Tuesday, 4 December 2007

Climate Change, Ethics, And The Economics Of The Global Deal

A Lecture Organised By The Royal Economic Society

Logan Hall, Institute of Education, London, UK

30th November 2007


SIR NICHOLAS STERN, London School of Economics

(Sir Nicholas will be ennobled on 11th December 2007, after which he will be known as Lord Stern).

I was invited to this lecture as a member of the Royal Economic Society. I accepted the invitation because I thought that it would be interesting to listen to one of the more influential thinkers on the subject of climate change. The Stern Review of Climate Change has become something of a landmark in terms of policy development in Europe, but has hardly registered as a policy document in North America. I relished the prospect of finding out why this might be so.

Sir Nicholas delivered a fairly standard economic review of climate change. It is an externality that stands out from other externalities in that it is global in scope, it has implications in a time frame much longer than most planning horizons allow for, the causes and effects of climate change are still uncertain, and the consequences of climate change are potentially large and potentially irreversible.

Whilst I had to admire the technical aspects of the presentation, the logic of the model, and the smooth way in which it was presented, I was unconvinced by the argument. I wasn’t convinced by the suggested use of the price mechanism to correct a market failure. I cannot foresee the US Government adopting Pigovian taxes on fuel consumption in the near future. And I cannot foresee multi-lateral agreement on the reduction of carbon emissions prior to COP 15 in Copenhagen in 2009. All in all, I came away from the presentation rather down in the dumps. Perhaps we ought to start preparing for a world in which there are 750 ppm of CO2e?

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