Leading British economist Sir Nicholas Stern was asked by UK Chancellor Gordon Brown in July, 2005, to review the economic impact of climate change. Stern delivered his 700-page review last October. Its core message is inescapable: Global warming is happening and we are in a race against time to avert climate catastrophe.
Economists are not generally associated with emotive language, which is what makes the Stern Review at first seem so striking. Sir Nicholas Stern is one of the world's leading economists-a former chief economist with the World Bank and now chief economic advisor at the UK Treasury-and is steeped in the market language and form of his profession. So when his report employs phrases such as "averting catastrophe," "urgent action is required," and, most telling of all, "the greatest and widest-ranging market failure ever seen," we can be left in no doubt as to how severe he thinks the problem we face is.
Sir Nicholas was commissioned by Chancellor of the Exchequer Gordon Brown to provide an economic assessment of the impacts of climate change, to be used as a basis for policy-making. Stern presented his findings on October 30,2006. In his review he studies three scenarios: firstly, business as usual; secondly, stabilizing carbon dioxide (CO2) in the atmosphere at 450 parts per million (PPM); and lastly, stabilizing CO2 somewhere between 500 and 550ppm.
The outcome of carrying on with business as usual, he says, is "catastrophic," occasioning an economic collapse akin (in today's money) to the cost of fighting two World Wars and the 1930s stock market crash combined.
Stabilizing the atmospheric CO2 at 450ppm is what the science tells us we have to do. This is the only reasonable "safe" option-the one that gives us a 50-50 chance of stopping climate temperature rising by more than 2°C, sending the polar caps and Antarctic ice sheets into terminal meltdown, the rainforests perishing, and sea levels rising to levels that would drive 200 million people from their homes.
The third option is to stabilize atmospheric CO2 at somewhere between 500 and 550ppm, where collapse is not inevitable, only considerably more likely.
The report then looks at what would be needed to achieve these latter two targets and at what economic cost, and concludes that two courses of action need to be started "urgently." One is mitigation-acting to prevent the situation becoming worse. The other, adaptation-modifying the way we behave as a society in light of the changes we already know are on their way as a result of climate change. Both of these, warns Stern, need to be started without delay.
It is at this point that the review was destined to become controversial. Putting a price on the cause and effect of climate change and preserving the biosphere couldn't be anything but, as Stern himself acknowledges. How much is a life worth? What level of climate shocks are we prepared to accept to maintain the convenience and consumer culture in the developed world for a little while longer? How much of the world's peoples and species and habitats can we "afford" to save? How much are we prepared to lose?
In some quarters, Stern has been accused of being "morally repugnant" for attempting to do this. This is erroneous and a smear. Stern is the messenger. If there is a criticism to be levelled about addressing a predominantly moral issue in economic terms, it should be directed against Gordon Brown, who posed the question. Stern simply gave the answer he was asked to provide.
To which end, Stern has given us a cost. The gross domestic product (GDP) of a country-or in this case the world-is defined as the market value of all final goods and services produced within the specified area in a given period of time. As it incorporates the sum of value added at every stage of the production of all goods and services, including wages and consumption, transportation, etc., it is often used as a crude measure of per capita income and therefore well-being. …