The Age of Global Warming: A History
Page 41
In a swift rebuttal, Stern gave no quarter. ‘This is not a theory that is fraying at the edges,’ he wrote.[8] Falling into Professor Tinbergen’s trap, Stern argued that unless the role of anthropogenic greenhouse gas emissions was recognised the temperature increase of the previous forty or fifty years ‘cannot convincingly be explained’ by climate models.[9] ‘In fact, the latest science suggests that the risks could be substantially greater than previously seen,’ a claim that was not based on any real world evidence.[10]
The Stern Review was published in October 2006. For the first time outside the US, public debate about global warming shifted to its economic consequences – in apocalyptic terms. Failure to act could create economic and social disruption on a scale associated with the First and Second World Wars and the Great Depression of the 1930s.[11] The costs and risks of climate change would be equivalent to losing at least five per cent of global GDP every year ‘now and forever’. If a wider range of risks and impacts was taken into account, ‘The estimate of damage could rise to twenty per cent of GDP or more.’[12] These were eye-popping numbers.
How had he done it?
As with other cost-benefit analyses of global warming, the Stern Review used a model to integrate physical impacts and a range of economic scenarios and variables to derive a social cost of carbon dioxide. The PAGE integrated assessment model used by Stern and his team had been developed by Chris Hope, a Cambridge academic. Although the details differed, it shared the economic and utilitarian principles of the other two widely cited models, Nordhaus’s DICE and Tol’s FUND models.
PAGE used a time horizon stretching out to 2200 – a compromise between natural scientists who wanted to go out to 2400 or 2500, and economists who, as Hope put it, were unhappy to go beyond 2050, knowing that economic models were lucky to hold up much beyond five to ten years. But if the modelling stopped before 2050, it would be too early to show benefits from capping greenhouse gas emissions.[13]
The review team was especially attracted to PAGE’s ability to handle uncertainty, using a variant of Monte Carlo probability analysis, with ten thousand to one hundred thousand model runs to derive a single result. The model incorporated the possibility of catastrophic climatic events, such as the melting of the West Antarctic ice sheet occurring before 2200 based on some work by Hans Joachim Schellnhuber and Stefan Rahmstorf of the Potsdam Institute. In Hope’s words, these were ‘just slightly more than illustrative’ – the evidence base for them being ‘very thin’.[14]
The single largest impact on estimating a value for the social cost of carbon is the climate sensitivity of carbon dioxide.[15] The Review took a triangular distribution ranging from 1.5oC to 4.5oC, with 2.5oC as the most likely value. The Review also ran a ‘high climate’ scenario to demonstrate a sizeable probability that the climate sensitivity of carbon dioxide was higher than previously thought.[16]
The second most important input was the pure time preference rate; in layman’s terms, the cost of time. Stern rejected the approach used by economists such as Nordhaus to derive the cost of time from market data, such as from bond yields, returns on investment and the amount people saved from their incomes. For Stern, it wasn’t a question of what the pure time preference rate is, but what it ought to be. ‘We take a simple approach in this Review: if a future generation will be present, we suppose that it has the same claim on our ethical attention as the current one.’[17]
The distinction has profound implications for what the Review was about. Was it about economics or was it, above all, about ethics? ‘If you care little about future generations you will care little about climate change,’ Stern argued, a position which did not have ‘much foundation in ethics and which many would find unacceptable.’[18] By the same token, it could be said; if you care little about the present, you will care a lot about climate change. There is a way of balancing the two. The discount rate, embodying the cost of time, is the mathematical bridge linking the present and the future.
At the heart of the Stern Review is an ethical argument, one that Stern articulated in almost identical terms as Boulding had suggested – but rejected – forty years earlier. Stern quoted Frank Ramsey, the brilliant young Cambridge mathematician and philosopher who, in the 1920s, described pure time discounting as ‘ethically indefensible’ and Oxford economist Roy Harrod, who called it a ‘human infirmity’ and ‘a polite expression for rapacity and the conquest of reason by passion’.[19]
These views neglect mortality as the most certain fact of an individual’s existence. Stern did recognise the relationship between an individual’s mortality and the cost of time. ‘The allocation an individual makes in her own lifetime may well reflect the possibility of her death and the probability that she will survive a hundred years may indeed be very small,’ Stern conceded.[20] Individuals’ preferences had ‘only limited relevance for the long-run ethical question associated with climate change’, Stern argued.[21] The Review was thus couched firmly within a collectivist perspective – what matters is the welfare of the anthill, not the individual ant. In his modelling, Stern used a pure rate of time preference of 0.1 per cent a year to reflect the possibility of humanity being wiped out, implying an almost ten per cent chance of the extinction of homo sapiens before 2100.[22]
There was a downside to Stern’s ethics – his treatment of the world’s poor and the transfer of wealth from them to the richer generations of tomorrow. Sir Partha Dasgupta, Frank Ramsey Professor of Economics at Cambridge, criticised Stern for taking a very inegalitarian attitude to the distribution of wellbeing when futurity was not at issue. The ethical parameter Stern had adopted to reflect inequality and risk in human wellbeing was, Dasgupta wrote, ‘deeply unsatisfactory’.[23] Overall, Stern’s assumptions would require the current generation to save 97.5 cents of every dollar it produced – ‘so patently absurd that we must reject it out of hand’.[24] Economists had taken the threat of climate change seriously, Dasgupta concluded, ‘but the cause is not served when parameter values are so chosen that they yield desired answers’.[25]
For Stern, it was all about the future. It was difficult to assess the impacts over a very long time period because future generations ‘are not fully represented in current discussions’.[26]
Who should then represent them and who knows what they will think?
