October 29, 2006
Open Thread on UK Stern Report
Posted to Author: Pielke Jr., R. | Climate Change
The Stern Review on the Economics of Climate Change, focused on climate policy, is going to be released tomorrow and I'm sure, like everyone else, we'll be discussing it. Until then I thought I'd open a space for anyone who is interested in discussing it or offering relevant pointers. The pre-release media coverage is already pretty interesting. When released, the report will be available here.Posted on October 29, 2006 10:44 AM
If you google 'The Stern Report', you'll find the submissions from organisations such as the Tyndall Centre, 4CMR/ICEPT, the WWF and others; pick your poison. I also came across a comment from the Competitive Enterprise Institute, from last November, saying that they thought the Stern report was a good idea and the Americans should do the same thing. I wonder what they'll be saying next week.
The Tyndall and 4CMR submissions are quite long, but are readable and worth the effort; there is a lot to think about in them. There are similarities with your workshop report from last week.
I have the files on Adobe but don't know how to attach them here.
Regards and respect,
Posted by: Fergus Brown at October 29, 2006 02:54 PM
Thanks Fergus- All of the submissions can be found here:
Posted by: Roger Pielke, Jr. at October 29, 2006 03:11 PM
Roger, you might like this bit:
Posted by: Lab Lemming at October 30, 2006 04:16 AM
Amazing how long on certainty it is. Look here:
Looking deeply into the assumptions and lack of clarity of thought that went into this slide show, therefore (presumably) the entire report, is what is scary.
Posted by: Steve Hemphill at October 30, 2006 06:02 AM
The Stern report is important because it is the most comprehensive report to date. No doubt many skeptics will dismiss it instantly. Lomborg dismissed it out of hand before publication...
I have been convinced for some time that we need to take action. However, the debate on what action to take has not really started yet. I don't think that what to do will be an easy question to answer and hopefully this report will start that debate for real.
Posted by: Acteon at October 30, 2006 06:44 AM
We have burned lots of ff the last 100yrs and the temp has increased 0.6dc (related or not). Now would you have me believe that our standard of living would be higher today if we had not burned those ff? We hadn't used that energy or paid much more for renewable energy?
Now given that the warming effect ~ log co2 we can expect the case for ff burning over the next 100 yrs to be more favorable than the last 100 yrs.
Thus if you want me to take seriously such claims about the future you need to first convince me regarding the past where we have real data.
Posted by: charles at October 30, 2006 09:31 AM
I do not often agree with Bjorn Lomborg, but in this case he was right.
The Stern Review was announced in the British media as the report that would bolster the green credentials of Gordon Brown, the heir-apparent to Tony Blair. Brown needs this, as David Cameron, the Tory leader, is much greener.
Surprisingly, no journalist thought it strange that a "scientific review" would a priori support a political position.
Now, after reading the report, I think that Bjorn Lomborg was wrong: The Stern Review is more alarmist and less competent than even Lomborg suspected.
Posted by: Richard Tol at October 30, 2006 09:48 AM
Question for economists-
Looking over the Stern Report it seems to assume that the costs of mitigation are decoupled from economic growth. That is, irrespective of mitigation costs, it has World GDP growing to $110T in 2050. Am I reading this correctly? Is this a good assumption? Wouldn't climate mitigtation policies have some impact on growth of GDP - positive or negative, but not zero?
Posted by: Roger Pielke, Jr. at October 30, 2006 12:44 PM
Answer from an economist:
Obviously, mitigation would affect GDP growth, and negatively so according to the vast majority of studies.
Vice versa, GDP growth affects mitigation costs. Here, the sign is less clear. Faster growth implies more emissions to be cut, but faster growth also implies more rapid technological progress and faster capital turnover.
I have not studied that part of the Stern Review. But if they assume independence between mitigation costs and GDP growth, they've very wrong.
Posted by: Richard Tol at October 30, 2006 12:59 PM
Lomborg was right?
He was right to dismiss a pretty comprehensive report even before he had read it? I don't consider that a particularly solid evaluation method.
Just because you don't like the press coverage doesn't mean the report itself is without merit.
