Blogger Ref Link http://www.p2pfoundation.net/Transfinancial_EconomicsReview From Make Wealth History (website), 2012
The Stern Review, as you may have gathered, is a highly influential document on the economics of climate change. It came out in 2006 and was a real game changer, showing that the cost of action to prevent climate change would be less harmful to the economy than the consequences of inaction. It’s a complicated and ethically compromised piece of economics, but it made Lord Stern a key figure in the climate debate.
More recently, Stern has turned his attention to the need for a global deal on climate change, and A Blueprint for a Safer Planet: How we can save the world and create prosperity is his attempt at outlining the kind of deal we need. I should start by pointing out that post Copenhagen, the book needs reviewing. It was released this year, but it would be a much better book if the publishers had delayed the paperback edition by a few weeks and brought it up to date. It was written in autumn 2008, and a lot has changed. It was written before Obama was elected, and talks non-specifically about ‘America’s new president’, for example. No doubt a second edition will emerge sooner or later, and if you’re thinking of reading this book I’d hold on for a bit.
For me, the subtitle was the main reason I wanted to read this. Stern is a cheerleader for economic growth, and sees climate change as an opportunity for more of it. “I offer a blueprint of how to build a safer planet” he writes, “or how to manage climate change while creating a new era of growth and prosperity.” Others maintain that this is a fantasy and that growth is impossible in the face of climate change. It’s an important debate – in fact it may be the key debate in the whole climate change problem.
So what’s the blueprint? Well, it’s based on the idea that climate change is a market failure, “the biggest market failure the world has ever seen” in fact. The damage that CO2 causes isn’t factored into the price of emitting it. Price it in through carbon trading, and the market will correct itself, although there’s more to do as well. Halting deforestation is a priority, along with every possible energy efficiency, an upscaling of renewable energy, and serious investment in promising technology, including carbon capture and storage. All of this should work together to keep atmospheric concentrations below 500ppm, which is Stern’s baseline.
There’s a lot of detail here about how individuals and companies would fit into the picture, and even more on the structure of a global deal – who gives what to whom, and how. It’s a maze, quite frankly. I admire Stern for tackling it and getting his head around it. I also understand much more clearly why world leaders didn’t secure a deal at Copenhagen. The whole thing is fiendishly complicated and full of pitfalls, potential inequities, or opportunities for gaming the system. It’s obvious that a global climate deal is possible, but getting there is going to require a whole new approach to diplomacy.
There’s no doubt that Stern has thought this all out very carefully. However, I have a couple of problems with his starting assumptions. After all his careful reasoning, the growth question is still the elephant in the room. “It is neither economically necessary nor ethically responsible to stop or drastically slow growth to manage climate change” he asserts, because “without strong growth it will be impossible for the poor people to lift themselves out of poverty.” I don’t doubt Stern’s commitment to the poor. He co-authored the Commission for Africa report and knows his stuff, but growth is not the best way to solve poverty. As nef have proved, growth is so unequally shared that if you wanted to lift everyone living on less than $2 a day to just $3 a day, you would need 15 planets worth of resources to do it.
The failure here is to distinguish between necessary and unnecessary growth. I agree that African economies need to grow, but why should American or European economies continue to grow? Stern even recognises that growth can’t go on forever: “a picture of indefinite expansion is an implausible story of the future” he writes, but he doesn’t go on to say when ‘enough’ would be. If everyone lived like Americans, we’d need five planets. So when is enough? Six planets, seven? It’s ridiculous to see growth in Africa growth in the West as equally good. A dollar of growth in a poor country is worth far more than growth in a rich country.
What’s worse is that Stern uses this very logic to justify ‘discounting’ the needs of future generations. We know that a unit of extra wealth means less to a richer person than to a poorer person. We also know, according to Stern’s growth assumptions, that growth will continue and future generations will therefore be richer than we are. That means that a unit of growth will mean more to us than to them. Conveniently, this means we can put our needs first. It’s economically logical, and neatly circumvents the golden rule of sustainability that requires us to meet “the needs of the present without compromising the ability of future generations to meet their needs.” It also shows why you should never put an economist in charge of anything that involves real people.
Interestingly, Stern hints at another way in passing. “Short of creating an immediate, major and prolonged world economic decline, it is impossible to big and sustained reductions in emissions starting immediately” he says, acknowledging that de-growth is the only immediate solution to climate change while dismissing it at the same time.
Lord Stern is obviously a highly intelligent and influential man. What if he were to able to entertain that heresy for a bit, to explore the idea that ending growth might actually be the best way to fix the climate? He could have written a book detailing how to ‘ration’ growth to countries that need it most, how to slow an economy without destabilising it, how to maintain employment, how to create new money for mortgages and pensions without the growth imperative of interest. In a world of peak oil, climate change and population growth, the notion that the future must inevitably be richer than the present strikes me as a rather rash assumption. Because of it, the message of A Blueprint for a Safer Planet is music to the ears of politicians and businessmen alike, but it is ultimately built on sand.
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