Showing posts with label Stern Review. Show all posts
Showing posts with label Stern Review. Show all posts

Thursday, March 12, 2009

Stern words from Stern

When the Stern review first came out he was pilloried for "scare mongering" and over selling the environment.

Now Stern says he got it wrong on the downside. I tend to agree with Stern on this one. The devastation will have a global reach.

Global warming 'will be worse than expected' warns Stern [Guardian]

Politicians have failed to take on board the severe consequences of failing to cut world carbon emissions, Nicholas Stern, the economist who warned the government of the high cost of climate change, said today.

Stern told a meeting of climate change scientists in Copenhagen that the effects of global warming would be worse than he predicted in his seminal 2006 report on the economics of the problem. He said policy-makers needed to think more about the likely impact of severe temperature rises of 6C or more.

Speaking after a keynote speech at the conference, Stern said: "Do the politicians understand just how difficult it could be? Just how devastating 4, 5, 6 degrees centigrade would be? I think not yet. Looking back, the Stern review underestimated the risks and underestimated the damage from inaction."

His remarks echo concerns by other scientists at the meeting. Privately, many climate experts and officials say that the European target of limiting world temperature rise to 2C above pre-industrial levels is no longer realistic.

Steven Sherwood, a climate researcher at Yale university, will tell the conference later today that warming of 4C or more this century looks "increasingly likely".

Bob Watson, a former head of the Intergovernmental Panel on Climate Change (IPCC) and chief scientist at the environment department, has already warned that governments need to prepare for a 4C rise.

The 2007 report of the IPCC said that average temperatures could rise by up to 6C this century if no action were taken to curb greenhouse gas emissions. Many scientists say this could be an underestimate, because world emissions have grown faster than expected.

According to the 2006 Stern report, a rise of 4C would put between seven million and 300 million more people at risk of coastal flooding each year, there would be a 30-50% reduction in water availability in southern Africa and the Mediterranean, agricultural yields would decline by 15%-35% in Africa, and 20%-50% of animal and plant species would face extinction. Yesterday, scientists announced at the conference that a 4C rise would lead to the loss of 85% of the Amazon rainforest.

A 5C rise would mean that major cities such as New York, London and Tokyo would be threatened by a rise in sea levels and increases in ocean acidity would severely disrupt marine ecosystems and fisheries. An increase of more than 5C — equivalent to the amount of warming that occurred between the last ice age and today — is, according to the Stern report, "likely to lead to major disruption and large-scale movement of population". It said the effects would be "catastrophic" and "far outside human experience".


Thursday, May 01, 2008

Climate Economics: A Meta Analysis

Much has been written on the Economics of Climate Change since the Stern review.

Geoffrey Heal presents an overview of the work done so far and offers up a few suggestions for future work. Some interesting stuff.

Climate Economics: A Meta-Review and Some Suggestions

Columbia Business School; National Bureau of Economic Research (NBER) April 2008

NBER Working Paper No. W13927

What have we learned from the outpouring of literature as a result of the Stern Review of the Economics of Climate Change? A lot. We have explored the model space and the parameter space much more thoroughly, though there are still unexplored regions. While there are aspects of the Stern Review's analysis with which we can disagree, it seems fair to say that it has catalyzed a fundamental rethinking of the economic case for action on climate change. We are now in a position to give some conditions that are sufficient to provide a case for strong action on climate change, but need more work before we have a fully satisfactory account of the relevant economics. In particular we need to understand better how climate change affects natural capital - the natural environment and the ecosystems comprising it - and how these affect human welfare.

JEL Classifications: D8, D9, Q01


Thursday, April 17, 2008

Stern: I UNDERESTIMATED global warming threat in Stern Review

In an interview with Sir Nicolas Stern the author of the self named "Stern Review" published 18 months ago, Stern admits that he underestimated the threat from global warming.

Stern uses the interview to argue that his original report figures were correct and that those academics who said his figures were grossly exaggerated were wrong.

He is now impressively pessimistic. A trait all economists should sympathise with.

INTERVIEW - Climate Expert Stern Says Underestimated Problem [PlanetArk]

LONDON - Climate change expert Nicholas Stern says he under-estimated the threat from global warming in a major report 18 months ago when he compared the economic risk to the Great Depression of the 1930s.

Latest climate science showed global emissions of planet-heating gases were rising faster and upsetting the climate more than previously thought, Stern said in a Reuters interview on Wednesday.

For example, evidence was growing that the planet's oceans -- an important "sink" -- were increasingly saturated and couldn't absorb as much as previously of the main greenhouse gas carbon dioxide (CO2), he said.

"Emissions are growing much faster than we'd thought, the absorptive capacity of the planet is less than we'd thought, the risks of greenhouse gases are potentially bigger than more cautious estimates, and the speed of climate change seems to be faster," he told Reuters at a conference in London.

Stern said that increasing commitments from some countries such as the European Union to curb greenhouse gases now needed to be translated into action. Policymakers, businesses and environmental pressure groups frequently cite the Stern Review as a blueprint for urgent climate action.

The report predicted that, on current treds, average global temperatures will rise by 2-3 degrees centigrade in the next 50 years or so and could reduce global consumption per head by up to 20 percent, with the poorest nations feeling the most pain.

Some academics said he had over-played the costs of potential future damage from global warming at up to twenty times the cost of fighting the problem now, such as by replacing fossil fuels with more costly renewable power.

Stern said on Wednesday that increasing evidence of the threat from climate change had vindicated his report, published in October 2006.

"People who said I was scaremongering were profoundly wrong," he told the climate change conference organised by industry information provider IHS.

Stern then has a dig at the IPCC criticising them for failing to take account of the ocean absorption issue. Given Stern was talking in the US and effectively saying that the US needed to cut emissions by 90% his strategy to make things look as bleak as possible is clearly the only politically sensible and media friendly stance to take.



Its latest report in 2007 had not taken detailed account of some dangerous threats, including the falling ability of the world's oceans to absorb CO2, because scientists had to be cautious and that evidence was just emerging, the former World Bank chief economist added.

"The IPCC has done a tremendous job but things are moving on," he told Reuters.

"The IPCC's (cautious) approach to this is entirely understandable and sensible, but if you're looking ahead and asking about the risk then you do have to go beyond."

Stern said that to minimise the risks of dangerous climate change global greenhouse gas emissions should halve by mid-century. He said the United States should cut its emissions by up to 90 percent by then.

He was speaking before a senior White House official, speaking on the condition of anonymity, said US President George W Bush planned on Wednesday to call for a halting of growth in US greenhouse gas emissions by 2025.

This link below covers the "ocean absorption story:

Oceans Absorbing Less CO2 May Have 1,500 Year Impact [PlanetArk]

VIENNA - Global oceans are soaking up less carbon dioxide, a development that could speed up the greenhouse effect and have an impact for the next 1,500 years, scientists said on Wednesday.

Research from a five-year project funded by the European Union showed the North Atlantic, which along with the Antarctic is of the world's two vital ocean carbon sinks, is absorbing only half the amount of CO2 that it did in the mid-1990s.



