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Climate Change

That is an issue of cost-benefit analysis. Clearly, one can never be absolutely sure when one tries to mitigate a risk, but one has to apply a probability, and the balance of probabilities—51 per cent.—is clearly not enough to justify a complete restructuring of our economy. What percentage should be applied is one of the issues that we need to examine carefully. People often invoke the precautionary principle. If that means anything, it should lead us to be wary of embarking on a policy unless we are clear that it is right. The risk of making a mistake, prejudicing global growth and consigning a substantial proportion of the world to continued poverty, not to mention the risk of hitting hardest the poorest in our own community—they are the people who pay for this—could be even greater than the risks of global warming. In other words, the precautionary principle is double edged. This is only another way of addressing the sixth condition to which I referred. The key question is how one weighs the benefits and costs of mitigation policies to remove carbon from the atmosphere against policies to adapt to warming once it has happened. By far the lengthiest piece of work on the subject has been produced by Professor Stern, the former chief economist to the Treasury. He concludes that the damage caused by unchecked global warming would substantially outweigh the costs of reducing carbon emissions. The key question is: is he right? Rather than going into too much detail, perhaps it would help if I gave the considered view of some of the world’s leading environmental and welfare economists on the subject. Professor Richard Tol of Carnegie Mellon university, who is a top environmental economist, said:"““If a student of mine were to hand in this report””—" the Stern report—"““as a Masters thesis, perhaps, if I were in a good mood, I would give him a ‘D’ for diligence; but more likely, I would give him an ‘F’ for fail.””" Professor Dr. William Nordhaus of Yale university, arguably the world’s leading environmental economist, has described the policy prescriptions of the Stern review as ““completely absurd””. Professor Dasgupta points out that the implications of Stern’s logic are ““patently absurd””. These people are queuing up. The list is so long that I do not have time to read out all the names, but what about a few more from the home team? There is Professor Wilfred Beckerman, one of Britain’s and the world’s leading environmental economists of the past 30 years and a former economic adviser to earlier Labour Governments. There is Sir Ian Byatt, the former director general of Ofwat; Professor David Henderson, the former chief economist of the OECD; Professor Alan Peacock; Lord Skidelsky—the list is virtually endless. To cut a long story short, they all say that Nick Stern has got it wrong, that he has overestimated the damage relating to global warming, and that he has underestimated the costs of decarbonising the economy. Perhaps, though, we should not be as harsh on the Stern review as some of those academic colleagues. For a start, Stern does have some equally eminent supporters. More importantly, he has done us a service by setting out a framework for thinking about how to address this hugely complicated question.