No Contradiction Between Climate Progress and Economic Growth

In September 2014, with the U.N. Summit on the horizon, the Global Commission on the Climate and the Economy released a consultation document, Better Growth, Better Climate, which culminates in a 10-point plan of key recommendations, aimed at the international community of economic decision-makers.

According to The Guardian newspaper, this report is the most significant intervention in climate politics for Lord Nicholas Stern since his 2006 report. “The report from the international commission concludes that making progress on the climate would not come at the expense of the global economy, but that there will have to be a sharp shift away from carbon-intensive fossil fuels if the world is going to avoid the worst impact of a changing climate”. See reaction at The Guardian at: http://www.theguardian.com/world/2014/sep/16/barack-obama-report-economy-grow-fight-climate-change-un-summit?CMP=EMCENVEML1631.

The Toronto Globe and Mail reaction honed in on the implications for Canada’s oil and gas industry of the report’s call for higher carbon pricing and the elimination of fossil fuel subsidies – see http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/oil-reliant-firms-at-risk-report/article20607843/#dashboard/follows/. Paul Krugman wrote an OpEd in New York Times on Sept.18 at: http://www.nytimes.com/2014/09/19/opinion/paul-krugman-could-fighting-global-warming-be-cheap-and-free.html.

The Global Commission on the Climate and the Economy was commissioned in 2013 by seven countries, with its programme of work conducted by eight research institutes, led by Washington-based World Resources Institute. The Commission is chaired by former President of Mexico Felipe Calderón, and includes Nicholas Stern amongst its other prominent members. Read Better Growth, Better Climate: the Synthesis Report at: http://static.newclimateeconomy.report/TheNewClimateEconomyReport.pdf.

 

Lord Stern Proposes an Alternate Model of the Economic Cost of Climate Change

A new academic paper by Nicholas Stern and Simon Dietz critques the widely-used Dynamic Integrated model of Climate and the Economy (DICE), developed by William Nordhaus in the 1990’s, and updated in 2013. In a summary from the London School of Economics, Lord Stern states: “I hope our paper will prompt other economists to strive for much better models which will help policy-makers and the public to recognise the immensity of the potential risks of unmanaged climate change.” By modifying assumptions – for example, using a range of temperatures from 1.5C to 6C for climate senstivity, rather than the single 3C level of the DICE model – Stern and Dietz arrive at a level of $200 per tonne for the cost of carbon – astonishingly higher than $40 – $50 per tonne cost that the DICE model would produce. (The carbon tax in British Columbia grew from $10 per tonne at its inception in 2008, to the current level of $30 per tonne of CO2, since July 2012. )

LINKS:
London School of Economics press release is at http://www.lse.ac.uk/GranthamInstitute/news/dietz_stern_june2014/ . A working paper version of the article , Stern and Dietz (2014) Endogenous growth, convexity of damages and climate risk: how Nordhaus’ framework supports deep cuts in carbon emissions, is available from a link at http://www.lse.ac.uk/GranthamInstitute/publication/endogenous-growth-convexity-of-damages-and-climate-risk-how-nordhaus-framework-supports-deep-cuts-in-carbon-emission/.
“We’re massively underestimating climate costs, experts warn” (June 16) at Grist at http://grist.org/news/were-massively-underestimating-climate-costs-experts-warn/