Thursday, March 13, 2008

Climate Change Economics - see for yourself

Here is a neat little tool that can show the effects of various assumptions on the economic impact of climate change on the average American.

All students (and indeed academics) should have a play. The Porter (innovation) Hypothesis is hidden in there somewhere.

See for yourself

H/T: Common Tragedies

Today, Yale’s School of Forestry & Environmental Studies posted a new website developed by economics professor Robert Repetto. In a way that anybody can easily understand, it synthesizes the results of thousands of policy simulations from 25 economic models being used to predict the economic impacts of reducing U.S. carbon emissions. To try this new website, just click on This website identifies the seven key assumptions accounting for most of the differences in the models’ predictions. It shows that even under the most unfavorable assumptions regarding costs, the U.S. economy is predicted to continue growing robustly as carbon emissions are reduced. Under more favorable assumptions, the economy would even grow more rapidly if emissions are reduced than if they are allowed to continue to increase as in the past. Even better, this new website allows site visitors to decide how likely they think each of the seven key assumptions are, and on that basis see for themselves what economic impacts all the leading economic models would predict, if carbon emissions are reduced by specific percentages over the next two decades. If you visit this site, you can make your own assumptions about the key factors that will influence the costs of stopping climate change and see the results.


Saturday, December 22, 2007

Kenneth Arrow on "Climate Change" and "the Stern review"

To get back to the real world, one of the worlds top bona fide economists talks about climate change. It is good to get back to real economics after the previous post.

The Case for Mitigating Greenhouse Gas Emissions [Project syndicate]

Last fall, the United Kingdom issued a major government report on global climate change directed by Sir Nicholas Stern, a top-flight economist. The Stern Review Report on the Economics of Climate Change amounts to a call to action: it argues that huge future costs of global warming can be avoided by incurring relatively modest cost today.

Critics of the Stern Review don’t think serious action to limit CO2 emissions is justified, because there remains substantial uncertainty about the extent of the costs of global climate change, and because these costs will be incurred far in the future. However, I believe that Stern’s fundamental conclusion is justified: we are much better off reducing CO2 emissions substantially than risking the consequences of failing to act, even if, unlike Stern, one heavily discounts uncertainty and the future.

Two factors differentiate global climate change from other environmental problems. First, whereas most environmental insults – for example, water pollution, acid rain, or sulfur dioxide emissions – are mitigated promptly or in fairly short order when the source is cleaned up, emissions of CO2 and other trace gases remain in the atmosphere for centuries. So reducing emissions today is very valuable to humanity in the distant future.

Second, the externality is truly global in scale, because greenhouse gases travel around the world in a few days. As a result, the nation-state and its subsidiaries, the typical loci for internalizing externalities, are limited in their remedial capacity. (However, since the United States contributes about 25% of the world’s CO2 emissions, its own policy could make a large difference.)

Thus, global climate change is a public good (bad) par excellence . Cost-benefit analysis is a principal tool for deciding whether altering it through mitigation policy is warranted. Two aspects of that calculation are critical. First, it has to be assumed that individuals prefer to avoid risk. That is, an uncertain outcome is worth less than the average of the outcomes. Because the possible outcomes of global warming in the absence of mitigation are very uncertain, though surely bad, the uncertain losses should be evaluated as being equivalent to a single loss greater than the expected loss.

The second critical aspect is how one treats future outcomes relative to current ones – an issue that has aroused much attention among philosophers as well as economists. At what rate should future impacts – particularly losses of future consumption – be discounted to the present?

The consumption discount rate should account for the possibility that, as consumption grows, the marginal unit of consumption may be considered to have less social value. This is analogous to the idea of diminishing marginal private utility of private consumption, and is relatively uncontroversial, although researchers disagree on its magnitude.

There is greater disagreement about how much to discount the future simply because it is the future, even if future generations are no better off than us. Whereas the Stern Review follows a tradition among British economists and many philosophers against discounting for pure futurity, most economists take pure time preference as obvious.

However, the case for intervention to keep CO2 levels within bounds (say, aiming to stabilize them at about 550 ppm) is sufficiently strong to be insensitive to this dispute. Consider some numbers from the Stern Review concerning the future benefits of preventing greenhouse gas concentrations from exceeding 550 ppm, as well as the costs of accomplishing this.

The benefits are the avoided damages, including both market damages and non-market damages that account for health and ecological impacts. Following a “business as usual” policy, by 2200, the losses in GNP have an expected value of 13.8%, but with a degree of uncertainty that makes the expected loss equivalent to a certain loss of about 20%. Since the base rate of economic growth (before calculating the climate change effect) was taken to be 1.3% per year, a loss of 20% in the year 2200 amounts to reducing the annual growth rate to 1.2%. In other words, the benefit of mitigating greenhouse gas emissions can be represented as the increase in the annual growth rate from today to 2200 from 1.2% to 1.3%.

As for the cost of stabilization, estimates in the Stern Review range from 3.4% of GNP to -3.9% (since saving energy reduces energy costs, the latter estimate is not as startling as it appears). Let’s assume that costs to prevent additional accumulation of CO2 (and equivalents) come to 1% of GNP every year forever, and, in accordance with a fair amount of empirical evidence, that the component of the discount rate attributable to the declining marginal utility of consumption is equal to twice the rate of growth of consumption.

A straightforward calculation shows that mitigation is better than business as usual – that is, the present value of the benefits exceeds the present value of the costs – for any social rate of time preference less than 8.5%. No estimate of the pure rate of time preference, even by those who believe in relatively strong discounting of the future, has ever approached 8.5%.

These calculations indicate that, even with higher discounting, the Stern Review’s estimates of future benefits and costs imply that mitigation makes economic sense. These calculations rely on the report’s projected time profiles for benefits and its estimate of annual costs, about which there is much disagreement. Still, I believe there can be little serious argument about the importance of a policy aimed at avoiding major further increases in CO2 emissions.


Monday, December 10, 2007

Sustainability Report: Cold Hard Facts

Today's FT has a report on "Sustainability" in companies.

The increasing awareness of companies to all things green has been impressive inspired by the Stern review and Al Gore's doom laden film.

The mix of the academic and populist approaches appears to have struck and cord and this blog (which in theory is a similar mix of academic and trivial items) hopes to contribute to this debate.

Our current academic research is also looking more closely at the environmental behaviour of firms to see exactly what drives firms adoption of environmental management systems - in a good journal near you soon. Note: this last sentence also covers average journals and given the time papers take to get published soon could also mean years.

We are particularly interested in the role played by "fuzzy public relations" as the FT calls them. We tend to find that they this remains a primary motivation for "some" firms.

The question is whether this report is in itself not really just another talking shop that is merely "fuzzy public relations" at the government level.

As academic economists this following statement sums of our frustration:

But even if companies are getting better at explaining their impact on the environment, they still struggle to come up with numerical targets they can be tested against. Carbon emissions can be measured in different ways, as can energy usage. Moreover, there is no single agreement on what should be included in these measurements.

Without hard numbers it is hard to do hard science.