GDP is a funny thing isn't it? If a hurricane hits New Orleans all the money spent on rebuilding adds to the GDP... Yes, mitigation would affect economic growth, but not by a great amount. Most studies put the cost to the global economy between 1% and 5%. Not a bad number for an insurance policy I would say.
Posted by: Acteon at October 30, 2006 02:43 PM
GDP is a funny thing isn't it? If a hurricane hits New Orleans all the money spent on rebuilding adds to the GDP
You're invoking the Broken Windows Fallacy - see http://en.wikipedia.org/wiki/Parable_of_the_broken_window
Posted by: TangoMan at October 30, 2006 04:03 PM
"That is, irrespective of mitigation costs, it has World GDP growing to $110T in 2050."
Let's see, the median variant for U.N. population in 2050 is 8.9 billion people:
So that's a per-capita GDP of $12,300.
The world GDP in 2005 has been estimated at $61 trillion:
The world population in 2005 was about 6.5 billion:
So the per capita GDP is $9,400.
In other words, the "economists" in the Stern Review estimate a per-capita GDP growth in the 45 years from 2005 to 2050 of only 31 percent.
That's 31 percent growth in 45 years, or far less *1 percent* per year. In fact, that's almost exactly 0.6 percent per year.
If the Stern Review does indeed predict a per-capita GDP growth rate averaging only 0.6 percent per year for the next 45 years, why would anyone bother to pay any attention to anything further they predict? If that is indeed their prediction, they're obviously not even remotely competent.
P.S. My own prediction, based on a population of 8.9 billion in 2050, is for a world GDP of $670 trillion ($75,000 per capita):
Posted by: Mark Bahner at October 30, 2006 06:22 PM
The broken windows fallacy is the claim that damage like Katrina can increase economic welfare by increasing activity. Except in some extreme cases, this is false - the net benefits of extra activity are less than the cost of the initial loss.
What's not controversial is Acteon's point that events like Katrina increase GDP, which is a measure of activity, not welfare.
However, it's all somewhat irrelevant here, since the Stern report is using welfare-based measures. GDP is just a scaling variable.
Posted by: John Quiggin at October 30, 2006 06:41 PM
Richard, can you summarise your substantive objections to the Report?
Posted by: John Quiggin at October 30, 2006 06:45 PM
Sorry... I was to economical with words... I was trying to point out that we should not get to focussed on GDP as it is a tool with limited relevance and usefulness.
Posted by: Acteon at October 31, 2006 03:43 AM
Playing with GDP figures is fun isn't it? Since the damage we do to the Earth's ecosystems by using the atmosphere as a free GHG dump isn't factored into GDP calculations, we can say that pricing GHG emissions dampens GDP growth.
Cutting off our nose to spite our face is a GOOD thing, but refraining is bad, since it slows GDP growth? Using statistics that disguise this cannibalism hamper our ability to discuss the problem forthrightly.
Posted by: TokyoTom at October 31, 2006 04:49 AM
Mark, if your much higher estimates of GDP growth are much better than those used by Stern, what does that tell us about the relative affordability of the measures that the report suggests?
Posted by: TokyoTom at October 31, 2006 05:06 AM
Stern's Chapter 1 deals with climate science (21 pages)and is based largely on the IPCC-TAR (2001) Summary for Policymakers -- but misquotes frequently. Sloppy editing: in one place, Stern refers to the warming in the early nineteenth (sic) century. He gently slides over the now discredited "hockeystick" result, which the IPCC had used to bolster their claim that the 20th century showed "unusual" warmth.
Posted by: S Fred Singer at October 31, 2006 06:36 AM
"Mark, if your much higher estimates of GDP growth are much better than those used by Stern, what does that tell us about the relative affordability of the measures that the report suggests?"
Tom, the real question is not whether my much higher estimates for GDP growth are better than those used by Stern (although the answer is almost certainly, "yes")...the real question is how anyone who would attempt to claim credibility as an economist would predict a worldwide per-capita GDP growth over the next 45 years of 0.6 percent per year?
