Lord Stern, the world’s most authoritative climate economist, has reiterated his call for urgent and drastic emissions reductions, warning that the financial damage caused by climate change will be considerable greater than current models predict.
In new research Nicholas Stern – author of the 2006 Stern Review examining the financial implications of global warming – reviewed current climate change economic modelling, finding them woefully inadequate in light of the most recent research on climate change.
He warned that they “grossly underestimate” the scale of the threat.
Even the most recent reports from the Intergovernmental Panel on Climate Change (IPCC) – the most authoritative analysis of climate research to date – are significantly flawed, according to Stern.
It is extremely important to understand the severe limitations of standard economic models, such as those citied in the IPCC report, which have made assumption that simply do not reflect current knowledge about climate change and its potential impacts on the economy.
I hope our paper will prompt other economists to strive for much better models that will help policy-makers and the public to recognise the immensity of the potential risks of unmanaged climate change. Models that assume that catastrophic damages are not possible fail to take account of magnitude of the issues and the implications of the science.
The paper (pdf), published in the Economic Journal and co-authored by Dr Simon Dietz, associate professor in environmental policy at LSE, warned that living standards could start to decline as early as the end of this century unless emissions growth is kept in check.
Using the latest research to inform economic models further strengthens the case for stringent climate action, it warns.
The latest warning from Stern comes as new figures show that the world could be heading in the wrong direction, as coal has reached its highest market share of global energy consumption for more than forty years.
With its high level of carbon emissions, coal is a prime cause of climate change.
Its use for power generation and other purposes grew by 3% in 2013 – faster than any other fossil fuels – while its share of the market surpassed the 30% mark for the first time since 1970.
The latest figures come from the BP Statistical Review – arguably the richest and most detailed source of global energy data – which also showed that oil remains the world’s leading fuel – making up 32.9% of global energy consumption.
In more positive news, the report also showed that low carbon energy sources also saw growth last year.
All renewables – including transport fuels – accounted for a record 2.7% of the global energy consumption, up from just 0.8% the previous year.
Meanwhile hydroelectric power accounted for 6.7% of consumption (growing 2.9%) and nuclear output now accounts for 4.4% of consumption seeing its first increase (of 0.9%) since 2010.
But while renewables may have seen a record year in 2013, their percentage of consumption is still dwarfed by the huge amounts of fossil fuels being burnt across the world.
Perhaps a sign of this continued trend was the fact that the BP review failed to even mention climate change, while greenhouse gas emissions were mentioned just twice, confirming that the “growth in global CO2 emissions from energy use also accelerated in 2013”.
But with warnings that climate impacts, and the financial implications of them, could be greater than currently thought, the calls for a global price on carbon are growing.
In his report, Lord Stern called for a price of up to $103 a tonne from as early as next year, rising to as much as $260 per tonne by 2035.
His words echo those of Christine Lagarde, head of the International Monetary Fund, who last week also reiterated her call for governments and central bankers to deliver new carbon pricing mechanisms before an international climate agreement is agreed in Paris next year.