Cost of tackling global climate change has doubled, warns Stern

Author of landmark report says 2% of GDP is needed
Inaction would mean far greater economic damage

Juliette Jowit and Patrick Wintour, The Guardian 26 Jun 08;

The author of an influential British government report arguing the world needed to spend just 1% of its wealth tackling climate change has warned that the cost of averting disaster has now doubled.

Lord Stern of Brentford made headlines in 2006 with a report that said countries needed to spend 1% of their GDP to stop greenhouse gases rising to dangerous levels. Failure to do this would lead to damage costing much more, the report warned - at least 5% and perhaps more than 20% of global GDP.

But speaking yesterday in London, Stern said evidence that climate change was happening faster than had been previously thought meant that emissions needed to be reduced even more sharply.

This meant the concentration of greenhouse gases in the atmosphere would have to be kept below 500 parts per million, said Stern. In 2006, he set a figure of 450-550ppm. "I now think the appropriate thing would be in the middle of that range," he said. "To get below 500ppm ... would cost around 2% of GDP."

In a recent report for the London School of Economics, Stern acknowledged that even 1% of GDP was "not a trivial amount". For the UK it is equivalent to £14bn a year. But he argue that it was a fraction of annual economic growth, and much less than the 8-14% that was spent, for example, on health by industrialised countries.

His reassessment of the cost of battling climate change comes at a sensitive time, the day before Gordon Brown makes a major speech setting out a £100bn strategy for ensuring that 15% of all energy used in the UK will come from renewable sources by 2020. The government has come under pressure from the Tories, whose statements on the environment include effectively banning new coal power stations and opposing a third runway at Heathrow.

Ministers are already under political pressure to row back on environmental taxes, such as increases in fuel duty and vehicle excise duty. Downing Street aides admit government policy is ahead of public opinion and that its proposals are on the margins of what the electorate will tolerate at a time of escalating oil prices and falling house prices. Brown will highlight that as many as 160,000 green jobs will be created by his climate change measures.

Speaking yesterday at the launch of the Carbon Rating Agency, the world's first ratings agency for carbon offsetting projects, Stern warned that the 2% estimate required governments to act quickly. "All this depends on good policy and well functioning [carbon] markets. There are many ways to mess this up, many ways of acting to make it more costly," he said.

The Stern review in October 2006 called for global emissions to be cut by a quarter by 2050 and to be stopped from rising above the equivalent of 550ppm of CO2, a measure that combines the effect of all the greenhouse gases. The current level is 430ppm, and is rising by 2ppm a year.

Yesterday, Stern, a former World Bank chief economist and head of the UK government economic service, said he now believed the limit should be 500ppm. This would reduce the risk from a 50% chance to a 3% chance that the global average temperature would rise by 5C above pre-industrial levels, he said, pointing out that the last time this happened, 35-55m years ago, alligators lived near the north pole. "These kind of temperature changes transform the word," he said.

His new comments follow a speech in April in which he said that the latest research showed climate change was more of a threat, and called for global emissions to halve by 2050, including cuts of 80% in the UK and 90% in the US.

The Department for Environment said the case for cutting global emissions was still strong: "We cannot afford inaction on climate change. Even at the upper range of the estimates, the cost of avoiding dangerous climate change is much lower than even the most conservative estimates of inaction."

The Confederation of British Industry said Stern's latest figures should add to pressure for government and businesses to act quickly to avoid the costs rising further.

"This only reaffirms the need to tackle climate change as an immediate priority and highlights both the benefits of early action and the cost of inaction," said Neil Bentley, CBI Director of Business Environment.

Caroline Lucas, the Green Party's principal speaker and an MEP, said during a recession concerted action to invest in efficiency and clean energy could "kick-start" the economy in a similar way to the New Deal in the US in the 1930s.

"What we need is a similar injection of capital but into green technology," said Lucas. "For example the aspiration of making every home energy efficient: that will cost money but at the same time provide a huge number of jobs and save people money on their fuel bills."

On Wednesday, a report from HSBC also showed shares in companies taking action to reduce emissions and develop products and services to cut pollution were outperforming the market.