A new report on the economics of climate change for the UK government by former World Bank chief economist Sir Nicholas Stern argues that, unchecked, global warming could shrink the global economy by as much as fifth. However, by taking action now this impact could be significantly reduced to just 1% of global GDP, Stern says.
The independent review, commissioned by the UK’s Chancellor of the Exchequer, examines the evidence on the economic impacts of climate change and explores the economics of stabilising greenhouse gases.
The report concludes that international collective action will be critical in driving an effective, efficient and equitable response requiring deeper international co-operation. Key areas include creating price signals and markets for carbon, spurring technology research, development and deployment, and promoting adaptation to climate change, particularly for developing countries.
‘Progress in the next 10 or 20 years will have a profound effect on the climate in the second half of this century and in the next,’ says the review, but a business as usual scenario could create risks of major disruption to economic and social activity on a scale ‘similar to those associated with the great wars and the great depression’. Stern adds: ‘The evidence gathered by the review leads to a simple conclusion: the benefits of strong, early action considerably outweigh the costs.’
The current level of greenhouse gases in the atmosphere is equivalent to around 430 ppm CO2 compared with only 280ppm before the Industrial Revolution, concentrations which have already caused the world to warm by more than 0.5°C.
However, the level of 550ppm CO2 could be reached as early as 2035, bringing with it at least a 77% chance of a global average temperature rise exceeding 2°C and threatening a range of severe impacts including an increased flood risk for one-sixth of the world’s population, and declining crop yields that could leave hundreds of millions without the ability to produce or purchase sufficient food. Rising sea levels will also result in tens to hundreds of millions more people being flooded annually.
In the long term, the report says, annual global emissions will need to be reduced to below 5 GtCO2e – the level that the earth can absorb – more than 80% below the absolute level of current annual emissions. Stabilising atmospheric concentrations at or below 550ppm CO2e would require global emissions to peak in the next 10 – 20 years, and then fall at a rate of at least 1 – 3% per year, Stern says, while stabilisation at 450ppm would require emissions to peak in the next 10 years and then fall at more than 5% per year, reaching 70% below current levels by 2050.
Power contributed 24% of total greenhouse gas emissions in 2000, according to the report, which adds that large-scale uptake of a range of clean power, heat, and transport technologies is required for radical emission cuts in the medium to long term. The power sector around the world will have to be least 60%, and perhaps as much as 75%, decarbonised by 2050 to stabilise at or below 550ppm CO2e.
A portfolio of technologies will be required, but even a very strong expansion of renewable and other low carbon energy sources, hydrocarbons may still make over half of global energy supply in 2050, Stern concludes. Extensive carbon capture and storage would therefore be required to allow this continued use of fossil fuels without damage to the atmosphere, and also guard against the danger of strong climate-change policy being undermined at some stage by falls in fossil-fuel prices.
On a positive note the study estimates that markets for low-carbon energy products are likely to be worth at least $500B per year by 2050, and perhaps much more, while implementing strong mitigation policies this year would reap net benefits of the order of $2.5T, a figure likely to increase over time.
Key recommendations include expanding and linking emissions trading schemes around the world; doubling support for energy research and setting international product standards for energy-efficiency; and fully-integrating climate change adaptation into development policy.
UK Prime Minister Tony Blair commented: ‘Unless we act now, not some time distant but now, these consequences, disastrous as they are, will be irreversible. So there is nothing more serious, more urgent or more demanding of leadership, here of course but most importantly, in the global community.’ Blair added that the conclusions of the Stern Review should be seen as ‘the final word’ on the subject. Stern concludes: ‘It is still possible to avoid the worst impacts of climate change; but it requires strong and urgent collective action. Delay would be costly and dangerous.’