Sustainability report seeks the cold, hard facts [FT]

Not so long ago "green" issues were commonly associated with fuzzy public relations gestures rather than cold, hard numbers. But as companies increasingly accept the need to tackle climate change, the focus has shifted to technical measurements.

Enter the accountants, and what observers say is nothing less than a sea change in thinking in the past year. A host of initiatives have examined what to report and, more importantly, how to measure it.

"No longer is this an issue you can delegate to a function that works offline. It is mainstream and the responsibility of the CFO and CEO," says David Phillips, senior corporate reporting leader at PwC.

Roger Adams, head of technical services at the Association of Chartered Certified Accountants, adds: "The Stern report lit the fuse and Al Gore was the rocket once that fuse was lit."

This week, that view will be further reinforced with the publication of a report by the Prince of Wales' Accounting for Sustainability project, which will focus on how to "embed" sustainability considerations into general corporate thinking, but also on how to report these efforts.

"This is a report that says: 'Here is where we are, these are the issues and this is what we suggest you begin looking at,' " says Richard Reid, UK vice-chairman of KPMG and a member of the AfS project board.

"What has been really interesting is the amount that is happening in business and government and trying to pull all that together - there had been a concern that sustainability was being talked about a lot, but that it might just be lip service."

According to research by Deloitte, the number of FTSE 100 companies producing a standalone corporate responsibility report - as opposed to separate reports on issues such as "community" and "environment" - is at a new peak, more than tripling since 2002 to 69 last year.

But even if companies are getting better at explaining their impact on the environment, they still struggle to come up with numerical targets they can be tested against. Carbon emissions can be measured in different ways, as can energy usage. Moreover, there is no single agreement on what should be included in these measurements.

"We need a common language of valuation so the financial implications come through clearly to the global markets," says Mr Adams. "We need to do more to engage the financial community - it's a bastion of short-termism still to be conquered and we need to be talking their language."

But there is a sense of caution in how to proceed. Mr Phillips warns: "Rush too quickly into how to measure and how to audit this, and if we get the metrics wrong, we'll get the wrong behaviours as a result."

Whatever systems are agreed, the work looks like an extra burden on companies. But advocates say there is little choice, given growing public pressure, and they point to the commercial benefits.

"It isn't just a 'nice to have'. It is about turning sustainability into a commercial issue and linking it into business strategy. Cutting emissions is a sustainability problem, but it is also an economics issue," says Mr Reid.

Some sectors are further ahead than others. The most advanced tend to be extractive industries such as oil producers and miners, who have long faced public pressure as a result of their clear impact on the environment.

Nearly all the energy, mining and utility groups in the FTSE 100 produce standalone reports. However, almost as many financial and property groups now do likewise - a sharp jump from five years ago, when less than a third did.

Even when companies are reporting, there is a further problem in getting them to report in a comparable way. If each uses different measurements, the results are impossible to compare, leaving investors and other stakeholders no better off. This is only multiplied when accountants and businesses are working on a global system.

"It's important we get everyone to talk before we end up with so many standards of reporting that we have the tremendous cost of converging them," says Jan Babiak, head of regulatory and public policy at Ernst & Young.

The Amsterdam Global Reporting Initiative is one such group, drawing up guidelines to encourage common reporting standards.

Yet most of the practical efforts are still being done at a national level, hence the Prince of Wales report this week.

"It is not as if companies aren't already working on this and we're not saying this is the Holy Grail of sustainable reporting," said one project worker on the report.

"I wish we were there, but this is still just the start."


Tuesday, December 04, 2007

Stern on Bali: Effectiveness, Efficiency and Equity

Nicholas Stern (of Stern review fame) writes in the Guardian about Bali. It is good to see that he is still very much a "true believer".

Whilst there is nothing really new here he has usefully put the need for action under three headings that will appeal to economists: (1) effectiveness, (2) efficiency and (3) equity.

Until this year my students would be asked to write an essay comparing the efficiency and equity behind possible policy prescriptions to tackle pollution.

The key to the whole problem is "equity". Different countries have different perceptions of what is or is not equitable. The US do not seem to have grasped this concept yet or appear to be working from a different definition to Stern.

A good article.

Bali: now the rich must pay [Guardian]
The Bali summit on climate change, which starts next week, will seek to lay the foundations for a new global agreement on reducing the greenhouse gas emissions that cause rising temperatures and climate change. Ambitious targets for emission reduction must be at the heart of that agreement, together with effective market mechanisms that encourage emission trading between countries, rich and poor. The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay. Climate change is a result of the greatest market failure the world has seen.

The evidence on the seriousness of the risks from inaction is now overwhelming. We risk damage on a scale larger than the two world wars of the past century. The problem is global and the response must be collaboration on a global scale. The rich countries must lead the way in taking action. And in thinking about global action to reduce greenhouse gas emissions, we must invoke three basic criteria.

The first is effectiveness: the scale of the response must be commensurate with the challenge. This means setting a target for emission reduction that can keep the risks at acceptable levels.

The overall targets of 50% reductions in emissions by 2050 (relative to 1990) agreed at the G8 summit in Heiligendamm last June are essential if we are to have a reasonable chance of keeping temperature increases below 2C or 3C. While these targets involve strong action, they are not overambitious relative to the risk of failing to achieve them.

The second criterion is efficiency: we must keep down the costs of emission reduction, using prices or taxes wherever possible. Emission trading between countries must be a central part of the story. And helping poor countries cover their costs of emission reduction gives them an incentive to join a global deal.

Third, we should be concerned about equity. Our starting point is deeply inequitable with poor countries certain to be hit earliest and hardest by climate change. But rich countries are responsible for the bulk of past emissions: US emissions are currently more than 20 tonnes of CO2 equivalent per annum, Europe's are 10-15 tonnes, China's five or more tonnes, India's around one tonne, and most of Africa much less than one.

For a 50% reduction in global emissions by 2050, the world average per capita must drop from seven tonnes to two or three. Within these global targets, even a minimal view of equity demands that the rich countries' reductions should be at least 80% - either made directly or purchased. An 80% target for rich countries would bring equality of only the flow of current emissions - around the two to three tonnes per capita level. In fact, they will have consumed the big majority of the available space in the atmosphere.

Rich countries also need to provide funding for three more key elements of a global deal. First, there should be an international programme to combat deforestation, which contributes 15-20% of emissions. For $10bn-$15bn per year, half the deforestation could be stopped.

Second, there needs to be promotion of rapid technological advance to mitigate the effects of climate change. The development of technologies must be accelerated and methods found to promote their sharing. Carbon capture and storage for coal (CCS) is particularly urgent since coal-fired electric power is currently the dominant technology around the world, and emerging nations will be investing heavily in these technologies. For $5bn a year, it should be possible to create 30 commercial-scale coal-fired CCS stations within seven or eight years.

Finally, rich countries should honour their commitment to 0.7% of GDP in aid by 2015. This would yield increases in flows of $150bn-$200bn per year. The extra costs that developing countries face as a result of climate change are likely to be upwards of $80bn a year, and it is vital that extra resources are available. This proposed programme of action can be built if rich countries take a lead in Bali on their targets, the promotion of trading mechanisms and funding for deforestation and technology. With leadership and the right incentives, developing countries will join.

