-Caveat Lector-
Begin forwarded message:
From: [EMAIL PROTECTED]
Date: March 30, 2007 1:42:51 PM PDT
To: [EMAIL PROTECTED]
Cc: [EMAIL PROTECTED], [EMAIL PROTECTED], [EMAIL PROTECTED]
Subject: The Costs of Global Warming
THE ECONOMICS OF CLIMATE CHANGE
Top economist believes economies can still grow while taking
responsibility for climate change
By: Terence Creamer
Published: 30 Mar 07 - 0:00
http://www.engineeringnews.co.za/article.php?a_id=105970
Renowned UK economist Sir Nicholas Stern, author of the now famed
‘Stern Review: The Economics of Climate Change’, believes adaptive
and mitigation action to stem the flow of carbon-dioxide emissions,
viewed by most scientists as the cause of global warming, is not
only urgent, but also not incompatible with a desire by governments
and business to continue to grow and develop their economies.
As arguably the leading economic scientist advocating intervention
on an international scale, Stern’s main contribution to the debate
has been to assign costs to the taking of action as against inaction.
His conclusion is that the “costs of strong and immediate action
will be far less than the costs of business as usual”.
Stern, who visited South Africa earlier this month in a bid to
galvanise the South African government’s backing for intervention,
quanti- fies the cost of that intervention at a one-off 1% of
global gross domestic product (GDP), as compared to a possible 5%
knock to global GDP under a scenario of inaction.
Even more bold, though, is his suggestion that there could be some
real economic opportunities arising from a global campaign to
reduce yearly CO2 flows and, ultimately, CO2 stocks in the
atmosphere. Climate-change sceptics will, no doubt, contest this
assertion, while some environmentalists will argue that fundamental
human-behaviour change is needed, as opposed to business-friendly
policy and regulation.
UNINTENDED CONSEQUENCES
Indeed, some environmentally conscious observers are deeply
suspicious of what could be described as the ‘corporatised’
solutions being proffered, arguing that some of these could create
new environmental problems, by, for instance, crimping biodiversity
and allowing for the proliferation of nuclear energy plants. The
other extreme, meanwhile, is that there are still a few scientists
who believe the climate-change agenda to be nothing more than a
cynical hoax, likely to divert attention and resources away from
other pressing social and economic challenges.
However, Stern is sanguine in the face of such criticism, arguing
that his review is conservative in its adoption of the science, and
proposes solutions that are imminently implementable, precisely
because it balances regulation to ensure adaptation with incentives
that will stimulate new behaviour by the private sector. Although
he does admit that this market-friendly model could have unintended
environmental fallout, which will need to be properly monitored and
researched.
One such unintended consequence could arise from the rush into
lower-carbon biofuels, a strategy also being pursued in South
Africa. The question is whether countries should pursue large-scale
biofuels solutions based on crops such as sugar or maize that are,
firstly, a source of food, and, secondly, require significant
quantities of water and fertile ground.
Stern acknowledges this could have serious negative implications
both on food security and biodiversity and is, thus, an advocate of
the use of crop residues and grasses that could be planted on
“marginal” agricultural land and can grow without, or with minimal,
irrigation. “If we can crack the problem of cellulosic ethanol,
which is ethanol that comes from grasses and crop residues, then we
will be able to plant the grasses on marginal land. At that point,
we will be able to perceive biofuels as a big part of the
mitigation story,” Stern asserts.
THE RISKS ASSOCIATED WITH ‘BUSINESS AS USUAL’
But Stern is also adamant that there has to be a sense of urgent
pragmatism in dealing with the climate-change issue and that, for
this reason, businesses have to be incentivised and/or
disincentivised to change their behaviour. Indeed, as an economist
first and foremost, Stern is a great believer in the use of policy
‘carrots and sticks’ to achieve the desired outcomes, particularly
in an instance of market failure – he describes climate change as
the world economy’s biggest-ever market failure.
But why should the world be taking the climate-change issue
seriously at all? The answer lies in the risk to current and future
generations as well as entire ecosystems should the worst
consequences of global warming actually occur – a risk that Stern
believes would be “reckless” to ignore.
But how can we respond? Here, it comes down to the issue of
stemming carbon-dioxide flows, in a bid, ulimately, to deal with
the stocks that are building up in the atmosphere.
The current level or stock of greenhouse gases in the atmosphere is
equivalent to around 430 parts per million (ppm) of CO2, compared
with only 280 ppm before the Industrial Revolution. Now, the Stern
Review argues that, even if the annual flow of emissions did not
increase beyond today’s rate, that stock level would reach double
(some 559 ppm) preindustrial levels, by 2050. However, with flows
accelerating, as developing economies invest in high-carbon
infrastructure and the demand for energy and transport increases,
the level of 550 ppm could be reached by as early as 2035, This,
the review suggests, could raise the global average temperature by
2-degrees C or more.
One scenario suggests that the stock of greenhouse gases could more
than treble by the end of the century, which could raise the global
average temperature by 5 ?C in the subsequent decades.
This, the review argues, would take humans into “unknown
territory”, illustrated by the fact that the planet is currently
only around 5-degrees C warmer than in the last ice age. The
impacts could transform the physical geography of the world.
Speaking at a gathering hosted by the South African Institute for
Inter-national Affairs, at the University of the Witwatersrand
earlier this month, Stern stressed that the “science is not all
rubbish”, and that the evidence for global warming has been
building up since the mid-1820s, when French mathematician and
physicist Fourier pointed out that the earth’s temperature was
determined by the energy balance between incoming sunlight and
outgoing radiation. “The theoretical and empirical evidence is now
overwhelming,” Stern argues, highlighting the findings of the
recent Fourth Assessment Report of the Intergovernmental Panel on
Climate Change, which states that it is now almost certain that
climate change, caused by human activity, is now a clear, serious
and growing problem.
