Clash over ecological economics

Pallab Ghosht, BBC News 27 Apr 09;

Warnings are being sounded about the way government is preparing for the cost of climate change.

The government's former chief scientific advisor, Professor Sir David King has told BBC News that he believes that the government is being misled by economic assessments of the impact of climate change such as those drawn up by Lord Stern in his review for the Treasury published in 2006.

Prof King believes that such models are underestimating the true cost of tackling the problem and leading to poor investments by businesses and governments.

Many governments including the UK now include an environmental cost benefit in policy making. That cost benefit uses estimates made by economic models, such as those developed by Lord Stern and his team for the Treasury.

Professor King, who is now director of the Smith School of Enterprise and the Environment at the University of Oxford and an advisor to UBS has said that he "questions the value of these simple models" saying that they are "misleading".

"Economic models such as those produced by Nick Stern are often based on steady growth," he said.

"But they are not very good at predicting the impact of catastrophic events," he added. "It's likely that because of Sea level rise and changes in rainfall patterns people will have to migrate. "That has the potential for massive conflict and massive geopolitical destabilisation and that can lead to a sudden downturn in the global economy".

Cost questions

Professor King argues that economic models are not fully able to account for such upheaval. This raises questions about how economists can put an accurate price on producing a tonne of carbon dioxide.

He also said that these models do not properly cost the environmental impact of large infrastructure projects. The decision to give the go-ahead to build four new coal-fired power stations with experimental carbon capture technology and a third runway for Heathrow airport in London are examples of projects that could not have been properly assessed by economic modelling, he said.

Dr Simon Dietz, deputy director of the Grantham Research Institute on Climate Change and the Environment and a member of the former Stern Review team, said: "Economic models of the impact of climate change, like scientific models of climate change, have both strengths and limitations.

"Modelling was used very carefully in the Stern Review and the uncertainties and limitations of the results were fully explained in the report," he said. "The models used in the Review had advantages over other economic models which tend to underestimate the potentially severe impacts of climate change.

"It is now two and a half years since the Stern Review was published, and further evidence on climate change has become available," he added. "As Nicholas Stern has highlighted, it has become apparent that the risks and potential costs of the impacts of climate change are even greater than we originally recognised," he said. "Future modelling will take that into account.

"We know that the Government is continuing to use modelling to help formulate its policies on climate change. When the models are used correctly, with good data, they can produce information to make better-informed decisions, but they are not the only sources of information that are taken into account."