The implication is Stern and like-minded successors, in a dynasty of economic Pharaohs, presiding over the global economy for decades and centuries ahead. In a 2007 critique, Nordhaus wrote of Stern, stoking the dying embers of the British Empire, to apply colonial-style Government House utilitarianism from ‘the lofty vantage point of world social planner’.[27]
Nordhaus also solved the puzzle of how Stern had derived his numbers. By using his DICE model, he could convert a one per cent reduction in output over the next century to a 14.4 per cent reduction ‘now and forever’. On Stern’s methodology, more than half the estimated damages ‘now and forever’ occur after 2800. ‘The large damages from global warming reflect large and speculative damages in the far-distant future magnified into a large current value by a near-zero time discount rate,’ Nordhaus wrote.[28]
Having answered the ‘How?’ what of the ‘Why?’
Just as with the British government’s assessment of weapons of mass destruction, Nordhaus suggested the Stern Review should be read primarily as ‘a document that is political in nature and has advocacy as its purpose’.[29] Was this overly harsh? An answer can be found in the Review. ‘Much of public policy is actually about changing attitudes,’ Stern wrote, in an authentic expression of the Blair-era style of governance as PR.[30]
Thus there is nothing in the Review that might put a question mark over whether Kyoto was a good deal for Britain or for the world. Despite mounting evidence to the contrary, Stern argued that countries would meet their Kyoto obligations. ‘Governments make and respect international obligations because they are in
line with perceptions of responsible and collaborative behaviour,’ Stern wrote, ‘and because domestic public opinion supports both the objectives and mechanisms for achieving them’ – a finding contradicted by Scott Barrett’s authoritative analysis.[31]
Neither did Stern examine what the costs and benefits of global warming might be for Britain. If a warmer climate benefited Britain, then cutting emissions is a lose-lose proposition.
Stern was dismissive of adaptation. ‘An inherent difficulty for long-term adaptation decisions is uncertainty, due to limitations in our scientific knowledge of a highly complex climate system,’ Stern wrote.[32] While uncertainty was an impediment to adaptation, the same lack of knowledge wasn’t a barrier to governments. ‘There speaks the true bureaucrat’ was Nigel Lawson’s stinging comment on Stern’s presumption of the superiority of government wisdom.[33]
By presenting an ethical argument – that future generations should have as much weight as the present – in the garb of an economic cost-benefit analysis, the Stern Review was mis-sold by its author and by its sponsoring government. ‘Tackling climate change is the pro-growth strategy,’ the review claimed.[34] ‘In broad brush terms,’ the review stated, ‘spending somewhere in the region of one per cent of gross world product forever could prevent the world losing the equivalent of five to twenty per cent of gross world product forever.’[35]
There’s something morally suspect about a proposition couched in terms of making you better off financially and morally. Ethics come into play when following financial self-interest leads to a morally bad outcome. On the other hand, ethics are cheapened when used in support of someone’s supposed material self-interest. If Stern had had the courage of his (moral) convictions, he should have made the case that taking action against global warming is costly and would hurt financially, but that the current generation had a moral duty to later generations.
How long would the pain last? Deep in the Review are two charts showing the costs of stabilising emissions at Stern’s target of 550 ppm of carbon dioxide equivalent. On the assumption that this would cost one per cent of Gross World Product (GWP), the chart showed a break-even point around 2080; if the cost was four percent of GWP, the benefits would not exceed the costs until around 2120.[36] The midpoint of the two implies there being no net benefit during the twenty-first century. A young person’s great-grandchildren might conceivably benefit, but not their children or grandchildren.
For countries committed to cap their emissions, the break-even point – assuming there is one – would be pushed into the twenty-second century and probably beyond. Stern reckoned that non-Annex I parties were likely to be responsible for over three quarters of the rise in energy related carbon dioxide emissions.[37] Agriculture and changes in land use alone accounted for forty-one per cent of emissions, with Indonesia and Brazil accounting for half these.[38]
Since the 1995 Berlin Mandate, the world community had been locked on a course that excluded non-Annex I parties from emissions caps. While endorsing Kyoto, Stern did not analyse the emission cuts required by Annex I countries to meet his 550 ppm stabilisation target or the impact on their economies. For citizens of Annex I countries, the prospect of action on climate change ever producing a net benefit was very remote, even if Stern’s assumptions on the science turned out to be right.