He says the science shows that it is the “stock” of greenhouse
gases in the atmosphere that is causing the problem, but that the
policy response has to focus on the control of the yearly “flow” of
emissions, which is a small part of the stock at around 2,5 ppm as
compared with the stock of 430 ppm. The implication is a material
lag in the system before the policy measures have any effect.
“This means there is a lot of climate change already on its way
which is a direct consequence of our failure to act in the past –-
so we don’t start from a very good place.”
So what are the likely consequences of climate-change? Those, such
as Stern, who believe it is “absurd” to deny the science also
believe that warming will have many severe impacts, mostly mediated
through water. These may include melting glaciers, increasing flood
risk and then reducing water supplies to the point of threatening
one-sixth of the world’s population; declining crop yields,
especially in Africa, which could leave hundreds of millions
without the ability to produce or buy sufficient food; and rising
sea levels, which may result in tens to hundreds of millions more
people flooded each year with warming of 3-degree C or 4-degrees C,
with one estimate suggesting that, by the middle of the century,
200-million people may become permanently displaced owing to rising
sea levels, heavier floods, and more intense droughts; and
Ecosystems will be particularly vulnerable, with around 15% to 40%
of species potentially facing extinction after only 2-degrees C of
warming.
Stern argues that the planet has reached the point where the only
way to carry on with a ‘business as usual’ approach is to be
“absurd and deny the science, reckless and say humanity will adapt
to whatever will come its way, or you can be unethical and say you
are not bothered about the future”.
BUT WHAT ARE THE OPPORTUNITIES
But Stern also argues that mitigation and adaptation investment of
1% of global GDP, while significant, is small in relation to the
damage that could be avoided. By paying the price, he believes the
world could limit greenhouse stock levels to around 550 ppm, as
compared to well over 750 ppm by the end of the century – the
latter scenario gives a better than 50% chance of raising the earth
temperature by 5-degrees C. He also stresses that the process of
global warming is “highly inequitable”, given that larger rich
countries have contributed most to the flows and built-up stocks,
but poorer countries are likely to suffer earliest.
He argues that, at 1% of global GDP, the cost is also not
incompatible with the desire to continue to grow and develop
economies, pointing out that modern economies have, in the past,
coped with 1%-type costs brought about by changes in exchange
rates. “We would rather not have to do it. It is not a small
number, but it is not the kind of number that stops growth,” Stern
argues, adding that the strategies being suggested are also
compatible with the desire for energy security. He says the
European Union (EU) demonstrated its belief in this com- patibility
with a pledge, earlier in March, to reduce greenhouse-gas emissions
by its 27 members by at least 20% from their 1990 levels by 2020 –
by 30% should other rich countries join in.
Stern says, however, there may also be real business opportunities.
In agriculture, for instance, there could be new crops and cropping
methods, new agricultural and more productive techniques, or
fertiliser innovations that require less tilling.
There is even the potential that low-carbon development could spur
major technological change that could drive a whole new era of
innovation that might actually stimulate growth. Innovations in
solar, for instance, could lead to decentral- isation of energy
systems and increase access to energy solutions among poor people.
In addition, there is likely to be far more emphasis given to
researching future energy systems – over the past quarter century,
research and development budgets into energy have halved, which is
viewed as unsustainable.
In the controversial area of carbon finance, moreover, there are
opportunities that could have beneficial spin-offs for poorer
countries. Stern says to “correct the market failure” of not having
priced in the damage to others that carbon emissions cause, taxes
and carbon trading will probably be extremely important tools. This
works by caps being set on emissions, which, if exceeded, will
require firms to buy emissions-reduction permits from a company
that has dropped below that cap. “Strong targets in rich countries
create a powerful demand side for emissions reductions, and this
creates the opportunity to look for ways of defining supply-side
emissions reductions in develop- ing countries,” he explains,
adding that this could be done without setting formal caps on
developing countries.
The scale of the carbon-trading market could expand markedly should
more countries join the system and if new sectors, such as air
travel, begin to be incorporated. Should this be achieved, a large-
scale carbon market, of the order of $20-billion to $40-bilion a
year, could begin to emerge.
This said, Stern stresses that, while development is not
incompatible with climate-change action, it does still require
adaptation and a realisation that development will be more
expensive. He argues that it would, thus, be “silly” for
development planners not to factor in climate change as part of
their development plans. Failure to do so, Stern claims, could lead
to infrastructure and agricultural planning that is disconnected
from the new weather patterns. “Adaptation to climate change is not
a conspiracy against investment in health or education, but a fact
of life that development planning has to take account of,” Stern
argues, adding that it will take a different approach to
infrastructure, urban planning, and different kinds of water
solutions.
He admits, too, that the response cannot only be about
incentivising markets, and will also have to incorporate trade-offs
and new regulation to force behaviour change. For instance, by
2009, traditional light bulbs will no longer be available in Europe
and all new light bulbs sold will have to be low-energy bulbs.
There are also suggestions that diesel or petrol cars will be
disallowed from entry into London and cities like it in Europe by
2020.
But apart from energy efficiency and conservation efforts, other
low-hanging fruits include accelerating efforts against
deforestation, given that emissions as a result of deforestation
are greater than from transport, and moving to reduce emissions
from agriculture, while raising productivity in the sector. Another
big-ticket item will be carbon-capture and storage from coal-fired
stations, with the EU planning to have all its coal-fired plants on
carbon-capture systems by 2020. This will also become a major issue
for South Africa, where well over 80% of its energy comes from coal
and will still be for many decades to come.
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