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Lord Stern’s stern deal

Nicholas Stern, The Global Deal: Climate Change and the Creation of a New Era of Progress and Prosperity. London: The Bodley Head; New York: PublicAffairs, 2009. 248 pages, includes references and index.

Reviewed by Marvin Shaffer

Lord Nicholas Stern has enjoyed an illustrious career as an economics professor, as Chief Economist of the World Bank and as an adviser to Gordon Brown, now British Prime Minister. He headed the British government team that in 2006 produced the 700-page “Stern Review” on the economics of climate change, and a very “stern” review it is. The report concludes that the costs of inaction are dire. Somewhat in the imperial tradition of William Gladstone, the moralizing 19th-century British Prime Minister, Stern has now supplemented the review with a book telling the world what is to be done.

“I am not a campaigner,” writes Nicholas Stern, but his passionate arguments and seemingly angry response to his critics speak otherwise. This is not follow-up analysis, nor simply logical argument. It is a call and guide for global action, and a curt dismissal of those who would argue against his position.

On the basis of his background in development economics and more recent work on climate change, Stern sees poverty in developing countries and climate change as the two greatest – and inextricably linked – challenges of our time. These are not alternative issues that must compete for global attention and resources: a central theme of Stern’s book is that they can and must be addressed together. Development assistance will not succeed if climate change is not mitigated. It is the developing countries that are most vulnerable to the effects of climate change and least able to cope with them. And efforts to curtail greenhouse emissions will be fruitless without the cooperation and participation of the developing world. These countries will be more willing and able to make significant contributions if their limited historic responsibilities are recognized and their future development aspirations are not undermined.

There is, in Stern’s view, no justification for failing to act. The scientific and moral imperatives are very clear. “Business as usual” will lead to concentrations of greenhouse gases in the atmosphere that significantly risk an increase in average world temperatures of more than 5 degrees Celsius – a level that would radically change the physical and human geography of the world. Failure to act, Stern warns, will result in severe dislocation; the consequent migration of billions of people “would plunge the world into massive and extended conflict.”

Carefully planned and concerted action, on the other hand, can reduce those risks at what Stern describes as relatively modest cost. His recommended target is to limit concentrations of greenhouse gases to 500 parts per million.That would still result in significant global warming, but would greatly reduce the probability of the more catastrophic temperature increases. To achieve this target, annual greenhouse gas emissions must be reduced by about 30 billion tonnes of carbon dioxide equivalent (more than 50 per cent of current levels) by 2050. Based on an estimated supply curve of greenhouse gas abatement opportunities, Stern calculates that the cost of achieving those reductions would be less than €30 (about C$48 at the time of writing) per tonne, in total less than 1 per cent of world GDP. Even if reductions costing up to €50 (C$79) per tonne were required, the total cost would still be less than 2 per cent of world GDP, a price “well worth paying” for the avoided risks.

Stern has no patience for those who do not accept what in his view is the overwhelmingly compelling logic of such greenhouse gas reductions. He calls those who argue for investment in adaptation as opposed to emission reduction “ignorant and reckless.” He dismisses as mistaken and confused those fellow economists who argue that he has overstated climate change costs by not applying a reasonable discount rate in summing distant future, uncertain events; in his view they are “making one logical mistake after another.”

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About the Author

Marvin Shaffer
Marvin Shaffer is an economist and adjunct professor at Simon Fraser University in Vancouver.


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