The building of the deal, and its enforcement, will come from the willing participation of countries driven by the understanding that action is vital. It will not be a wait-and-see game as in World Trade Organisation talks, where nothing is done until everything is settled.

The necessary commitments are increasingly being demonstrated by political action and elections around the world. A clear idea of where we are going as a world will make action at the individual, community and country level much easier and more coherent.

These commitments must, of course, be translated into action. There is a solution in our hands. It will not be easy to build. But the alternative is too destructive to accept. Bali is an opportunity to draw the outline of a common understanding, which will both guide action now and build towards the deal.

· Sir Nicholas Stern led the Stern review on climate change; today in London he is giving the Royal Economic Society public lecture on Climate Change, Ethics and the Economics of the Global Deal


Thursday, November 01, 2007

Economists' Voice on "Global Climate Change"

A special issue on global climate change has jsut been released from Economists' Voice.

When economists such as Arrow and Stiglitz wade into a discussion it is worth listening.

Each paper can be downloaded if you register as a "guest".

Contents page is here:

Global Climate Change


Joseph Stiglitz (2006) "A New Agenda for Global Warming", The Economists' Voice: Vol. 3: No. 7, Article 3.

Joseph E. Stiglitz presents his plan for getting the United States and the Developing World to address global warming, and argues that by failing to address this problem, the United States is implicitly subsidizing energy usage and engaging in unfair trade practices.

Sheila M. Olmstead and Robert N. Stavins (2007) "A Meaningful Second Commitment Period for the Kyoto Protocol", The Economists' Voice: Vol. 4: No. 3, Article 1.

Robert Stavins and Sheila Olmstead propose ways to modify the Kyoto Protocol for its second commitment period (2012-2016) so that it will provide a way forward that is scientifically sound, economically rational, and politically pragmatic.

Kenneth J. Arrow (2007) "Global Climate Change: A Challenge to Policy", The Economists' Voice: Vol. 4: No. 3, Article 2.

Kenneth J. Arrow explains why something must be done to limit global warming even if the Stern Report inadequately discounted future costs.

Thomas C. Schelling (2007) "Climate Change: The Uncertainties, the Certainties and What They Imply About Action", The Economists' Voice: Vol. 4: No. 3, Article 3.

Thomas Schelling argues although the uncertainties regarding climate change are many, the certainties create certain urgencies and inaction is an extreme position; he emphasizes technological advance and governmental sponsorship.

Lawrence H. Goulder (2007) "California's Bold New Climate Policy", The Economists' Voice: Vol. 4: No. 3, Article 5.

Lawrence Goulder describes California's recent commitments addressing Global Climate Change and recommends that a cap-and-trade program play a key role in achieving the state's climate policy goals.

Scott Barrett (2007) "Proposal for a New Climate Change Treaty System", The Economists' Voice: Vol. 4: No. 3, Article 6.

The existing international agreements on climate change are inadequate, according to Scott Barrett, and a new approach is needed.

Joshua S. Gans (2007) "Do Voluntary Carbon Offsets Work?", The Economists' Voice: Vol. 4: No. 4, Article 7.

Voluntary purchases of offsets for carbon emissions have been criticized as potentially increasing emissions. However, Joshua S. Gans argues that even if offsets do increase the consumption of carbon intensive goods, net emissions will always fall because these goods will become less carbon intensive.

Rognvaldur Hannesson (2007) "Letter: The Other Problems with the Stern Report", The Economists' Voice: Vol. 4: No. 3, Article 4.

The Stern Report seems optimistic about the cost of emissions reductions, and does not seriously face the fact that stabilizing the climate could require keeping much of the world in poverty, according to Rognvaldur Hannesson.


Sunday, October 28, 2007

Geo-4 "Global Environmental Outlook" - Bleak for Mankind

UNEP have just released their "Global Environmental Outlook". Generally speaking humanity remains at risk from climate change, food shortages and a collapse in biodiversity. In short, things are looking rather bleak.

There is a lot of interesting material to wade through.

This post has gone multimedia with links to podcasts and videos after the press release.

"The fourth Global Environment Outlook: environment for development (GEO-4) assessment is a comprehensive and authoritative UN report on environment, development and human well-being, providing incisive analysis and information for decision making."

Here is the English Press release:

Planet’s Tougher Problems Persist, UN Report Warns

Nairobi/New York, 25 October: The United Nations Environment Programme says that major threats to the planet such as climate change, the rate of extinction of species, and the challenge of feeding a growing population are among the many that remain unresolved, and all of them put humanity at risk.

The warning comes in UNEP’s Global Environment Outlook: environment for development (GEO-4) report published 20 years after the World Commission on Environment and Development the Brundtland Commission) produced its seminal report, Our Common Future.

GEO-4, the latest in UNEP’s series of flagship reports, assesses the current state of the global atmosphere, land, water and biodiversity, describes the changes since 1987, and identifies priorities for action. GEO-4 is the most comprehensive UN report on the environment, prepared by about 390 experts and reviewed by more than 1 000 others across the world.

It salutes the world’s progress in tackling some relatively straightforward problems, with the environment now much closer to mainstream politics everywhere. But despite these advances, there remain the harder-to-manage issues, the “persistent” problems. Here, GEO-4 says:

“There are no major issues raised in Our Common Future for which the foreseeable trends are favourable.”

Failure to address these persistent problems, UNEP says, may undo all the achievements so far on the simpler issues, and may threaten humanity’s survival. But it insists: “The objective is not to present a dark and gloomy scenario, but an urgent call for action.”

Achim Steiner, UN Under-Secretary General and UNEP Executive Director, said: “The international community’s response to the Brundtland Commission has in some cases been courageous and inspiring. But all too often it has been slow and at a pace and scale that fails to respond to or recognize the magnitude of the challenges facing the people and the environment of the planet”.

“Over the past 20 years, the international community has cut, by 95 per cent, the production of ozone-layer damaging chemicals; created a greenhouse gas emission reduction treaty along with innovative carbon trading and carbon offset markets; supported a rise in terrestrial protected areas to cover roughly 12 per cent of the Earth and devised numerous important instruments covering issues from biodiversity and desertification to the trade in hazardous wastes and living modified organisms,” he added.

UNEP FULL REPORT (22.5MB) - that is large.


UNEP Press release VIDEO.

As an academic I always want to know how such reports are refereed before release especially after the farce of the Stern Review. The refereeing appears to be comprehensive enough.

Did the GEO-4 report undergo a peer review process? How were comments from reviewers addressed in the drafting of the GEO-4?

The GEO-4 report underwent two rounds of governmental and expert review. We received over 13 000 comments on the drafts of the GEO-4 report and 3 000 comments on the GEO-4 Summary for Decisions Makers. Every comment was recorded and addressed by the GEO-4 Chapter Expert Groups, and their responses to the comments were posted on a password-protected Web site. All reviewers were able to see the responses to their and others’ comments. The Web site is not available to the general public in order to maintain confidentiality and allow for candid feedback from the reviewers. Further review was provided by independent experts who served as review editors, ensuring that all review comments were adequately and objectively addressed by the Chapter Expert Groups.