Barring global thermonuclear/biological war, or a really major asteroid strike, such a prediction is simply laughably low. It doesnít even pass the straight face test. Global per-capita GDP growth over the PAST 45 years has averaged approximately 3-5 times that amount (per Brad DeLong, others have slightly lower estimates):
And there is very solid evidence that the continuing evolution of computers will speed up economic growth (not slow it down).
So why would a group of people who presumably claim economic expertise make such a prediction? Two reasons I can think of are profound dishonesty or incompetence (or some combination of the two). In any case, it renders any recommendations they make in the matter highly suspect.
P.S. Iíll try to address what I see as the additional implications of higher GDP growth rates tonight.
P.P.S. How appropriate to issue a report apparently designed primarily to scare people so near to Halloween! But again, why would anyone who values his or her reputation as an economist do so?
Posted by: Mark Bahner at October 31, 2006 10:29 AM
Per Roger Pielke Jr., the Stern Review has the world GDP at $110 trillion in 2050. Assuming the UN median variant population of 8.9 billion, that produces a per capita GDP of $12,300, and a per capita GDP growth of only 0.6 percent over the next 45 years. That's ridiculously low.
But other than the fact that the ridiculously low prediction shows either profound incompetence or dishonesty, why should we care? Why should we care if the per-capita GDP growth rate will almost certainly be least 2-3 times that high? Or that an even more likely estimate would be 5-10 times that high? Why does it make a difference whether the per-capita GDP in 2050 is $12,300 or 2 or 3 times that high?
Well, almost everyone agrees that it's morally wrong to force the poor to sacrifice for the benefit of the rich. The current world per-capita GDP is $9,400. If in 2050, the per-capita GDP were expected to be $20,000, or $30,000, or $50,000 (or more) most people would say it doesn't make sense for people today to sacrifice for those much richer people in 2050.
Does anyone suppose that might be why the Stern Review chose such a ridiculously low GDP growth rate? Because they knew that otherwise people would think what they were advocating was morally wrong?
Posted by: Mark Bahner at October 31, 2006 06:08 PM
Mark, I note that you didn't answer my question about the relative affordability of mitigation approaches in the light of your higher estimates of GDP.
I also note that what you suggest is an argument to the effect that the present generation never has a responsibility to control the externalities they create; on the contrary, for you the morally better position is contrary approach of passing problems off to wealthier future generations to adapt to (but not to solve, as they can also rationalize not solving the problem by passing it off onto subsequent generations).
I am afraid I don't understand your position on the equities of action. To date, virtually all of the committed AGW has been due to emissions in the now developed world, and reviewers fairly universally report that the greatest negative impacts of AGW will be felt in the developing world. For this reason the Stern report explicitly argues that the developed countries have a moral obligation to seriously reduce their own emissions and to compensate the developing countries for the costs of AGW damages, adaptation and to assist the developing world in developing infrastructure and in meeting any GHG reductions that they are to bear.
It is interesting to hear you say that the Stern report is morally wrong, as it calls for the poor to subsidize the rich. To the contrary, it seems to me that you are saying that the rich countries have no obligations to the poor, despite the fact that the rich have essentially created the problem and the poor are likely to suffer proportionally greater negative effects and are least prepared to grow themselves to a position where they can afford to adapt.
Or am I missing something?
Posted by: TokyoTom at October 31, 2006 08:28 PM
You write, "Mark, I note that you didn't answer my question about the relative affordability of mitigation approaches in the light of your higher estimates of GDP."
Wasnít your question pretty much rhetorical?
But let's run through some actual numbers:
Current (2005) GDP, population, per capita GPD = $61 trillion, 6.5 billion, $9,400 per person.
Stern Review 2050 GDP, population, per capita GPD = $110 trillion, 8.9 billion, $12,300 per person.
My estimate (i.e., an honest and competent estimate) of 2050 GDP, population, and per-capita GDP = $670 trillion, 8.9 billion, $75,000 per person.
Let's assume that addressing global warming to the extent that there will be *no cost* to people from 2050 onward will cost 1 percent of the present (2005) GDP for the next 45 years. The 2005 GDP is approximately $60 trillion, so 1 percent is $600 billion per year, times 45 years, is $27 trillion.
