Commentary

The Economics of Climate Change

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The Economics of Climate Change

The publication of Sir Nicholas Stern’s Review on the Economics of Climate Change is being viewed with great interest around the world. On Friday 3rd November E3G’s Jennifer Morgan contributed to USA-based public radio show ‘Living on Earth’ to discuss the impact of the Review.

‘Living on Earth’ with Steve Curwood is the weekly environmental news and information program distributed by Public Radio International. Every week approximately 300 Public Radio stations broadcast Living on Earth’s news, features, interviews and commentary on a broad range of ecological issues. The show airs in 9 of the 10 top radio markets and reaches 80% of the US.

The transcript of the interview with Jennifer Morgan follows below.

The Economics of Climate Change

Curwood: A new report from the top economist of the British government says if climate change continues unchecked, it would likely cripple the global economy. Sir Nicholas Stern is the head of the UK’s economic service and he issued his report in advance of the Kyoto Protocol’s next round of negotiations scheduled for later this month in Nairobi, Kenya.

The current phase of the Kyoto Protocol requires modest emissions reductions by industrialized countries. The next phase of Kyoto begins in 2012. It is expected to call for much deeper cuts in greenhouse gases and include mandatory limits on emissions from the large developing nations, including China, Brazil and India.

Jennifer Morgan is the Climate and Energy Security Director at Third Generation Environmentalism and she joins me now to discuss the Stern report. Hello there.

Morgan: Hello.

Curwood: So, what’s the significance of this report?

Morgan: I think the significance of the Stern report is it’s the first time when the world has been offered a mentally robust economic analysis on the challenge of climate change. Both from the side of how much the impacts of climate change would cost society and how much it would cost or benefit society to avoid those impacts. And in fact that there is not a need to choose between avoiding climate change and promoting growth and development. We can do both at the same time.

Curwood:So what are the most important findings from your perspective?

Morgan: Well number one is what he’s found on the cost of the impacts. He finds that the world’s economy could face massive depression. That the costs if urgent action are not taken could be along the lines of World War I, World War II and the Great Depression combined. Up to 20 percent of GDP each year could be the cost of the impacts of climate change. And he finds that actually in order to implement risk reduction of those cost you would need to invest just about one percent of GDP by 2050 to avoid that kind of depression.

Curwood: Now, why was this study commissioned in the first place?

Morgan: I think that Gordon Brown, the Secretary of Treasury of the United Kingdom commissioned it because he wanted more information on the economics of climate change. There have been a lot of studies done, a lot of controversy, a lot of squabbling about numbers. I think he was looking to get one of the world’s top economists to step in and give him some hard nosed numbers on the problem.

Curwood: Now you say squabbling over numbers. What squabbling? What numbers?

Morgan: Well, the climate change debate, as many may have probably heard, is often ripe with industrial groups claiming that doing something about climate change will bankrupt the economy. And I think what the UK government was looking for was an impartial voice that looked at all of the literature and did some really hard number crunching to come up with something that was credible.

Curwood: Jennifer, could you give us some specifics of the economic effects that Sir Nicholas is talking about here?

Morgan: Well, for example, what happens when glaciers melt? The impacts of glacier melt on fresh water supply, and then of food security issues that you think of the Himalayas and billions of people dependent on those glaciers. The cost of first a flood from the melting of the glaciers and then a drought. And the food security issues around that for a country like India.

Curwood: And what are the economic dividends that he said would be returned by making investments in fighting climate change right now?

Morgan: He finds a number of different dividends. He finds that the benefits of investment would exceed the costs by 2.5 trillion dollars annually. And that the market for green technologies could be worth at least 500 billion a year by 2050. There’s actually quite a lot of money to be made from this.

Curwood: So as I understand it Sir Nicholas Stern is going to present his findings at the meeting of the parties of the Kyoto Protocol at the UN climate change convention in Africa, later in November. What can we expect out of this meeting?

Morgan: My hope is that this meeting, which is the first climate change meeting in Africa, will result in much greater support for adaptation efforts in Africa. In other words, helping Africa deal with the impacts of climate change that are already occurring and will happen at a much more devastating rate in the future. I would also hope that it would spur greater movement on the solutions side. Right now we’re in a bit of a stuck phase I would say where we’re in a negotiation that is supposed to conclude next year. Well this report would give all countries impetus to speed those up, to meet more often, to come to a conclusion by next year, to set forward the post 2012 phase or the next phase of the Kyoto Protocol. And to set it up so that it is absolutely impossible for the United States to stay out of the system.

Curwood: Tell me more about what the Kyoto process needs to get negotiated by next year.

Morgan: Well, there is a range of different tracks in the negotiations right now. One has to do with what developed countries are willing to do further. The Kyoto Protocol includes binding targets to reduce emissions from developed countries but it’s only in the range of five percent by 2012. And what we need is something in the range of 30 percent by 2020.

Curwood:Jennifer Morgan is the climate and energy security director for Third Generation Environmentalism. Thank you so much.

Morgan:Thank you.

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