The Stern Report is now out and as usual with these sorts of things we’re going to have the most almighty cat fights about what it all means. A number of observations:
1) The report itself, although not much of the commentary upon it, gives a timescale of ‘centuries to a millenium’ for the melting of the Greenland and Antarctic ice caps, if that indeed happens at all. No, despite what the papers seem to say, no one is predicting sea level rises of 7 metres in only 94 years time.
2) In order to make mitigation now work financially instead of adaptation later it is necessary to work on the concept of discount rates. The report insists that we should use very low ones with the effect that such mitigating spending now looks better.
3) Quite rightly (to my mind, of course) the point is made that the poor need to be encouraged, even aided, to become richer so that they will be more able to make whatever adaptations are necessary. This would seem to indicate once again that we should abandon our own trade restrictions: nothing helps the poor more than buying the things they make. Free Trade for Gaia perhaps?
There’s one part, where they do their own modelling, that I think (again, please note, this is my opinion) is an horrendous error, so bad that I think it discredits everything else. The entire logic behind the call to action runs like this: If we don’t change our ways now then people in the future will be poorer than they could have been if we did change our ways. As long as the costs to us are less than the increased income in the future from our doing so, then it is a moral imperative that we should indeed change.
However, the model of the future that is used to calculate said future incomes and costs is the ‘A2′ model from the Special Report on Emissions Scenarios (SRES), the basis of the IPCC report. (Page 61, chapter three of the Stern Report.) This assumes a medium high emissions scenario, a population of 15 billion in 2100 (!!) and a definite slowing of globalization so that we maintain a series of regional economies with little diffusion of technology. This is referred to as the business as usual (BAU) scenario.
However, that is something of a misunderstanding of the SRES scenarios. Each scenario has an equal probability, there is no such thing as ‘this is what will happen unless we do something’. There are other families of scenarios, like the A1, B1 and B2 ones. The A1 family, for example, is based upon the international movement of people, ideas and technology and a strong commitment to market-based solutions. It’s worth noting that this produces a world, in aggregate, twice as rich as the A2 one used by the Stern Report and given the lower population, one four times as rich per head of population.
So if indeed it is true that we have a moral duty to ensure that our descendants are as rich as possible (which is, after all, the report’s justification for mitigation now) then don’t we also have one to push the world in the A1 direction, not the A2? More globalization for example? That would have a much greater effect on their standards of living than any of the mitigation that the report proposes. Missing this point means that I’m rather less than impressed with the rest of the report.
(Please note that all SRES scenarios assume no mitigation attempts.)
One final small joy though is the way that Pigou and Pigouvian taxes are lauded, along with a calculation of the costs of a tonne of CO2 emissions: $85. If we are indeed to tax the externalities of CO2 then it is easy enough to calculate that the correct Pigovian tax on a litre of petrol is about ten pence. As it is currently taxed at some fifty pence look out for an interesting speech by Gordon Brown soon: fuel duty should, if he accepts the report, be coming down.
From Adam Smith Institute
Tags: Libertarian, Politics, Liberty, Freedom
