The summary was released before the main report. Rejecting the Scottish Enlightenment, we are invited to believe its findings without inspecting the evidence. It seems, though, that Lord Brentford has produced another work of far-fetched fiction. Stern2.0 makes three claims, none of which stand up: Climate policy stimulates economic growth; climate change is a threat to economic growth; and an international treaty is the way forward.
“Well-designed policies […] can make growth and climate objectives mutually reinforcing”
The original Stern Review argued that it would cost about one percent of Gross Domestic Product to stabilise the atmospheric concentrations of greenhouse gases around 525 ppm CO2e. The Intergovernmental Panel on Climate Change puts the costs twice as high. Stern2.0 advocates a more stringent target, 450 ppm, and finds that this would accelerate economic growth.This is implausible. Renewable energy is more expensive than fossil fuels. The rapid expansion of renewables is because they are heavily subsidised rather than because they are commercially attractive. The renewables industry collapsed in countries where subsidies werewithdrawn. Raising the price of energy does not make people better off. Higher taxes, to pay for subsidies, are a drag on the economy.
Climate policy need not be expensive. Study after study had shown that it is possible to decarbonize at a modest cost. Stern2.0 missed an opportunity to point out that climate policy may be cheap, but this is not guaranteed. Climate policy can also be very, very expensive. Europe has adopted a jumble of regulations that pose real costs on companies and households without doing much to reduce emissions.
The subsidies and market distortions that typify climate policy do, of course, create opportunities for the well-connected to enrich themselves at the expense of the rest of society. Perhaps Stern2.0 mistook rent seeking for wealth creation.
“[I]f climate change is not tackled, growth itself will be
at risk”
The new report claims that climate change would be a threat
to economic growth. The original Stern Review argued that the damages would be
5-20% of income. In the worst case, we would not be 4 times as rich by the end
of the century, but only 3.8 times. The Intergovernmental
Panel on Climate Change reckons Stern1.0 exaggerated the impacts by a
factor 10 or more. The new Stern agrees that the old Stern was off by an order
of magnitude, but in the opposite direction.Over the last two decades, economists have re-investigated the relationship between economic development and geography. This has not led to a revival of the climate determinism of Ellsworth Huntington. On the contrary, most research has shown that climate plays at most a minor role in economic growth, and that the impact of climate is moderated by technology and institutions. Just consider Iceland and Singapore. Stern2.0 goes against the grain of a large body of literature.
“A strong […] international agreement is essential”
The new Stern Review calls for an international treaty with
legally binding targets. Albert Einstein defined insanity as doing the same
thing over and over again and expecting a different result. Since 1995, the
parties to the United Nations Framework Convention on Climate Change have met
year after year to try and agree on legally binding targets – and failed every
time. The reasons are simple.
It is better if others reduce their emissions but you do not. No country likes
to be bound by UN rules for its industrial, agricultural and transport policies.
The international climate negotiations have been successful in creating new
bureaucracies, but not in cutting emissions.Stern also argues that “[d]eveloped countries will need to show leadership”. The EU has led international climate policy for two decades, but without winning any followers. The broken record that is Stern2.0 is unlikely to inspire enthusiasm for more expensive energy.
A way forward
The Stone Age did not end because we ran out of stones, but because we found something better: bronze. The fossil fuel age will end when we find an alternative. The current renewables are simply not good enough – except for the happy few who profit from government largesse. The environmental movement’s aversion to nuclear power and shale gas increases emissions and creates an impression of Luddism whereas climate policy should focus on accelerating technological change in energy. The unfounded claims by Stern2.0 do not build the confidence that investors and inventors need to take a punt on a carbon-free future. Exaggeration is great for headlines, but sober analysis is more convincing in the long run.An edited version appeared in The Conversation
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