Back in the autumn of 2006, Sir Nicholas Stern published his report, The Economics of Climate Change. This was supposed to be an authoritative assessment of global warming from an economic perspective.
British Prime Minister Tony Blair declared:
“The consequences for our planet are literally disastrous … without radical international measures to reduce carbon emissions within the next 10 to 15 years.”
The author was even more hysterical:
“If we don't act, the overall costs and risks of climate change will be equivalent to losing at least five per cent of global GDP each year, now and for ever.”
“If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20 per cent of GDP or more… Our actions now and over the coming decades could create risks … on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century.”
Tony Blair’s reputation for integrity and credibility had taken a battering since his “dodgy dossier” which persuaded the Government to authorise the invasion of Iraq in 2003. Events since October 2006 merely confirm that if the Prime Minister is prepared to go to such lengths to convince people about something then it almost certainly isn’t true.
Now that Stern’s peers have had the time to digest his 700-page contribution to the debate on global warming, they are queuing up to take potshots at his report.
First up is Professor William Nordhaus who is the Sterling Professor of Economics at the Cowles Foundation, Yale University. Nordhaus was also a member of the President's Council of Economic Advisers between 1977 and 1979. His teaching fields are Macroeconomics and Environmental Economics.
Quite simply, the man is an expert in his field of study and highly respected as such. It is highly unlikely Sir Nicholas would disagree with that appraisal as he copied extensively from Nordhaus’ works when compiling his own report.
What concerns the professor is Stern reported his projections beyond the year 2100 as completely accurate even though the author clearly stated they were “particularly unreliable”.
At a stroke, this means many of the figures that Stern built his report around are nothing more than wild guesses, albeit by an extremely knowledgeable forecaster.
Next, we have Professor Richard Tol who is the Michael Otto Professor of Sustainability and Global Change, Departments of GeoSciences and Economics, and Director, Research Unit on Sustainability and Global Change, Centre for Marine and Climate Research, Hamburg University, Germany; a Principal Researcher, Institute for Environmental Studies, Vrije Universiteit, Amsterdam, the Netherlands; and an Adjunct Professor, Center for Integrated Study of the Human Dimensions of Global Change, Department of Engineering and Public Policy, Carnegie Mellon University.
As his biography states:
He is known for his work on impacts of, and adaptation to climate change. He developed the Climate Framework for Uncertainty, Negotiation and Distribution, an integrated assessment model for climate change. He is a board member of the Centre for Marine and Climate Research and of the International Max Planck Research Schools of Earth Systems Modelling and Maritime Affairs, all at Hamburg University. He participates in the model comparison exercises of the Energy Modeling Forum of Stanford University. He is an editor for Energy Economics and an associate editor for Environmental and Resource Economics. He is advisor and referee of national and international policy and research. He is an author (contributing, lead, principal and convening) of Working Groups I, II and III of the Intergovernmental Panel on Climate Change. He is an author and editor of the UNEP Handbook on Methods for Climate Change Impact Assessment and Adaptation Strategies. He is actively involved in the European Climate Forum and the European Forum on Integrated Environmental Assessment.
In other words, the man knows his stuff. And what did he have to say about Sir Nicholas’ report?
The report is “alarmist and incompetent”. He is especially scathing about the way Stern lifted material written by Tol on rising sea levels without making any allowance, as Tol did, for the fact that people would find ways of adapting to that rise. His review of The Economics of Climate Change report is best summed up by his comment on Stern’s calculations on the control of emissions:
“This can be found in any textbook on cost/benefit analysis. It is puzzling that economists at HM Treasury can make such basic mistakes.”
Puzzling, but it does go some way to explaining how Gordon Brown (who commissioned the report) and his team have done such a lousy job of managing the British economy.
The following is a brief post from Professor Tol as part of an online interview on the subject:
“There are arguments for low discount rates (it is the right thing to do) and there are arguments for high discount rates (it is what people use). That is not my point, however.
HM Treasury has clear guidelines on discounting. In fact, they recommend a discount rate that falls over time -- so that problems like climate change are not discounted away.
The Stern Review violates the guidelines of HM Treasury. This is most peculiar, as the Stern Review was written by civil servants of HM Treasury. This is bad procedure.