Letís compare that $27 trillion cost to GDP, calculate the cost per person, and calculate the cost per person as a percentage of per-capita GDP:
Current (2005): $27 trillion is 45 percent of GDP, and $4200 per person (which is 45 percent the per-capita GDP).
Stern Review (2050): $27 trillion is 24 percent of GDP, and $3000 per person (which is 24 percent of the per-capita GDP).
Mark Bahner (2050): $27 trillion is 4 percent of the GDP, and $3000 per person (which is 4 percent of the per-capita GDP).
Obviously, to answer your (rhetorical) question, the relative affordability of the $27 trillion cost is much better if the economic growth is better. But do you see no difference in the *morality* of the situation, depending on whether economic growth is what I predict, versus the ridiculously low prediction of the Stern Review?
I donít have time on my lunch hour to address your other comments. Iíll try to do so tonight, but I might not be able to address them until tomorrow.
Posted by: Mark Bahner at November 1, 2006 10:41 AM
You write, "I also note that what you suggest is an argument to the effect that the present generation never has a responsibility to control the externalities they create; on the contrary, for you the morally better position is contrary approach of passing problems off to wealthier future generations to adapt to (but not to solve, as they can also rationalize not solving the problem by passing it off onto subsequent generations)."
No, that's a caricature of my position and my philosophy. As I explained to you great detail previously, the answer to the question, "Is it moral for one generation to leave debts which a later generation must pay?"...the answer HAS to be:
It depends on: 1) Are later generations better off (if not, the answer is clearly "no")? 2) How big is the debt, relative to later generation's ability to pay (if it is huge, the anwewr is probably "no")? 3) Was the debt incurred for frivolous reasons (e.g. to fight WWII, or build a Superconducting Supercollider)?
My attitude--unlike how I perceive your attitude--is that the answers to these questions are necessary to answer the question of whether this generation is moral to leave debts to other generations. And my answers--****in this particular case****--are that:
1) future generations will be almost incomprehensibly better off,
2) the debt will be trivial (to people in the 2050 to 2100 time period), and
3) it is not for a trivial reason (PARTICULARLY for people in China, India, and other developing countries).
It is ONLY because my answers to those three questions are what they are that I think the debt left for future generations is not merely moral, it's trivial.
"I am afraid I don't understand your position on the equities of action. To date, virtually all of the committed AGW has been due to emissions in the now developed world, and reviewers fairly universally report that the greatest negative impacts of AGW will be felt in the developing world."
The absolutely critical words there are "WILL BE felt in the developing world."
The "developing world" of 2070+ will be much richer and better off than even the most developed countries in the world in 2006. (I say. And unlike the Stern Review, I actually have economic and technological science on my side.)
"For this reason the Stern report explicitly argues that the developed countries have a moral obligation to seriously reduce their own emissions..."
I don't agree, because the "developing world" of 2070+ will be will be much richer and better off than the developed countries of 2006.
"...and to compensate the developing countries for the costs of AGW damages,..."
I agree that the developed world should compensate the developing world OF TODAY for any of the costs of AGW damages.
"...and to assist the developing world in developing infrastructure and in meeting any GHG reductions that they are to bear."
I absolutely disagree. The developing world should not "bear" even ONE PENNY of "GHG reductions." I cannot understand why you don't see what to me is the PROFOUND immorality of forcing developing countries to lower their GHG emissions. Do you not agree with me that it's immoral for the poor to sacrifice for the benefit of the rich?
"It is interesting to hear you say that the Stern report is morally wrong, as it calls for the poor to subsidize the rich. To the contrary, it seems to me that you are saying that the rich countries have no obligations to the poor, despite the fact that the rich have essentially created the problem and the poor are likely to suffer proportionally greater negative effects and are least prepared to grow themselves to a position where they can afford to adapt.
Or am I missing something?"
You are indeed missing "something!" You are missing my entire point! I say that EVERY SINGLE PERSON ON EARTH will be a millionaire by 2100:
And I mean that absolutely literally. In fact, (unlike the Stern Review!) I'm actually betting on it:
Posted by: Mark Bahner at November 1, 2006 03:59 PM