Finally, we end on a slightly brighter note. The 4 main messages from the report almost read like there is a shaft of light at the end of the tunnel.

What are GEO-4’s main messages?

1. The world has changed considerably over the past 20 years, but we have not turned the corner towards sustainable development. We live in a better world than at any time in history, but unprecedented environmental change has made us more vulnerable than we have ever been.

2. Human innovation to engineer and exploit the environment is being countered by the force of environmental change itself. Change is happening faster than we can keep up with.

3. We have a much better toolbox and technologies to tackle some of the global challenges. We have better science, a more informed public, and a more proactive private sector but are yet to cross the threshold of sustained action and staying power to reverse the negative trends of environmental decline.

4. How many environmental assessment reports such as GEO-4 and various others that have been or are being launched in 2007 do we need to reach the tipping point? We have a better understanding of the challenges we face. We can undo and reverse some of the damage now unfolding, adapt to those we can’t, and cease opportunities to strengthen mitigation. But we don’t have the luxury of time – delay exacerbates the problems and increases the complexity and cost to address the problems of environmental decline. The time to act is NOW!


Friday, September 21, 2007

Freakonomics does "global warming"

A useful article asking "experts" for their answers to the two-part question:

"What should the U.S. government be doing about global warming, and what should individuals be doing?"

What Should We Really Be Doing About Global Warming? A Freakonomics Quorum

This is what Jason Pontin, editor and publisher of the M.I.T.-owned Technology Review, had to say:

I don’t have very much to say about what individuals can do about climate change; indeed, I am skeptical that individuals can do very much by themselves.

Other contributors make some excellent points and cover the fundamental economics of climate change well. Worth a read.

Thursday, August 16, 2007

J.K. Galbraith talks about the economics of climate change

Interesting article from Galbraith slipping in some fine economics into the climate change debate.

This phrase is pretty much the crucial element to the discussion:

"We must be careful not to enact policies that will unnecessarily impose a financial burden on American families."

While climate change skeptics but no longer be "science skeptics" they are now merely "economic skeptics". I am not sure which is worse but hopefully climate change economics will catch up with the science.

The crucial issues for economics are touched on my Galbraith:

"Why, they ask, should we sacrifice in order to help future generations, who will have all the benefits of technical progress and economic growth yet to come?"

It is the numbers behind the statement above that are crucial but what sort of value can you put on "global catastrophe?" A fairly large one I imagine.

Finally, Galbraith brings up the line:

As Al Gore said before Congress on March 21: "The best way—and the only way—to get China and India on board is for the U.S. to demonstrate real leadership."

This is the rub. India and China are a problem but the current situation is not their fault and they still have enormous levels of poverty to grow out of. Galbraith's "planning" discussion is an interesting one.

Market Meltdown: Understanding Climate Economics

Eight years ago in Austin, Texas, pio­neering climate economist Eban Goodstein drew a thin crowd speckled with hecklers, whose buttons demanded, "Show Me the Science!" When he returned this year, the deniers were gone, the room packed, the mood serious. Thanks to Al Gore, people get the science. Now, they want to know what to do.

To this, Republicans in Congress answer: nothing. House Minority Leader John Boehner (R-Ohio) has appointed six members to the new climate change committee. Most of them had been global-warming skeptics; now they're policy skeptics. As Rep. John Shadegg (R-Ariz.) stated: "We must be careful not to enact policies that will unnecessarily impose a financial burden on American families." Their new button reads: "Show Me the Economics!"

The British government's Stern Review Report on the Economics of Climate Change is the place to turn for a deep seminar on such matters. Up front, we find these simple words: "Climate change presents a unique challenge for economics: It is the greatest and widest-ranging market failure ever seen." The Stern Review outlines the economic costs of climate change (declining food and water supplies, coastal flooding, storm damage, the extinction of up to half of all land species), the distribution of those costs (to be borne most acutely by poor subsistence farmers), and the economic ethics of why the rich must act to help the poor and why the present must act to protect the future.

Climate-policy skeptics love to dwell on questions like these. To them, the cost of any policy weighs heavily because we pay that cost now, while the benefits will come later and accrue to others. Why, they ask, should we sacrifice in order to help future generations, who will have all the benefits of technical progress and economic growth yet to come? Because, as the Stern Review makes clear, if CO2 isn't stabilized soon, then catastrophe is certain. And extinctions and sea-level changes cannot be reversed by the wealth that might be created in the next 50 years. Facing the judgment of history, no ethical standard entitles us to condemn the future to a hot, dry, famished, and flooded world. For this reason, we must treat the costs and burdens of climate change as if they are already falling on us.

And that's the rub: They aren't. The market's real failure is that it allows for no signal from the future to the present, either from the conditions that will exist 30 years hence or from the people who will be alive and working then. The question becomes: Can we really create a market in which those far-off voices are effectively heard?

Mainstream climate change economics assumes so. "Establishing a carbon price, through tax, trading or regulation, is an essential foundation for climate-change policy," the Stern Review posits. This makes some sense. After all, markets and taxes encourage cheap solutions, and there is plenty of low-hanging fruit. For a start, why not replace state sales and federal payroll taxes with carbon taxes? A cap-and-trade system would lead industry to use low-emissions technologies more and high-emissions technologies less. Business leaders are rallying behind a "carbon price." Fine. Give it to them.

But is tinkering with the market enough? According to the Stern Review, stabilizing atmospheric carbon at 550 parts per million requires cutting total emissions by a quarter by 2050, in the face of population and economic growth. Many experts, including nasa's top earth scientist, James Hansen, favor even more drastic reductions. Goodstein simplifies bluntly: We have 30 years to get the gasoline out of cars and the coal out of power plants, a goal beyond the power of markets.

Market policies rely on competition, and are responsive only to prices. But corporations such as ExxonMobil and txu like to run the world as they see fit. Should we guarantee to them the kind of profits they earn in a carbon-based energy world, as carbon pricing might do? Can they be trusted to invest those profits correctly? No. A real climate solution must shrink some industries and grow others, and that means changing the distribution of profits. Exactly how is something we need to plan.

"Planning" is a word that too many in this debate are trying to avoid, fearful, perhaps, of its Soviet overtones. But the reality of climate change is that central planning is essential, and on a grand scale. It would start with tens of billions of dollars in research to determine what is feasible, what is socially tolerable, and at what cost. A National Institute for Climate Engineering would be a good start. Departments of climate engineering at major universities would follow. Presidential candidates should take the lead by proposing a cabinet department of climate planning.

What then? Which new technologies would get taken up and how quickly? Part of the answer is public investment, big-time—in cities and the ways they use power, in transportation and the energy used for it. Mandatory changeovers in technology would follow. Fuel efficiency, building efficiency, urban density, transportation modes, and requirements for renewable energy must all be part of the mix. Cities from Austin to New York, and states—notably California—are already leading the way. But the laggards—Texas emits more carbon dioxide than California and New York state combined—will determine whether carbon emissions are sufficiently reduced.