In my work, I typically present results for a range of discount rates -- and let the reader make her own choice.
The Stern Review does not allow this choice. This is bad style.”
By and large, professors are polite, restrained people, so for Tol to use that kind of language, either Sir Nicholas has been up to no good with a member of the Tol family or he is utterly incompetent.
For a full coverage of the interview and a copy of Tol’s review of the report, click on this link:
http://sciencepolicy.colorado.edu/prometheus/archives/climate_change/000974the_stern_review_on_.html
If you just want a copy of the report, click here.
Another Yale Professor, Robert Mendelsohn, is also critical of Stern. For the record, he is the Edwin Weyerhaeuser Davis Professor of Forest Policy & Professor of Economics at Yale. Mendelsohn has written extensively on global warming, with particular emphasis on forestry issues.
He takes Stern to task for assuming that the economic damage from hurricanes will rise strongly each year. The mild impact of hurricanes in 2006 is proof this is not so.
According to Professor Mendelsohn, Stern's calculations on future costs of climate change might easily be wrong by trillions of dollars. Considering the entire US federal budget for 2007 is $2.7 trillion, this is hardly small change we’re talking about. More importantly, it is your money, as Stern proposes spending taxpayers’ money on his “solutions”.
Our next critic is Sir Partha Dasgupta. His biography is as follows:
Sir Partha Dasgupta is the Frank Ramsey Professor of Economics and past chairman of the faculty of economics and politics at the University of Cambridge. From 1991 to 1997, Dasgupta was chairman of the scientific board of the Beijer International Institute of Ecological Economics of the Royal Swedish Academy of Sciences and, from 1989 to 1992, professor of economics and philosophy, and director of the Program in Ethics in Society at Stanford University. His research interests have covered welfare and development economics; the economics of technological change; population, environmental, and resource economics; the theory of games; and the economics of under nutrition. Dasgupta is a fellow of St. John's College, a fellow of the Econometric Society, a fellow of the British Academy, foreign honorary member of the American Academy of Arts and Sciences, honorary fellow of the London School of Economics, honorary member of the American Economic Association, member of the Pontifical Academy of Social Sciences, foreign associate of the U.S. National Academy of Sciences, and fellow of the Third World Academy of Sciences. He is a past president of the Royal Economic Society (1998-2001) and the European Economic Association (1999). Dasgupta was named Knight Bachelor by Her Majesty Queen Elizabeth II in 2002 in her Birthday Honours List for services to economics and was co-recipient (with Karl Goran Maler) of the 2002 Volvo Environment Prize. He is a fellow of the Royal Society (elected 2004) and a foreign member of the American Philosophical Society (elected 2005).
Again, we see a respected academic who specialises in the field Stern has written about respond with criticism that suggests Sir Nicholas is just plain wrong. Not only wrong, but boneheaded:
“Where the modern economist is rightly hesitant, the authors of the review are supremely confident.”
The most annoying aspect of The Economics of Climate Change from an economist’s perspective is the discount rate. In plain English this is the method used to calculate the relative value of present and future payments.
Most economists would probably use a 4% discount rate as standard for such projections. Sir Nicholas used a discount rate of 0.1%, something Dasgupta considers “patently absurd”.
To make things worse, Stern has predicted the people we are being asked to make the sacrifices for will be twelve times better off than us on average in 2006 terms. He also predicts that by 2100 North Korea will have a bigger economy than the US. On such shonky “economics” has this report been based.
The final nail in the coffin must be Stern’s claim that failure to follow his recommendations means the global economy losing 5% of GDP “now and for ever”.
Take a look around you. You know full well the world is not losing any percentage of GDP now or even in the foreseeable future. You also know it is impossible to calculate anything whatsoever “for ever”.
This leads us to an inescapable set of conclusions:-
1. The Economics of Climate Change is patently wrong in its findings.
2. The author is woefully incompetent and/or concocted this report, knowing it was wrong in its findings, with a political motive. The motive in question being to persuade the public that global warming is an imminent threat to the world and that the left wing politicians and environmentalists who have proposed a plan of action must be supported and obeyed without further question.
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