Queensland declared a natural disaster Jan. 12, 2011 in Brisbane, Australia. Credit: Bigstock

By Carey L. Biron
WASHINGTON, Sep 24 2013 (IPS)

More than a half-dozen governments on Tuesday launched a yearlong collaborative investigation into the economic benefits of taking broad action to combat global climate action.

The nine-million-dollar initiative, dubbed the New Climate Economy project, is being spearheaded by a commission chaired by former Mexican president Felipe Calderon and is backed by the governments of Colombia, Ethiopia, Indonesia, Korea, Norway, Sweden and the United Kingdom.

The research will be carried out by institutes located in most of these countries and will culminate in a report to be published in September 2014, just ahead of a major scheduled United Nations summit on climate.

In addition to an oversight panel made up of former heads of state and finance ministers, the Global Commission on the Economy and Climate is co-chaired by Nicholas Stern, the British economist who published a touchstone climate change review for the U.K. government in 2006. For this reason, the project is being seen as a direct follow-up to Stern’s previous work.

“At a time when governments throughout the world are struggling to boost growth, increase access to energy, and improve food security, it is essential that the full costs and benefits of climate policies are more clearly understood,” Stern said Tuesday, as the new project was launched on the sidelines of the U.N. General Assembly in New York.  “It cannot be a case of either achieving growth or tackling global warming. It must be both.”

Since the publication of his 2006 report, Stern has been credited with having had perhaps the most significant impact on the international public understanding of the economic threats posed by climate change. He will now formally review the New Climate Economy report.

“There is some sense that this new report will be Stern 2.0, but in fact the focus looks set to be somewhat different,” Michele de Nevers, a senior programme associate at the Centre for Global Development (CGD), a Washington think tank, told IPS.

“The Stern Review really focused on the costs of climate change, trying to make the point that the costs of halting or reversing climate change was relatively small in the global context. This new review, on the other hand, wants to focus on the benefits of climate action.”

Such a focus, she notes, could turn the conventional discussion on its head. “The global conversation needs to look at not just the costs,” she says, “but also the benefits that would accrue from climate action, in terms of economics, health and environment.”

Question of implementation

In developing and developed countries alike, a primary stumbling block in international climate discussions remains the amount of money both adaptation and mitigation efforts will require. The new United Nations-overseen Green Climate Fund, for instance, is aiming to raise 100 billion dollars a year by 2020 from industrialised countries, but even the first year’s pot of money has been slow to come together.

Similar debates are happening at national and community levels throughout the world, as well, as the impacts of growing weather extremes are becoming better understood. For the moment, much of this discussion continues to revolve around the sometimes staggering estimated costs of adaptation efforts and converting energy systems to be less carbon-intensive, and around the prospect that these efforts could raise significantly business operating costs.

In part for this reason, some are cautious in welcoming the new review, wondering whether the commission’s composition will be able to offer the innovative impetus required to guide the global climate discussion.

“A fresh focus on the economic consequences of climate change is very much needed, but this looks a bit like an exercise in rounding up the usual suspects – there’s significant overlap with previous … panels asking the same questions, which produced long reports that weren’t implemented thanks to the reluctance of industrialised countries to contribute their fair share,” Oscar Reyes, an associate fellow with the Climate Policy Programme at the Institute for Policy Studies, a Washington think tank, told IPS.

“With bank bailouts leading climate funds to dry up, we unfortunately now see those same industrialised countries pushing for a climate finance system that’s even more dependent on the financial sector. This won’t change unless governments start to rethink their economic policies in light of the urgent climate challenge.”

Still, mounting research is making it increasingly difficult for lawmakers to ignore the prospect that climate inaction could ultimately be more expensive than policy overhauls.

New research from China, for instance, suggests that a small carbon tax would have a substantive impact on greenhouse gas emissions even as it cuts down on the air pollution that has substantially driven up health costs in that country.

Likewise, the official U.S. government auditor this year added climate change to the list of issues that pose the greatest financial risk to the government and country – and warned that Washington is markedly unprepared to deal with the scope of the problem.

The Government Accountability Office reported that disaster declarations in the United States increased to a record 98 in 2011, compared with 65 in 2004, requiring a total 80 billion dollars during that period. Further, this figure was nearly equalled by the single request, late last year, for more than 60 billion dollars in response to Superstorm Sandy, the hurricane that ravaged much of the country’s northeast.

“The launching of this new commission is extremely timely, in part because this country and other countries have finally started coming to terms with the increase in extreme weather events,” Nathaniel Keohane, vice-president of international climate at the Environmental Defence Fund, told IPS after attending the commission’s formal launch.

“That makes this kind of deep dive into the positive stories around the economies of climate change very timely. We need to move away from the old debate about what this will cost to recognise not only the price of inaction but also the opportunities that climate action will have for economies, jobs and innovation.”

Environmentalists and policy advocates say they will now be looking forward to the commission’s recommendations, as well as the potential impact the initiative’s report could have on the global negotiations to agree on a new international agreement on climate action, due the following year.

“One would hope that the report could put new energy and momentum into those talks,” CGD’s de Nevers says. “The process towards 2015 is for governments to identify their country-specific goals, but understanding that there are other economic, health and environmental benefits in play could put momentum toward being a bit more ambitious.”

