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Many economic assessments of the climate crisis “grossly undervalue the lives of young people and future generations”, Prof Nicholas Stern warned on Tuesday, before the Cop26 climate summitGlasgow
Economists have failed to take account of the “immense risks and potential loss of life” that could occur as a result of the climate crisis, he said, as well as badly underestimating the speed at which the costs of clean technologies, such as solar and wind energy, have fallen.
Stern said the economics profession had also misunderstood the basics of “discounting”, the way in which economic models value future assets and lives compared with their value today. “It means economists have grossly undervalued the lives of young people and future generations who are most at threat from the devastating impacts of climate change,” he said. “Discounting has been applied in such a way that it is effectively discrimination by date of birth.”
The school strike of Greta Thunberg sparked youth protests all over the globe. These protests, along with rising extreme events, have been a key driver in increasing demand for action in recent decades. Recent research has shown that the majority of people born today will not be able to read or write. suffer many times more extreme heatwavesa lot more than their grandparents.
However, Stern said: “The move to net zero [emissions] can be the great driver of a new form of growth – the growth story of the 21st century. This growth will be more resource-efficient, more productive, and healthier, and will offer greater protection to our biodiversity.”
Renewable energy costs have fallen dramatically and electric cars are moving to scale, he said, while 75% of global emissions are now covered by national commitments to net zero emissions by the middle part of century, though “some of those commitments are more credible than others”.
Stern’s remarks are based on a paper to be published in the Economic Journal of the Royal Economic SocietyIt was held to commemorate the 15th Anniversary of the Stern review of the economics of climate crisis. It concluded that inaction on climate was more costly than action, and that the climate crisis was the most significant market failure in history.
Carbon emissions have risen 20% since the publication of the report. Stern was also critical of much economic analysis that has been used to inform policymakers. “Cavalier treatment of risk, and the missing of the very rapid technical progress, means the models have been profoundly misleading,” he said. He said that the theory of discounting was not based on its ethical foundations or allowed for future generations to be poorer.
Political action has been slow since 2006, Stern said, because of the persistence of the “damaging” idea that climate action cuts economic growth and also because of the global financial crisis, which diverted attention and cut middle-class incomes, making politics more “fractious”.
“The economic question now is: how do we manage the radical transformation we have to make in the world economy in the next 20 or 30 years?” he said. “How do we promote the 2% or 3% extra investment we’ll need – which is a very valuable investment, not a cost.”
Stern stated that there are many policies needed, including regulation, product standardization, carbon pricing, regulation, product quality, investment in research, and reform of the capital markets. It is crucial that low-cost, large-scale finance be available to fund the low-carbon transition. This is especially true for developing countries.
Stern was directly involved at the negotiation of climate finance promises from rich nations, amounting to $100 billion per year. This has not been delivered, but it is a crucial goal of Cop26. On Monday, developed countries released a delivery planThe goal was to mobilize the funding. It was nearly achieved in 2022, but it was not yet met. Nick Mabey at the E3G thinktank said it was “just about credible”.
Some criticised the Stern review for exaggerating climate crisis risks. “The idea that I was alarmist is just laughable in retrospect. We underestimated the dangers. The costs of inaction were very worrying 15 years ago – they are immensely worrying now.”
