A Serious Economic Threat

Nicholas Stern, 7 years after the publication of his renowned Stern Report, admits that he underestimated the impacts of climate change.

SternReview_coverNicholas Stern, former chief economist at the World Bank, and chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, is the author of the 2006 landmark review which discussed the effect of global warming on the world economy. His review stated that in terms of risk management, the response to climate change was the most extreme market failure ever seen. [1]

The main conclusion of the 2006 Stern Report argued that the benefits of immediate and resilient action on climate change and cutting emissions far outweighed the costs of failing to act. The report advised that without prompt counter measures the overall cost of climate change would be equivalent to losing 5-20% of global gross domestic product (GDP) each year, for an indefinite period. Economists have since estimated that the cost of preventing that outcome would result approximately in the loss of only 1% of GDP.

“I underestimated the impacts and risks…”

Stern advocated that in order to curb climate change a limit would need to be placed on the amount of fossil fuels that should be utilised in the future [1]. But now, seven years on, he admits that his 2006 review greatly underestimated the impacts and risks associated with climate change. “Emissions are at the top or above the projections we talked about six or seven years ago…We didn’t say enough about the interactions between climate and ecosystems. [2]

In an interview this year at the World Economic Forum in Davos Stern said, "Looking back, I underestimated the risks. The planet and the atmosphere seem to be absorbing less carbon than we expected, and emissions are rising pretty strongly. Some of the effects are coming through more quickly than we thought then.” His 2006 report had stated that global temperatures would rise by 2-3 degrees above the then average, but he now believes we are "on track for something like four" degrees. When asked how he would have changed his report based on his current knowledge he replied, "I think I would have been a bit more blunt. I would have been much more strong about the risks of a four- or five-degree rise.” [3]

We have to find climate-friendly ways of encouraging economic growth. The good news is we think they exist.

– JIM YONG KIM
PRESIDENT OF THE WORLD BANK

Jim Yong Kim, the new president of the World Bank, spoke out this year about the serious risk of conflicts over natural resources should Stern’s forecast of a four-degree global temperature rise be corroborated; "There will be water and food fights everywhere," Kim said. He has vowed to prioritise climate change action as part of his plans for his five year term. "People are starting to connect the dots. If they start to forget, I am there to remind them. We have to find climate-friendly ways of encouraging economic growth. The good news is we think they exist". Kim urged the private sector to become more involved in creating solutions, and enticed them by saying, "there is a lot of money to be made in building the technologies and bending the arc of climate change." [3]

What is the main obstacle for combatting climate change?

Despite this support from the World Bank president, Stern still sees a general lack of political will as the principal obstacle to overcome in order to generate meaningful scientific and political action to combat climate change. He believes this stems from an absence of understanding in three key areas: climate change’s real risks, the benefits of an alternative pathway, and the need for collaboration and mutual understanding. [2]

The 2013 Intergovernmental Panel on Climate Change Report

The 2013 Intergovernmental Panel on Climate Change report (IPCC), “makes crystal clear that the risks from climate change are immense,” according to Stern. [5] Many scientists believe that climate change is not only associated with the increased rate of our melting ice caps, but is also affecting our water systems, leading to greater risks from floods and droughts.

Perhaps unsurprisingly though, the IPCC report is not without its critics. In an interview with the Guardian in September for example, Myron Ebell, of the US Competitive Enterprise Institute, was quoted as saying "Global warming, although it may become a problem some decades in the future, is not a crisis and is highly unlikely to become a crisis. We should be worried that the alarmist establishment continues using junk science to promote disastrous policies that will make the world much poorer and will consign poor people in poor countries to perpetual poverty." [4]

Some climate change sceptics, such as Paul Crovo, policy advisor to The Heartland Institute, have also argued that anthropogenic global warming is a myth, and that, “the causal linkage between CO2 and temperature change is tenuous at best.” Crovo argues that “it should suffice to say that other variables such as solar cycles, multi-year atmospheric oscillations and other factors in the climate equation should be given greater attention relative to the impact of the trace gas carbon dioxide.” [7]

Stern’s response to climate change sceptics

Stern’s response to such climate change sceptics was robust, saying, "It is astonishing, irrational and unscientific to suggest the risks are small,” he said in a recent interview with the Guardian, “How can they say they know the risks are small? The clear conclusion from 200 years of climate science and observations show a strong association between carbon dioxide rises and global surface temperature. The science is unequivocal and shows there is serious danger.” [4]

UnburnableCarbonReportHaving accused sceptics of an economically vested interest in contradicting the glaring truth of science, Stern’s 2013 Unburnable Carbon Report also suggested that global markets are investing in the development of fossil fuel reserves which conflict with what is required for future climate security. [8]

His report warns that “if we burn all current reserves of fossil fuels, we will emit enough CO2 to create a prehistoric climate, with Earth’s temperature elevated to levels not experienced for millions of years. Such a world would be radically different from today, with changes in the intensity and frequency of extreme events, such as floods and droughts, higher sea levels re-drawing the coastlines of the world, and desertification re-defining where people can live. These impacts could lead to mass migrations, with the potential for widespread conflict, threatening economic growth and stability.”