So the real test will be whether national decisions are made and enforced. Mandates force the pace of technical change, lower unit costs, and help businesses with their own plans for technical transitions. Plans provide clarity and reduce risk, an essential step in making things happen. Of course, planning can be authoritarian, and planners make mistakes. Much of what goes into a national plan, especially at first, may be wasted. But so what? Waste and inefficiency are part of human endeavor, and markets do not protect against them.

What counts is not whether every single decision is wise. What counts is the possibility that we might prevent catastrophe and at the same time keep people employed and life tolerable, decades and centuries hence. What counts is not the economy we have, but a new economy that we, and future generations, can live with.

It's our job, too, to blaze trails for the rest of the world. As Al Gore said before Congress on March 21: "The best way—and the only way—to get China and India on board is for the U.S. to demonstrate real leadership." This is a worthy mission. Hostile to central planning though we are, we are ironically the only country with the capacity to plan and to change on such a scale. We are also the only country empowered by the world—through its willingness to hold our debts at low interest rates—to pay for it. And we are the only country that can concentrate the scientific, technical, and economic talent necessary to pull it off.

Friday, July 27, 2007

World Economics: Climate Change articles

A good collection of papers that continue the "economics of climate change" debate.

Included is a paper from Simon Dietz, Dennis Anderson, Nicholas Stern, Chris Taylor & Dimitri Zenghelis entitled "Right for the Right Reasons" arguing against the general view from many economists that the Stern review somehow got it right but for the wrong reasons. They call this the FINAL rejoiner - case closed?

World Economics


Continuing the debate from previous issues, a paper by Simmonds and Steffen criticises part 1 of the ‘Dual Critique’ by Carter et al. on the science of climate change, that appeared in Vol. 7, No. 4 of this journal. The dual critique authors respond. The debate then moves on, with responses by critics of the Stern Review to papers in the previous issue [Vol. 8, No. 1] by defenders of the Review’s approach and conclusions. An article by David Henderson questions the way governments are responding to climate change issues and in particular their reliance on the process of the Intergovernmental Panel on Climate Change. The debate is concluded in this issue with a final rejoinder by members of the Stern team.

Response to ‘The Stern Review: A Dual Critique—Part I: The Science’
Ian Simmonds & Will Steffen
In their comments on part one of the ‘Dual Critique’ [Vol. 7, No. 4] the authors draw attention to a number of instances where the treatment of sources and evidence is selective and biased, and perhaps where it reveals a modest understanding of the vast amount of conventional and well-established literature on climate science and allied topics. The purpose of this record is not fundamentally to dissect all the main points made by the Dual Critique authors. Rather, Simmonds and Steffen have confined themselves to commenting under a few headings on issues which they found particularly striking (grossly misleading, inconsistent with the workings of the climate system, or just plain wrong).

Response to Simmonds and Steffen
David Holland, Robert M. Carter, C. R. de Freitas, Indur M. Goklany & Richard S. Lindzen

A Stern Reply to the Reply to the Review of the Stern Review
Richard S. J. Tol & Gary W. Yohe
Tol and Yohe point out that, in their reply [Vol. 8, No. 1] to Tol and Yohe’s review [Vol. 7, No. 4], the Stern team demonstrates the fragility of the numerical findings of the cost–benefit analysis in the Stern Review. At the same time, the Stern team puts less weight on cost–benefit analysis as a guide to policy making on climate change. Tol and Yohe show that the Stern Review allows several, mutually contradictory interpretations of the model that underlies the cost estimates; and argue that each interpretation implies that Stern’s cost estimates have a severe downward bias.

Climate Science and the Stern Review
Robert M. Carter, C. R. de Freitas, Indur M. Goklany, David Holland & Richard S. Lindzen
Fundamentals of the climate science dispute and common misunderstandings of some issues raised about Part 1 of the Dual Critique of the Stern Review [Vol. 7, No. 4] are discussed. One consideration is that a distinct anthropogenic greenhouse gas signal has not yet been identified within natural climate variations. The slight warming that has occurred in the late 20th century, falling within previous natural rates and magnitudes of warming and cooling, is a priori unalarming. Empirical evidence shows that the warming effect of increasing carbon dioxide at the rates of modern industrial emission and accumulation is minor, noting the established logarithmic relationship between gas concentration increases and warming. No global increase in temperature has occurred since 1998 despite a 15 ppm (4%) increase in carbon dioxide concentration, and an expectation of continued warming even at constant CO2 levels. The key issue is assessment of risk, but that includes the risk of future coolings as well as warmings, as well as their significance relative to other factors. This is why an adaptive policy towards climate change is the most sensible response option.

Governments and Climate Change Issues
The case for rethinking

David Henderson
Governments, and in particular the governments of the OECD member countries, are mishandling climate change issues. Both the basis and the content of official policies are open to serious question. Too much reliance is placed on the established process of review and inquiry which is conducted through the agency of the Intergovernmental Panel on Climate Change. This process, which is wrongly taken to be objective and authoritative, has been made the point of departure for over-presumptive conclusions which are biased towards alarm, in the mistaken belief that ‘the science’ is ‘settled’. Rather than pursuing as a matter of urgency ambitious and costly targets for drastic further curbing of CO2 emissions, governments should take prompt steps to ensure that they and their citizens are more fully and more objectively informed and advised. This implies both improving the IPCC process and going beyond it. As to the content of policy, it is not the case that the choice now lies between two extremes, of no action and the immediate adoption of much stronger measures to curb emissions. The orientation of policies should be made more evolutionary and less presumptive, with actual policy measures focusing more on carbon taxes rather than the present and prospective array of costly and intrusive regulatory initiatives.

Right for the Right Reasons
A final rejoinder on the Stern Review
Simon Dietz, Dennis Anderson, Nicholas Stern, Chris Taylor & Dimitri Zenghelis
Four authors of the Stern Review on the Economics of Climate Change, and Dennis Anderson who provided advice and background papers for the Review, make a final rejoinder on the debate about the Review that has occupied recent issues of this journal. They respond to comments in the present issue by Carter et al., by Henderson, and by Tol and Yohe. Carter et al. continue to argue against a growing body of scientific evidence and a growing consensus on that same evidence. The source of their critique is, first, a distinctly partisan, and increasingly untenable, position on the broad range of available scientific evidence and, second, a mistrust of the international consensus-building exercise centred on the Intergovernmental Panel on Climate Change. Henderson is also largely preoccupied with the latter, procedural issues. Tol and Yohe focus on economic arguments. Their critique is rather narrower in focus and concerns the way in which abatement costs were calculated in the supporting work carried out by Dennis Anderson. It rests on basic confusions and misconceptions, many of which were explained in previous contributions. However, readers of World Economics might be more interested in a broader reflection: how would the Stern team, following the debate of the last eight months, assess the approach, policies and arguments set out in the Review? Their view is that their analyses and policy proposals, and the arguments in support, are sound and have stood up well to scrutiny. In other words, they were right and for the right reasons. Central to many critiques of the Review is a fundamental misunderstanding of the role of formal, highly aggregated economic modelling. Nevertheless, the Stern team have argued strongly and in their view convincingly that, even within the confines of formal economic modelling, the concerns raised by a small group of commentators do not overturn their basic conclusion that the cost of action is much less than the cost of inaction. The critics here fall short by failing to simultaneously afford the necessary importance to issues of risk and ethics.