A confluence of factors could make 2013 the most fruitful opportunity in years – and for years – for potentially major action on climate change, according to a leading voice on climate change policy, the British economist Nicholas Stern.

Nicholas Stern has been credited with having had perhaps the most significant impact on the international public understanding of the threats posed by climate change. Credit: IMF

“This combination of political circumstances in 2013 is as good as it’s likely to get,” Stern said Tuesday in a major address at the International Monetary Fund (IMF) headquarters here, warning that failures of political will had made action on climate change progress occur “far too slowly”.

Still, he cited new or renewed administrations in the United States and China that won’t have to face further elections, alongside strong pledges by leaders in both Washington and Beijing. Stern also noted new commitments by the IMF, World Bank and Organisation for Economic Cooperation and Development (OECD), continued support from European leaders, and important movement among developing countries.

“Look at plans in Ethiopia, Mexico, South Africa – these countries have leaderships taking this issue very seriously,” he said. “So 2013 is the best possible year to try to redouble efforts to create political will that hitherto has been much too weak … [but] we need to do much better at knowing what others are doing and to collaborate.”

Stern, the author of a major 2006 report for the U.K. government on the economic impacts of climate change, has been credited with having had perhaps the most significant impact on the international public understanding of the threats posed by climate change. Yet at the IMF on Tuesday, he warned that his landmark study “badly underestimated” these risks.

Warning that the world now looks on track to raise the global temperature by as much as five to seven degrees Celsius by the end of this century – which he said would result in a “radical transformation” – Stern noted that his previous forecasting “should have been much stronger”.

“Today, emissions are at the top of or even above what we thought about then, while some effects are coming through faster,” he said.

“We didn’t say enough about the interactions of climate ecosystems. Further, regarding those elements missing from the scientific models, we now recognise those are even more important than we thought at the time … a lot of things aren’t in the models simply because scientists don’t fully understand them yet.”

Modelling human welfare

In fact, Stern puts down these underestimates to an inherent inability of the types of models that both scientists and economists still use in forecasting global weather systems changes.

“The failure … is that lasting destruction isn’t a part of these models – they’re ahistorical in terms of economic impact,” Stern, a former U.K. chief economist for the World Bank, said.

“Following the Pakistan floods in 2007, some parts of the country saw development pushed back by 20 years. But if these types of events were to happen, say, every 10 years, the current models don’t allow us to speak about this.”

Stern called for a “new generation” of modelling that can take into consideration the impact of climate change on human lives and human welfare.

“If we had to describe the destructive events of the last century – World War I, World War II, the Holocaust – we wouldn’t do it in terms of aggregate gross domestic product,” he said. “Instead, we have to learn to discuss risk to describe, as well as we can, all dimensions, including loss of life. What would we be ready to pay to reduce this risk?”

Stern was particularly disparaging about three aspects of the current global discussion on climate change. First and foremost, he warned against the common tendency, particularly among policymakers, to view the discussion as one of climate action versus jobs and economic growth.

Second, he noted the danger of decoupling issues of development, mitigation and adaptation to climate change, stating these three always need to be considered “bound up” together.

Third, he pointed out the “acute contradiction” of believing simultaneously that current pricing of oil and gas – widely seen as far too low – can coexist with a goal of keeping the planet’s temperature rise to just 2 degrees Celsius this century.

Single biggest threat

Stern’s appearance at the IMF comes as both the fund and its sister institution, the World Bank, are taking significant new steps into the global climate discussion. He called both lenders “absolutely fundamental to this whole story”.

The economist was introduced on Tuesday by IMF managing director Christine Lagarde, and spoke just hours after World Bank President Jim Kim gave a major address here on the bank’s new climate focus for coming decades.

“It’s not odd or off point for the World Bank and the IMF to be talking about climate change as the single biggest long-term threat to economic growth,” Rachel Kyte, the bank’s vice-president for sustainable development, said Tuesday, speaking alongside Stern.

“If we have a mission that is aimed at speeding up the rate at which we end poverty, building more inclusive societies through shared prosperity, then climate change is the rug that will get pulled out from beneath all of our clients. And it will be pulled unevenly, with the poor and vulnerable suffering the most.”

While many are applauding the new climate focus by both of these institutions, some are expressing concerns about a current lack of policy harmonisation. On Wednesday, 55 civil society organisations from 20 countries sent an open letter to President Kim, urging the World Bank to stop funding fossil fuel projects unless they are specifically aimed at increasing energy access for the very poor.

“Nicholas Stern puts a significant emphasis on getting the price of carbon right, and clearly bank officials do understand this,” Janet Redman, director of the Sustainable Energy and Economy Network at the Institute for Policy Studies, a Washington think tank, told IPS.

“Yet there’s a sense that the poorest of the poor still need dirty fuels to facilitate energy access. In fact, there’s been a lot of work, including by the bank, showing that burning fossil fuels not only doesn’t increase energy access for the poorest of the poor, but actually increases poverty.”

In response, the bank’s Kyte told Bloomberg News Wednesday that her institution’s fossil fuel-related lending last year amounted to around 19 percent of total energy funding, aimed at ensuring that poor countries can deal with everyday needs. She also said that, over the past decade, the bank has doubled its investments in renewables.