defences. Roger Pielke Jr, an expert in climate-change policy at the University of Colorado, Boulder, also accuses Stern of “cherry picking” alarming results from the literature on the link between natural disasters and climate change.

    Such criticisms come as no surprise to Mike Hulme, director of the Tyndall Centre for Climate Change Research in Norwich, UK. Hulme says that the British government has asked him many times to conduct a study on the total cost of climate change. He declined, as he does not feel it's a question that researchers can answer. Difficulties in estimating the impact of strategies such as coastal defences are only part of the problem. When other assumptions, such as the economic cost of species extinctions, are included, Hulme feels that the uncertainties become so great that he would not be able to defend the end result.

    He says that Stern's team seems to have done a good job, but with so many assumptions involved, and the review having been conducted by a political appointee: “This is not the last word of scientists and economists, it's the last word of civil servants.”

    Trillion-dollar questions

    An academic involved in the Stern review, who did not want to be named as he was speaking on behalf of the team, told Nature that each assumption is based on the “sound principles of science and economics” and that the review spells out how the uncertainties affect the final result. He adds that the involvement of civil servants does not justify the “dangerous and incorrect” allegation that the report is politicized: “There was never any political pressure to produce high numbers.”

    The inevitable criticisms of the review need not reduce its impact. Negotiations over the future of the Kyoto Protocol are taking place this week (see 'Kyoto looks to the future'), and the review will strengthen the case of countries like Britain, which want tough limits on future emissions. Stern discusses several ways in which this could be done; one suggestion, that the current European Union emission-trading scheme be made global, was backed by Brown at the review's launch. Stern also notes that a substantial hike in public energy-research spending is needed, as market factors alone will not drive the development of technologies such as improved solar cells and biofuels that are needed to reduce emissions.

    Stimulating debate over spending decisions, rather than putting a figure on the true costs of climate change, may be the review's main legacy. Although Hulme questions the assumptions behind the headline result, he has no doubt that Stern is broadly correct: “In a sense it's neither here nor there whether you believe the numbers. This will take the discourse away from the costs of taking action and put attention onto the costs of inaction.”

    Additional information

    See Editorial, page 884; News & Views, page 919.

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