The climate crisis will destroy our economies – we learned this 20 years ago. When will we act? | Fiona Harvey — SkimNews
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- Nicholas Stern published The Economics of Climate Change 20 years ago this week — 700 pages of graphs and data — reaching three then-radical conclusions: the cost of climate inaction exceeds the cost of action, climate change is a market failure, and economic growth is compatible with cutting greenhouse gas emissions.
- William Nordhaus, the previous standard for climate economics, urged governments in the early 1990s to budget for “moderate” warming of 3C-4C above preindustrial levels, reasoning that below that the cost of cutting emissions outweighed climate damage — a calculation built on discounting future losses and lives that Stern rejected as assigning future generations less worth than the present.
- Nordhaus published a 2018 paper claiming 3C of heating would cost only 2.1% of global GDP and 6C just 8.5%, and won the Nobel prize that year with his climate work prominent in the citation and prize lecture, while climate scientists have indicated that at 6C widespread famine could leave billions of people suboptimally productive in economic terms.
- The Economics of Climate Change has held up over the two decades since publication, with Stern underestimating the rapidity of heating and the scale of economic consequences while overestimating the cost of renewable energy.
- Stern's framework gave governments a route to justify bold climate strategies to investors, aid donors and bond markets, and gave opponents of laggard administrations a line of attack at the ballot box and, increasingly, in court.
- Traditional growth models built on Nordhaus's work are still taught in hundreds of universities, and sunny GDP-loss estimates remain in use among governments, businesses and international institutions even as record temperatures and a supercharged El Niño threaten trillions of dollars in damage and insurers allegedly massage climate risk out of their figures.
- Biodiversity's collapse is a key economic and national-security threat that Stern says he would now put at the centre of a rewritten review; the results of the past 20 years, he writes, are governments refusing to act, markets over-valuing fossil fuel companies and investors punishing businesses that prepare for a low-carbon world.
Why it matters: Stern gave governments a way to justify climate strategies to investors, aid donors and bond markets, yet the GDP framing pricing 3C warming at just 2.1% and 6C at 8.5% still circulates in hundreds of universities and among governments, businesses and international institutions. Where that framing prevails, markets over-value fossil fuel companies and investors punish firms preparing for a low-carbon world.
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