Inaction on Climate Change Endangers World Economy, Warns British Report

Delaying action on climate change – even by a decade or two – will take the planet into dangerous territory, a new report from the British Government warns.

The Stern Review on climate change calls climate change “the greatest market failure the world has seen” but concludes optimistically that there is still time to avoid the worst impacts if the international community acts now.

The report estimates that the dangers could be equivalent to as much as 20 percent of the world’s Gross Domestic Product or more.

In contrast, the costs of action to reduce greenhouse gas emissions to avoid the worst impacts of climate change could be limited to around 1 percent of global GDP each year. “People would pay a little more for carbon-intensive goods, but our economies could continue to grow strongly,” the study says.

At the same time, a shift to a low-carbon economy will also mean economic opportunities, according to the study. “Markets for low-carbon technologies will be worth at least $500 billion, and perhaps much more, by 2050 if the world acts on the scale required,” it reports. “Tackling climate change is the pro-growth strategy; ignoring it will ultimately undermine economic growth.”

Sir Nicholas Stern, a former World Bank Chief Economist, carried out the study, commissioned by the British Government last year.

British Prime Minister Tony Blair said the conclusions of the Stern Review should be seen as “the final word” on why the world must act now to limit the damage being done to the planet.

Stern says it’s a “false economy” to put off climate change action since costs will only rise, with the impact of global warming costing as much as 20 per cent of the world’s GDP.

“Unabated” climate change risks raising average temperatures by over 5°C from pre-industrial levels, according to the study. “Such changes would transform the physical geography of our planet, as well as the human geography – how and where we live our lives,” Stern notes.

Stern says all countries will be affected by climate change, but the world’s poorest countries will suffer the most.

Stern recommends expanding and linking emissions trading schemes around the world; doubling support for energy research and setting international product standards for energy-efficiency; and integrating climate change adaptation into development policy.

The study concludes on an optimistic note:

“There is still time to avoid the worst impacts of climate change, if we act now and act internationally. Governments, businesses and individuals all need to work together to respond to the challenge. Strong, deliberate policy choices by governments are essential to motivate change.”

But the task is urgent. Delaying action, even by a decade or two, will take us into dangerous territory. We must not let this window of opportunity close.”

The report sets forth three elements of policy it says are needed for an effective response:

The first is carbon pricing, through taxation, emissions trading or regulation, so that people are faced with the full social costs of their actions. “The aim should be to build a common global carbon price across countries and sectors,” Stern writes.

The second is technology policy to “drive the development and deployment at scale of a range of low-carbon and high-efficiency products.”

The third is “action to remove barriers to energy efficiency, and to inform, educate and persuade individuals about what they can do to respond to climate change.”