Climate change – The Economic costs of doing nothing.

A report by Sir Nicholas Stern (former chief economist at the world bank) is being issued tomorrow about the economic costs of climate change. In the report Sir Stern paints a bleak picture of what will happen if we do nothing to tackle climate change in economic terms. However we can do something to protect the future of the world economy. Huge amounts of money will have to be spent on tackling climate change.

The points that have leaked from the report so far are as follows:

• Emissions would need to by cut by 3 quarters of GDP by 2050, to stabilize carbon levels to 500-550 parts per million compared to todays level which is around 430 parts per million.

• The Power sector will need to be decarbonized by 60% to 70%.

• Deforestation would have to be stopped as it causes 18% of global emissions.

• Transport emissions will also need to be cut by a large amount.

• Around 1% of global GDP by 2050 will have to be spent to pay for these changes.

• Growth will be hit by spending 1% of GDP on tackling climate change.

• If we carry on as business per usual it would lead to a loss of up to 5% of global per capita consumption, which we will not recover from.

• If we do nothing at all to tackle climate change then we could see a reduction of consumption per head of up to 20%.

Stern says that if we spend 1% of GDP tackling climate change then we could be richer by 20% :- “Stern says that if you take the present value (the value in today's money) of the benefits over the coming years of taking action to stabilize greenhouse gases by 2050, then deduct the costs, you end up with a "profit" of $2.5 trillion (£1.32 trillion). “ There are two models through which emission cuts can be obtained by:

1. Taxation

2. Rationing the amount of carbon that business and individuals can make and create a carbon trading market where by companies can sell off excess carbon to other companies.

Governments will have to change behavioral patterns through regulation on things like energy efficiency in buildings etc. Though the poorer nations will suffer more than the developed world which is why richer nations should take on the lions share of cutting emissions, which would be around 60% to 80%. It is a moral obligation that we as people of developed nations have to take on. As we have caused most of the carbon emissions that have lead to climate change.

So there is now an economic reason to tackle Climate change. It will cause a lot of short term pain but the benefits outweigh the pain.

Source: BBC News website. Note: This may not make a whole lot of sense, as it has been a long time since i've had to deal with units of GDP (like 10 years).

Here is the BBC's guide to climate change.