Sir Nicholas Stern gave a lecture in Oxford tonight about the government’s economics and climate change review. The review started last summer/autumn and he billed the talk as a chance to hear some of the early thoughts from the inquiry as it begins to frame its investigation.
In some ways, it was quite promising. From the outset, he emphasised that there is no doubt that climate change is a problem that must be addressed and that science has an on-going role to play in informing any economic response (e.g. how might a particular climatic change affect future growth forecasts and hence mitigation strategies?). It was noted that climate change will have to be dealt with as a collective action issue, not as an externality problem (e.g. like many traditional forms of pollution), and that persuasion has a major role to play alongside instruments and their supporting institutions (in other words, enlisting governments to climate change action will require an appeal to their self-interest).
This is clearly all sensible stuff and should set the foundation for a competent review of the economics of climate change – as the name says! However the talk started with the following quote:
“Economics should be at the heart of any serious discussion about how to proceed [on climate change]“
Certainly economics is a significant part of any discussion about climate change but as the question and answer session went on, it became clear that the assumptions underlying such an economic analysis were not really on the table. Stern did say that the problem shouldn’t be considered as “a horse race” between economics and other disciplines but, for example, when a question was asked about the ethical considerations of making changes at home or making cheaper changes abroad, there was no hesitation in the response: the cheapest option wins (cue snickering from the economics department audience that anyone could countenance another response). Furthermore when a brilliant question was asked, hinting that the review was asking the wrong questions – i.e. can economics find a solution if the problem extends beyond the economic system? – there was a vague, don’t-worry-about-it answer.
There’s no doubt that the Stern Review will provide some excellent suggestions on how climate change might be dealt with, in language that will please the Cabinet Office and Treasury (who are sponsoring the report). However the feeling one gets from the presentation was that, intentionally or not, the economics review is likely to be too technical and that by trying to find the right mechanisms and institutions, more serious questions about whether the current system can deliver at all are being neglected.
For more information, there is a pdf available from the Review’s website outlining the key issues the economics of climate change. The final report is due in Autumn 2006.
