Sir Nicholas Stern, author of a controversial October 2006 report alleging global warming will wreak havoc on the global economy, on December 11 resigned his position as second permanent secretary in the British treasury department after the government essentially ignored his call for drastic action.
Upon its release, the Stern report on projected economic costs of climate change caused a political uproar and media frenzy.
Sponsored by British Chancellor Gordon Brown, who is favored to succeed Tony Blair as the next British prime minister, the report garnered great media attention because it purported to show the future harm from human-induced global warming would be much greater than any previous study had predicted. Stern’s report said the harm would be as much as 20 percent of world gross domestic product each year.
By contrast, the report estimated the costs to reduce future warming significantly would be less than 1 percent of present and future world gross domestic product, lower than almost every previous estimate.
Citing Stern’s conclusions, environmental activist groups called for even deeper cuts in greenhouse gas emissions than required by the Kyoto Protocol and renewed calls for the United States to join the international treaty.
Economists Refuted Report
Because the report’s findings were so radically at odds with previous economic analyses, it received a great deal of attention and criticism from economists.
Award-winning economists such as Robert O. Mendelsohn and William Nordhaus of Yale University and Sir Partha Dasgupta of Cambridge University pointed out the report assumed a 60 percent higher growth rate in global population than expected by international demographers; assumed income growth rates would be less than half the present rate; and used inconsistent and arguably absurd discount rates that substantially underestimate the costs of cutting carbon emissions while simultaneously using a higher discount rate when calculating the benefits of immediate action.
Economists rejected Stern’s estimates of the economic costs associated with climate change. They pointed out, for example, that Stern’s projections of the damage from climate change did not take into account any adaptive steps.
Stern’s analysis of flood damage, they noted, did not consider the possibility that societies may build dams, sea walls, and raised structures to avoid flooding. Nor did it recognize farmers might plant different crops than they do under present climate conditions, in order to adapt to changed conditions. Stern instead envisioned farmers would continue to plant the same crops even if ill-suited to new conditions.
Malaria, Hunger Scares Rebutted
Indur Goklany, in a September 2005 study, “Living with Global Warming,” published by the National Center for Policy Analysis, exposed flaws in assertions by Stern and others that global warming will cause worldwide malaria epidemics.
Goklany pointed out that absent any efforts to tackle malaria in other ways, global warming is projected to increase global malaria rates by 3 percent. By contrast, investing $1.5 billion annually–just a minuscule fraction of the costs of reducing carbon dioxide emissions to the extent required by the Kyoto Protocol–in malaria prevention and treatment today would cut the annual malaria toll in half.
Concerning hunger, Goklany observed, while the Kyoto Protocol would likely reduce the number of people facing hunger by less than 2 percent, investing an additional $5 billion annually to solve agricultural problems would cut by 50 percent the number of people at risk of hunger.
Other Approaches More Effective
Another critic of the Stern review is Danish scholar Björn Lomborg.
Lomborg asked eight world-renowned economists, including three Nobel Laureates, to rank the best ways of advancing global welfare, supposing that an additional $50 billion of resources were available. The “Copenhagen Consensus” examined a range of proposals to meet 10 global challenges identified by the United Nations.
Three of the 17 options were measures to slow expected climate change by reducing CO2 emissions. They came in dead last–finishing in the 15th, 16th, and 17th places, ranked as “bad” investments.
The panel concluded the cost of CO2 emissions reduction proposals, including the Kyoto Protocol, exceed the expected benefits.
Stern attempted to circumvent the economic consensus by cherry-picking statistics to reach a desired conclusion, said Myron Ebell, director of energy and global warming policy at the Competitive Enterprise Institute.
“The report’s estimates for reducing greenhouse gas emissions are laughably rosy, while the assumptions about the impact of global warming are ridiculously overblown,” said Ebell. “The Stern Review may look professionally done, but it doesn’t pass the laugh test.”
Rejected by British Government
After the Stern report received such sustained criticism from noted economists, the British government backed away from its proposals and quietly played down the report when considering potential action to address global warming.
Brown’s recent budget report, released just before Stern announced his resignation, rejected most of the “green” taxes and new carbon trading schemes recommended in the report.
H. Sterling Burnett ([email protected]) is a senior fellow with the National Center for Policy Analysis.
For more information …
Indur Goklany’s September 2005 report for the National Center for Policy Analysis, “Living with Global Warming,” is available through PolicyBot™, The Heartland Institute’s free online research database. Point your Web browser to http://www.policybot.org and search for document #20558.