A Stern Warning
The cost of ignoring climate change is higher than the cost of acting to mitigate it. According to Lord Nicholas Stern’s testimony last Thursday before the House Energy and Commerce Committee Subcommittee on Energy & Air Quality hearing, governments must immediately enact policies that will reduce greenhouse gas emissions to avoid global catastrophes such as flooding, drought, famine, and mass immigration. Stern estimates that global warming impacts could cost 5-20 percent of the global GDP. He also claimed that he underestimated the threat associated with climate change in the 2006 Stern Review, his influential report framing climate change in economic terms. Stern said that “emissions are growing more quickly than we thought” when his team initially wrote the report. In his testimony, Stern claimed that the sort of movement that would occur when people are driven from coasts by a sea level rise of over a meter would cause huge conflicts, especially considering a global population of nine billion by 2050. He pointed out that “world wars seem to involve losses of 15 percent or more of GDP and the conflicts we are discussing are likely to be on a bigger scale, longer lasting, and, of course, affect much more than GDP.”
Stern also defended the discount rate he uses to estimate the economic impact of climate change from criticism. In economic analysis, discount rates determine the value of future costs and benefits. The Stern Review uses a discount rate close to zero, indicating that we should place nearly the same value on the well being of those alive in the year 2200 as we do on those alive today. Stern states that “discounting the future simply because it is the future is to adopt the value judgment that we should a priori care less about future lives…the approach of treating people with different birthdays in an equal way is a direct invocation of a notion of equality that is standard in most treatments of justice and rights.” Stern’s discount rate sparked a flurry of discussion about appropriate discounting, and Stern’s testimony was designed to unite economists around the idea that “even if we were to use much higher discounting, the higher risk of severe damages would imply that the overall numbers on cost do not change significantly from the original results of the Stern Review.” Basically, whether or not you agree with the value Stern places on the well being of your great-great-great-great-grandchildren, the science supports his plea for immediate and drastic policy.
The basis of Stern’s analysis rests on accurate predictions of future GHG emissions and the corresponding global temperature increase. Stern frames the balance of faith in and skepticism of the science behind his analysis as a modern Pascal’s Wager: “The common sense analysis of risk is clear. If we assume the science is right, and act correspondingly, and it turns out to be wrong, we will have some new technologies and a cleaner and safer world. If we assume the science is wrong and delay action and it turns out to be right, then we will be unable, except at a very high cost, to back out.” That means that even if an individual does not understand or accept the scientific evidence on global warming (like some members of the Subcommittee on Energy and Air Quality), policy that will lead the way towards cleaner, more efficient technology is still the responsible choice.
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