Bloomberg BNA — Global political leaders have the best opportunity yet in 2013 to adopt bold solutions that globally address climate change, a leading British economist said April 2.
Lord Nicholas Stern, chairman of the Grantham Research Institute at the London School of Economics and lead author of a 2006 report on the economic impacts of climate change, said
technical progress at addressing the impacts of climate change has come faster than anticipated, but global political will for addressing the problem continues to lag.
However, Stern said he is optimistic the world can make substantial progress on addressing climate change in 2013 because both Chinese and U.S. political leaders appear engaged on the issue and do not face elections for several years.
U.S., China Seen Acting Seriously
“Leadership from the United States and China is absolutely fundamental,” Stern said at an event sponsored by the International Monetary Fund and World Resources Institute. “Now, you've got people who are in the position to decide who take this issue seriously. 2013 is the best possible year to try and redouble our efforts to create the political will that hereto has been far too weak.”
Stern also praised the governments of India, South Africa, Mexico, Ethiopia, and several other countries for taking climate change seriously, and he applauded the IMF and World Bank for similar engagement on the issue.
Christine Lagarde, managing director of IMF, and Rachel Kyte, vice president of sustainable development at the World Bank, both said in separate speeches at the event that failure to act on climate change would devastate economic development.
Report ‘Badly Underestimated’ Economic Risks
Stern said his 2006 Stern Review on the Economics of Climate Change, prepared for the British government, “badly underestimated” the risks posed by climate change to economic prosperity.
He said the report failed to adequately account for the impacts of millions of people relocating due to sea levels rising, and he said many of the impacts forecasted were occurring much more quickly than anticipated.
“Our story wasn't strong enough,” Stern said. “Emissions are at the top or above the projections we thought about six or seven years ago.”
Stern called for development of new scientific and economic models that would better take into account the long-term economic consequences of extreme weather events.
“If you knock down the capital structure, you are less productive afterwards,” he said. “These are lasting destructions, but those factors don't come into the current model. As we move forward in science, we need to look more closely at the implications for human welfare [from extreme weather] and try to model those better.”
Stern said the international community missed an opportunity to develop “a more sensible framework” for climate change action during the economic crisis of the last five years.
He said addressing climate change would require government investment in research and development, improved information sharing between countries, and eliminating market failures that have not provided incentives for private investment, among other factors.
“Surely the time to embark on this new story is when there is less pressure on resources and when interest rates are very low,” Stern said. “If only we could be much stronger and clearer with our policies, a lot of private sector companies have the liquidity to act.”
‘Toasted, Roasted, and Grilled.’
Lagarde echoed many of Stern's comments and vowed to use IMF's financial expertise to help address climate change.
“If nothing is done we'll be toasted, roasted, and grilled,” Lagarde said. “If climate change issues are not properly addressed … then medium- and long-term financial stability is clearly at stake.”
Kyte said successfully addressing climate change would require setting a price on carbon, removing fossil subsidies, rethinking how cities are constructed, and developing sustainable agricultural practices around the world.
“We agree that collectively we've underestimated the risk,” Kyte said. “And we've failed to communicate the risk. Climate change is the rug that will be pulled out [from under] the global economy unless we get our hands around it, and the poor and vulnerable will suffer the most.”
World Bank President Jim Yong Kim said failure to address climate change could put 360 million people living on coastlines at risk, according to remarks prepared for delivery at Georgetown University April 2.
“Climate change is not just an environmental challenge,” Kim said. “It is a fundamental threat to economic development and the fight against poverty.”
A copy of the slides used in Stern's presentation is available at the World Resources Institute website.
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