Thursday, June 21, 2007

Why Climate Change Economics is important: Stern speaks

In a recent interview with the FT, Sir Nicholas Stern about his review and other issues:

INTERVIEW: Chanes improve for a Kyoto successor[FT subscription required].

In this blog post it is useful to highlight his conclusion which is a neat summary of teh link between economics and climate change (and hence the issues that this blog aims to encompass).

Stern on climate change now that he is back in Academia:

"It is a subject that's so important and so interesting, you've got everything in there, even the ethics, the economicsiof risk,all sorts of industrial economics, detailed public economics of what you do in a perfect economy, you've got game theory, expansion of trade and development, everything, finanical structures, there's hardly any part of economics that's not there. It is absolutely fascinating, so I will stay involved with that".

We of course agree and is one of the motivations for maintaining this environmental economics blog.

For additional reading:
Economics of Climate Change: Articles in one place

Stern Review

Wednesday, May 09, 2007

Nordhaus on the Stern Review - NBER working paper

Acadmic subscription required for the full text version. Some friendly academics may be able to supply a copy if asked nicely.

"The Stern Review on the Economics of Climate Change"
NBER Working Paper No. W12741

Yale University - Department of Economics, National
Bureau of Economic Research (NBER)

Full Text:

ABSTRACT: How much and how fast should the globe reduce greenhouse-gas emissions? How should nations balance the costs of the reductions against the damages and dangers of climate change?
This question has been addressed by the recent Stern Review on the Economics of Climate Change, which answers these questions clearly and unambiguously. We need urgent, sharp, and immediate reductions in greenhouse-gas emissions. An analysis of the Stern Review finds that these recommendations depend decisively on the assumption of a near-zero social discount rate. The Review's unambiguous conclusions about the need for extreme immediate action will not survive the substitution of discounting assumptions that are consistent with today's market place.

Thursday, April 19, 2007

World Economics and Climate Change

The latest issue of World Economics has 2 papers written by Nicholas Stern and colleagues.

I am afraid an academic subscription may be needed to read the full article. Sorry.

This issue of World Economics, like the previous one, devotes considerable space to the important global issue of climate change. Some of the papers are responses to articles published in the previous issue of this journal, which in turn were responses to The Stern Review on the Economics of Climate Change that was published in October last year.

How Can Norway Become A Climate-Friendly Society?
Jørgen Randers & Knut H. Alfsen

Addressing Climate Change
Is there a role to be played by the IMF?
Peter S. Heller

A Robust Case for Strong Action to Reduce the Risks of Climate Change

Simon Dietz, Chris Hope, Nicholas Stern & Dimitri Zenghelis

A Growing International Opportunity to Move Strongly on Climate Change

Lorraine Hamid, Nicholas Stern & Chris Taylor

Ethics of the Discount Rate in the Stern Review on the Economics of Climate Change
Wilfred Beckerman & Cameron Hepburn

The Stern Review and the Costs of Climate Change Mitigation
A response to the ‘Dual Critique’ and the misrepresentations of Tol and Yohe
Dennis Anderson

Response to Carter et al.
John Mitchell, Julia Slingo, David S. Lee, Jason Lowe & Vicky Pope

Response to ‘The Stern Review: A Dual Critique’
Nigel Arnell, Rachel Warren & Robert Nicholls

A Response to ‘The Stern Review: A Dual Critique’
Andrew Glikson

For other Climate Change papers see our designated page at our Globalisation and the Environment websiteHERE.

Wednesday, April 11, 2007

The Legacy of the Stern Review

Apologies for the lack of posts over the last 2 weeks - academic research has a way of disrutpting blogging especially when you are in countries with insufficient internet speed.

Obviously much has been missed but I hope to post a few catch up posts over the next few days.

The first is a nice little paper by Gary W. Yohe, Richard S.J. Tol and Dean Murphy relating to the recent Stern Review.

On Setting Near-term Climate Policy while the Dust Begins to Settle: The Legacy of the Stern ReviewDate: 2007-03

By: Gary W. Yohe
Richard S.J. Tol (Economic and Social Research Institute, Dublin)
Dean Murphy

We review the explosion of commentary that has followed the release of the Stern Review: The Economics of Climate Change, and agree with most of what has been written. The Review is right when it argues on economic grounds for immediate intervention to reduce emissions of greenhouse gases, but we feel that it is right for the wrong reasons. A persuasive case can be made that climate risks are real and increasingly threatening. If follows that some sort of policy will be required, and the least cost approach necessarily involves starting now. Since policy implemented in 2007 will not “solve” the climate problem, near term interventions can be designed to begin the process by working to avoid locking in high carbon investments and providing adequate incentives for carbon sequestration. We argue that both objectives can be achieved without undue economic harm in the near term by pricing carbon at something on the order of $15 per ton as long as it is understood that the price will increase persistently and predictably at something like the rate of interest; and we express support for a tax alternative to the usual cap-and-trade approach.

Keywords: Stern Review, climate change, climate policy, social discount rate; risk and equity aversion
JEL: Q54

We have not started a page within our Globalisation and the Environment project website that will attempt to collate research papers in this area.

The Economics of Climate Change: The Stern Review

Wednesday, March 21, 2007

Economics of Climate Change: Articles in one place

The economics department here at Birmingham held a Workshop on "The Economics of Climate Change" on the 9th March 2007.

Speakers included

David Maddison , University of Birmingham
Dennis Anderson, Imperial College London
Dimitri Zenghelis , HM Treasury
Richard Tol, Economic and Social Research Institute, Dublin
Cameron Hepburn, University of Cambridge

Their papers and other articles on the Economics of the Stern Review are now available for download from a new page on our academic "Globalisation and the Environment" website (as distinct from this academic/non-academic blog).

We also include links to papers by:

Robert Mendelsohn , Yale University
Martin Weitzman , Harvard University
William Nordhaus , Yale University


Globalisation and the Environment

Monday, March 12, 2007

The Great Global Warming Swindle: The Fightback

Since our original post on this blog previewing the "Global Warming Swindle" television programme on channel 4 last week HERE we have had many interesting comments with each side taking predictable positions.

Aside from the general sniping some good points were raised. On a academic level we held an Academic Workshop on Friday called

"The Economics of the Stern Review"

that included speakers involved in the writing of the report (directly and indirectly) Dimitri Zenghelis (HM Treasury) and Dennis Anderson (Imperial College London) as well as some of it critics, Richard Tol (Economic and Social Research Institute Dublin) and David Maddison (University of Birmingham). The middle ground was covered by Cameron Hepburn (University of Oxford) who gave an excellent talk on discounting as well as expertly bridging both sides of the argument.

Liks to the presentations will be available on this blog soon.

Returning to the "Great Global Warming Swindle" it was clear that an agenda was being followed although some of the issues were covered in Friday's workshop.