An optimistic future

We need urgently to identify how we can achieve economic growth and job creation while also reducing emissions and tackling climate change.

– JIM YONG KIM
PRESIDENT OF THE WORLD BANK

This September saw seven countries launch a new ‘economics of climate change’ analysis. South Korea, Ethiopia and the UK have combined their efforts with four other countries in order to launch an $8.9 million examination in to the impacts of climate change upon the economy. Chair of The Global Commission on the Economy and Climate, and former President of Mexico, Felipe Calderón, stated that “Climate impacts are rising and the evidence of warming is increasingly clear, but most economic analysis still does not properly factor in the increasing risks of climate change or the potential benefits of acting on it. We need urgently to identify how we can achieve economic growth and job creation while also reducing emissions and tackling climate change.” [6]

Stern himself has remained optimistic, urging people to see the next few years as both an economic opportunity, and an opportunity to redouble efforts to mobilise political will globally. He has commended the action some countries have taken in order to combat the serious risks of climate change, highlighting how China, the world’s biggest emitter of greenhouse gases, was "taking seriously" the threat from emissions, alongside the leadership of countries such as Ethiopia, South Africa and Mexico. [4]

Gazasia’s Response

Gazasia is committed to improving air quality and mitigating greenhouse gas emissions by producing biomethane, a clean and renewable road transport fuel. Road transport is one of the largest sources of harmful air pollution and greenhouse gas emissions globally.  In the Philippines, where Gazasia’s current projects are located, air pollution has reached critical levels, exceeding the World Health Organisation air quality limits. Air pollution from diesel vehicles has been associated with damaging health impacts including asthma, heart disease and cancer. Poor air quality is placing a considerable financial burden upon the Philippine’s healthcare system. [9] Studies have shown that 80 per cent of the pollution in Manila comes from fossil fuel powered vehicles. [10] By replacing diesel with biomethane, Gazasia is playing an important role in reducing air pollution and improving public health.

Compared to diesel, biomethane is a very clean burning fuel offering more than 90% reduction in particulate matter emissions, over 60% reduction in nitrogen oxides, and 50% reduction in sulphur dioxide emissions. Further-more, biomethane is a carbon neutral fuel achieving over a 100% reduction in lifecycle greenhouse gas emissions compared to diesel. One of the main reasons for this is that production of biomethane involves capturing methane emissions that would otherwise have been released into the atmosphere from the biological break down of organic waste disposal sites. Methane is as powerful as a greenhouse gas so converting it into a renewable vehicle fuel offers an effective route of mitigating climate change.

Generating biomethane from biodegradable waste also helps alleviate the escalating burden of waste in cities and facilitates sustainable waste management.  The reduction of waste is urgently required in Asia's growing cities. The use of organic waste to produce biomethane will reduce society’s reliance on fossil fuels for transportation, help to preserve natural resources, and reduce the environmental impacts associated with producing and burning fossil fuels. Gazasia is helping to make cities greener, cleaner and healthier for current and future citizens.

[1] Stern Review, October 2006

[2] WRI Insights, April 2013

[3] The Guardian (Stewart & Elliott), January 2013

[4] The Guardian (Harvey), September 2013

[5] Press Association, 2013

[6] Responding to Climate Change, September 2013

[7] Heartland (Crovo), May 2013

[8] Unburnable Carbon Report, April 2013

[9] GMA News, April 2012

[10] Philippine Daily Inquirer

 

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THE COST

Of acting
1%
Of not acting
5%-20%
Percentage of GDP

Looking back, I underestimated the risks. The planet and the atmosphere seem to be absorbing less carbon than we expected, and emissions are rising pretty strongly. Some of the effects are coming through more quickly than we thought then.

– NICHOLAS STERNFORMER CHIEF ECONOMIST AT THE WORLD BANK, AND CHAIR OF THE GRANTHAM RESEARCH INSTITUTE ON CLIMATE CHANGE AND THE ENVIRONMENT AT THE LONDON SCHOOL OF ECONOMICS

Estimated Rise in Temperature