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Sir Nicholas Stern’s report on climate change estimated that action to combat globble worming would only cost one per cent of the planet’s economic output. But, as the Spectator’s Fraser Nelson reports, there is a problem:
While conducting the report, Sir Nicholas and his team knew something they even now cannot admit. The United Nations Intergovernmental Panel on Climate Change (IPCC), the recognised world authority on whose work the Stern review was itself based, is preparing its own review on climate change economics. It calculates that the 550 ppm target would cost up to 5 per cent of economic output, five times the loss Stern suggests. I ask Sir Nicholas how he intends to persuade the world that he is right and the IPCC is wrong.
‘The IPCC has not reported yet,’ he says. This is technically true: it will not publish until later this year. But its draft report has been sent to all policymakers, I say. He must have seen it. ‘I think if you wait and see what the report does actually say…’. I produce a leaked copy of the UN draft, and show him the page where it disagrees with him. What’s more, the IPCC declares it has found a ‘high level of agreement and much evidence’.
So when this is published, won’t it blow the Stern review out of the water? He pauses, and stares at the document ...
(Via Pommygranate, now permalinked.)
It calculates that the 550 ppm target would cost up to 5 per cent of economic output, five times the loss Stern suggests.
And this would not be 5% spread out equally. It would be more like 8% for the US and the West and 2% for others. And oh yeah, those counties not tied down by Kyoto would see an increase to their economies as more carbon intensive industries relocate there.
All the while, no discernible benefit will accrue from all this change.
Posted by wronwright on 2007 01 24 at 12:50 PM • permalinkIt was never intended to do so, wronwright. Kyoto was an international wealth redistribution scheme from the get-go. A UN income tax on success.
Posted by Spiny Norman on 2007 01 24 at 01:31 PM • permalinkIt would be more like 8% for the US and the West and 2% for others.
Keep in mind how much non-Western countries now depend on trade with the West. Their reduction likely wouldn’t remain at 2% for long.
At any rate, on a previous Stern thread I did a back-of-the-envelope calculation of the implied rate of return of Stern’s proposed level of
wastageeco-spending and the alleged economic growth resulting from it, and it came out as a ridiculous 50% return on investment. I wonder how the numbers would work out now with 5% of GDP instead of 1%. (Bwahahahaha!)The IPCC reminds me of the ITU, the International Telecommunications Union. It was put in place to ensure interoperability of phone systems. It ended up creating a series of one way taxes on communications, the net effect of which was to transfer billions of dollars from western economies to non western economies. Technology has basically destroyed this tax system, which is why international calling has gotten so cheap. It was always a tax that protected providers were happy to pay in return for the govt keeping out competition.
Plenty about Stern and global warming here:
http://meteo.lcd.lu/globalwarming/
(Via Small Dead Animals.)Posted by andycanuck on 2007 01 24 at 07:53 PM • permalink#9 Exactly Spiney. And, I am ashamed to say, dreamed up by a canadian -
Posted by Wimpy Canadian on 2007 01 24 at 08:23 PM • permalink#16 contd. Maurice Strong famous for saying that the problem was to be resolved by ending western industrial society. Another link
Currently hiding in China.
Posted by Wimpy Canadian on 2007 01 24 at 08:28 PM • permalinkMy understanding is that the IPCC will also reduce some key prediction such as temperature rise and sea level rise.
Even then, the IPCC’s predictions are completely flawed. In order to inflate emissions estimates, they made some completely unrealistic assumptions about economic growth.
For example, economic heavywieghts such as North Korea, Libya, Algeria, Tunisia and Saudi Arabia are assumed to have a higher per capita income than the US in 2100.
If the IPCC’s predictions are this flawed, what does it say about Stern’s?
Posted by Art Vandelay on 2007 01 24 at 09:15 PM • permalink#18 Art
Definitely the IPCC predictions are very bullish. Once of the things that made me particularly cynical about them was that for the previous policymakers summary they did hundreds of simulations of various temperature rise outcomes, the vast majority of which showed only moderate warming, but chose to publicly emphasise an outlier result showing the largest increase (which had absurdly generous assumptions of emissions and gdp growth). That and their ad hominem and defensive reaction to Ian Castles pointed criticisms of the gdp assumptions that you alluded to in your comment convinced me to be very sceptical.
But as i tell my globally warmed friends, when you create an international bureacracy call the Intergovenmental Panel on Climate Change odds are they’re not going to find that no climate change is occurring.
But we’ll all be dead by then, Bonmot. Won’t we?
(BTW a Cold Weather Alert to get the homeless off the streets has been issued in Toronto tonight that was unseasonably warm just two weeks ago.)Posted by andycanuck on 2007 01 25 at 12:57 AM • permalinkBTW a Cold Weather Alert to get the homeless off the streets has been issued in Toronto
Yeah, a real bummer.
Hang on a sec, I just gotta go and turn the aircon down a bit - hot here and the humidity you could cut with a knife.
Stuffed if I know how you can live in that wretched climate.
Admittedly, we have melanomas here, but hey, you gotta die of somethin’.....At a workplace that shall remain nameless, certain unnamed parties have done an analysis of Stern’s report (God he took up a lot of space to say very little. A cyncial person would say he did it to stop all but the most dedicated to discover his methodology).
Anyway, a quick summary from my sources:
Stern was careful to choose his examples of the impact of CC to those that are most pessimistic;
he assumes away incremental adaptation to make future economic impacts as big as possible;
he did not admit to uncertainy in the base data; and worst of the worst
the bugger did not use standard economic methodology to do his analysis.The last is the reason why the IPCC analysis is so different to Stern. To try and work out what the cost of something is in the future, and whether something should be done now, economists discount the future value to measure it in today’s dollars. Usually this takes account of inflation, productivity changes, etc. or average return on investment. A typical example of a discount rate could be seven percent. Stern used a discount rate of one percent. He spends a lot of time in an appendix trying to justify this shonky approach, but it is very unconvincing.
Now, I have no idea if what the IPCC is doing is any better, but I think they are a bunch of self interested catastrophists, and I suspect they are prone to be a bit ‘expansive’ of the cost of future impacts before they even start discounting to present value.
Methodology is important, because if the present value of the impact is negligible, the case is made to not do anything now, as a better return on investment would be made by not doing anything until later. This importance is compounded due to the uncertainty that surrounds climate modelling and long term forecasts.
Bottom line, wait for better information, and act when it is financially appropriate.
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Isn’t the Stern Report at the stage where one can no longer “blow it out of the water”? One can only plink at the wreckage flotsam with small arms.