It is interesting however, that the press backlash has started. The Independent on Sunday ran the following article:

Climate change: An inconvenient truth... for C4

This expert in oceanography quoted in last week's debunking of the Gore green theory says he was 'seriously misrepresented'

By Geoffrey Lean, Environment Editor
Published: 11 March 2007

It was the television programme that set out to show that most of the world's climate scientists are misleading us when they say humanity is heating up the Earth by emitting carbon dioxide. And The Great Global Warming Swindle, screened by Channel 4 on Thursday night, convinced many viewers that it is indeed untrue that the gas is to blame for global warming.

But now the programme - and the channel - is facing a serious challenge to its own credibility after one of the most distinguished scientists that it featured said his views had been "grossly distorted" by the film, and made it clear that he believed human pollution did warm the climate.

Professor Carl Wunsch, professor of physical oceanography at the Massachusetts Institute of Technology said he had been "completely misrepresented" by the programme, and "totally misled" on its content. He added that he is considering making a formal complaint.

A Channel 4 spokesman said: "The film was a polemic that drew together the well-documented views of a number of respected scientists to reach the same conclusions. This is a controversial film but we feel that it is important that all sides of the debate are aired. If one of the contributors has concerns about his contribution we will look into that."

Any complaint would provoke a crisis at Channel 4, now recovering from the Jade Goody Big Brother storm. It had to make a rare public apology after the Independent Television Commission convicted previous programmes on environmental issues by the same film-maker, Martin Durkin, of similar offences - and is already facing questions on why it accepted another programme from him.

The commission found that the editing of interviews with four contributors to a series called Against Nature had "distorted or misrepresented their known views".

Professor Wunsch said: "I am angry because they completely misrepresented me. My views were distorted by the context in which they placed them. I was misled as to what it was going to be about. I was told about six months ago that this was to be a programme about how complicated it is to understand what is going on. If they had told me even the title of the programme, I would have absolutely refused to be on it. I am the one who has been swindled."

When told what the commission had found, he said: "That is what happened to me." He said he believes it is "an almost inescapable conclusion" that "if man adds excess CO2 to the atmosphere, the climate will warm".

He went on: "The movie was terrible propaganda. It is characteristic of propaganda that you take an area where there is legitimate dispute and you claim straight out that people who disagree with you are swindlers. That is what the film does in any area where some things are subject to argument."

Mr Durkin last night said that Professor Wunsch was "most certainly not duped into appearing into the programme" and that it "had not in any way misrepresented what he said".

Before the programme was shown, the IoS asked Channel 4 why it had commissioned another film from Mr Durkin and, further, whether it was making any special checks on its accuracy.

A spokesman said the programme made by Mr Durkin for which it had had to apologise was a decade old, adding: "We treat Martin as any other film-maker."

Monday, February 26, 2007

Oil Drum on Discounting

A long essay on the evolution of the discount rate. There are some interesting points raised in this rather left-field analysis.

The interview to start the article off is highly amusing but I suspect depressingly representative. Neoclassical economics also gets a kicking.

The whole Peak-Oil brigade post a lot of "interesting" stuff for those that like conspiracy stories - this is one of the better, but still amusing, posts.

There is also a great "evolutionary" cartoon in there as well.

Climate Change, Sabre Tooth Tigers and Devaluing the Future
The debate on the realities of both climate change and Peak Oil has moved from 'are they real?' to questions concerning timing, magnitude and impact. At the same time, expanding research in 'temporal discounting' in economics (called 'impulsivity' in psychology), is shedding light on how steeply we value the present over the future, a trait that has ancient origins. Knowing this tendency, how can we expect factual updates on peak oil and climate change to behaviorally compete with Starbucks, sex, slot machines, and ski trips?

Science is rapidly increasing our knowledge about the planet. To affect change however, we must become equally knowledgeable about ourselves. The time has come to integrate ecological science with insight about human behavior derived from new findings in anthropology, hunter gatherer studies, evolutionary psychology and the neurosciences. Below the fold is an overview on human discount rates, their evolutionary origins, and their relevance to the mitigation and adaptation to climate change and peak oil.

Here is a nice little definition and take on discount rates for all those Stern Report readers out there who want to know what all the fuss is about:
Everyone is familiar with the 'discount rate' in the financial markets. It's the rate that the Federal Reserve charges its member banks. Its also the rate that a stock analyst might use to discount a companies future earnings stream back to the present. Imagine a company whose entire business plan is to sell a product in 10 years – say at the Olympics – they make no money until then but a lot of money in that one year, say $100 million. How much would investors pay for this company? Certainly something less than $100 mil, as that money wont come for 10 years. They would determine what the risk was of actually getting that $100 mil 10 years hence, then determine what an appropriate rate of return would be, say 15% per year. Discounted at 15% per year, $100 mil is $24.75 mil- that is what they should be willing to pay. So in this example, the discount RATE is 15% and the discount FACTOR is 24.75%, or how much something in the future is worth today. The higher a discount rate the lower the discount factor will be. A discount rate approaching 1, means things in the future have no value at all in the present moment. A discount rate of zero means that $1 dollar in 2050 is worth $1 today.

The original neoclassical assumption was that the discount rate curve was exponential, meaning that we discounted the same from period to period. Actual economic experiments however show that the shape of the discount curve is hyperbolic, or as Harvard economist David Laibson prefers quasi-hyperbolic. This means that the early periods have much steeper discount rates than later periods. Laibsons research indicates that peoples discount rates are 12% during days 0-5 but drop to 4% in days 20-25. We REALLY prefer the present.

Hat-tip: Gristmill.

Friday, February 16, 2007

Wolf's Climate Change Forum: Economics of Stern

In light of the previous posts on this blog related to the economics of climate change and specifically the economics of the Stern Review Martin Wolf and his panel of invited guests make some interesting comments.

In spite of economic sceptics, it is worth reducing climate risk

In the public at large, including sizeable sections of the business community, a new consensus on climate change has emerged: it is happening; it is important; and something needs to be done. The publication last week of the latest assessment from the intergovernmental panel on climate change and discussions at this year’s annual meeting of the World Economic Forum in Davos made the growing agreement on all these points plain. Yet there is one group among whom dissent reigns: economists.

It was to them, above all, that Sir Nicholas Stern’s review on the Economics of Climate Change was addressed. It has failed to persuade. So much the worse for economists, the environmentally minded will declare. I disagree. Economists are trained to address the costs and benefits of alternative policies rigorously. Scientists are not.

What then do economists object to in the arguments for early and forcible action to halt the increase in the stock of greenhouse gases? In essence, they make three arguments: first, the Stern review has exaggerated the economic costs of climate change; second, it has underestimated the costs of mitigating emissions; and, third, it has employed the wrong discount rate for relating near-term costs of mitigation to the costs of continuing on our present course.

Other participants include Jeffrey Frankel, Lawrence Summers, Paul Seabright, John Williamson, Andrew Oswald, Stephen Cecchetti and Claude Henry.

The are some excellent points raised in particular by Claude Henry and Paul Seabright. Essential reading and I am sure many of these points will be raised at the up coming Workshop here at Birmimgham.