* Stern was in good company in mis-ascribing the effect of convection to radiation. In a primer on global warming, Sir John Houghton, the first chair of the IPCC’s Working Group I, wrote of glass in a greenhouse as having ‘somewhat similar’ properties to the atmosphere in absorbing radiation which is re-emitted back into the greenhouse, the glass acting as a ‘radiation blanket’. Global Warming: The Complete Briefing (1994), p. 21.
* Of the many interglacials of the Quaternary Period (there have been at least nine), the current one is but the most recent. Its maximum period of warmth is now passed – in North West Europe, some five to seven thousand years ago.
[1] Nicholas Stern, The Economics of Climate Change: The Stern Review (2007), p. xv.
[2] P.T. Bauer, Reality and Rhetoric – Studies in the Economics of Development (1984), p. 147 .
[3] Decca Aitkenhead, ‘“We’re the first generation that has had the power to destroy the planet. Ignoring the risk can only be described as reckless”’ in the Guardian, 30th March 2009.
[4] ibid.
[5] Yale Center for the Study of Globalization, Yale Symposium on the Stern Review (2007), http://www.ycsg.yale.edu/climate/forms/FullText.pdf, p. 8.
[6] Ian Byatt, Ian Castles, David Henderson, Nigel Lawson, Ross McKitrick, Julian Morris, Alan Peacock, Colin Robinson and Robert Skidelsky, ‘The Stern Review “Oxonia Papers”: A Critique’ http://webarchive.nationalarchives.gov.uk/+/http://www.hm-treasury.gov.uk/sternreview_backgroundtoreview.htm, p. 3.
[7] ibid., p. 5.
[8] Nicholas Stern, ‘Reply to Byatt et al’ in World Economics, Vol. 7, No. 2 (April–June 2006), p. 154.
[9] ibid., p. 156.
[10] ibid., p. 155.
[11] Stern, The Economics of Climate Change: The Stern Review (2007), p. xv.
[12] ibid.
[13] Chris Hope interview with author, 27th October 2011.
[14] Hope interview with author.
[15] Yale Symposium on the Stern Review (2007).
[16] Stern, The Economics of Climate Change: The Stern Review (2007), Box 6.1 and p. 4.
[17] ibid., p. 35.
[18] ibid., p. 54.
[19] ibid., p. 35.
[20] ibid., p. 54.
[21] ibid.
[22] ibid., p. 53.
[23] Partha Dasgupta, ‘Commentary: The Stern Review’s Economics of Climate Change’ in National Institute Economic Review, No. 199, January 2007, p. 6.
[24] ibid.
[25] ibid.
[26] Stern, The Economics of Climate Change: The Stern Review (2007), p. 35.
[27] William Nordhaus, The Stern Review on the Economics of Climate Change (2007) http://nordhaus.econ.yale.edu/stern_050307.pdf, pp. 14–15.
[28] ibid., p. 25.
[29] William Nordhaus, A Question of Balance: Weighing the Options on Global Warming Policies (2008), p. 167.
[30] Stern, The Economics of Climate Change: The Stern Review (2007), p. 448.
[31] ibid., p. 523.
[32] ibid., p. 468.
[33] Nigel Lawson, An Appeal to Reason: A Cool Look at Global Warming (2008), p. 44.
[34] Stern, The Economics of Climate Change: The Stern Review (2007), p. 191.
[35] ibid., p. 320.
[36] ibid., Figs 13.1 & 13.2.
[37] ibid., p. 193.
[38] ibid., Box 7.1.
26
Selling Salvation
‘Solutions’ are at hand, given wise collective decisions and actions. It is the combination of alarmist visions with confidently radical collectivist prescriptions for the world as a whole which characterises global Salvationism.
David Henderson, 2004[1]
On 30th October 2006, flanked by Tony Blair and Gordon Brown, Stern launched his Review. Blair spoke first. Within seconds, the hyperbole was in full flow. If the science was right, the consequences for the planet were literally disastrous – not in some science fiction future many years ahead, ‘but in our own lifetime’.[2]
The Review was the most important report on the future produced by the government, Blair said. ‘We know it is happening. We know the consequences for the planet.’ Stern showed the economic benefits of strong early action easily outwe
ighed the costs. ‘For every £1 we invest now, we can save at least £5 and possibly much more by acting now.’ Investment to prevent it ‘will pay us back many times over’.[3]
Blair spoke for less than ten minutes.
Brown then took the stage – for an interminable sixteen. Nothing was too small to escape mention. A rainforest initiative with Brazil, Papua New Guinea and Costa Rica. A plug for biofuels. ‘I’m determined that we use biofuels from palm and rape oil, to soya and sugar and eventually cellulosic biofuels,’ he said, announcing that Al Gore was joining Alan Greenspan as his personal adviser. ‘Environmental policy is economic policy,’ Brown insisted.[4]