The Hidden Opportunity in Global Warming

By Marjorie Kelly, Tellus Institute. Posted December 21, 2006.

While the Baker-Hamilton report from the Iraq Study Group dominates the news in recent weeks with its rebuke of the colossal mess the United States has made in Iraq, there is another report released at the end of October -- even more vital in its import -- that has gone virtually unnoticed. I'm referring to the Stern Review on the Economics of Climate Change, released by the U.K. government, which has received far too little attention in the U.S. press. It too is about a colossal mess we've made, not in a single nation but in the atmosphere of the entire planet, with possible consequences for all life on earth.

If the news in the Stern Review is scary to think about, it's ultimately a message of hope: It's not too late to act on global warming -- provided we take strong, united global action, starting now and increasing over the next 10 years. Indeed, "delay would be dangerous and much more costly," the Review warns. What's powerful about the report is that it positions the issue in easy-to-grasp economic terms. It estimates that acting now to stabilize climate change could cost 1 percent of global GDP each year -- which is relatively manageable -- but not acting could create losses that dwarf that. Likely the losses from inaction, the Review estimates, would reach 5 percent to 20 percent of global GDP year after year, "now and forever."

For politicians who argue that taking action now to reduce global warming emissions is too costly in economic terms, the Stern Review offers a stern rebuke: The real economic damage will come not from action but inaction. And as a measure of the report's economic credibility, it was commissioned by the British Chancellor of the Exchequer, was prepared by one of the world's leading economists, Sir Nicholas Stern, and has been endorsed by four Nobel Prize-winning economists plus the president of the World Bank.

The Stern Review offers powerful economic ammunition for the global warming debates that will play out in politics in coming months and years. But as useful as it is, it takes us only part of the way. An analysis by my colleagues at the Tellus Institute shows that the report stops short on two counts.

First, it looks only at environmental damages that can be monetized and quantified, when the risk of catastrophic changes in the climate and ecological systems are far more unknowable. "The Stern Review should be considered a conservative estimate of the dangers," says Tellus President Paul Raskin. By using only monetized values, he added, "it's like looking at a mountain through a pinhole."

Second -- and more consequential -- is the question of how we get to a world of reduced emissions. The Stern Review concludes that climate stabilization will require that annual greenhouse gas emissions be brought down more than 80 percent below current levels. And it predicts that this can be achieved without significantly compromising world economic growth -- since the shift to a low-carbon economy will create huge business opportunities in developing low-carbon and high-efficiency products. As the U.K. Treasury put it in a public statement,

"Tackling climate change is the pro-growth strategy."

While this optimistic assessment may in an economic sense prove true, it underplays the enormous lifestyle changes that will ultimately be necessary if massive global climate change is to be averted. "It's a question of both necessity and opportunity," Raskin says. The necessity is that we can't get to a sustainable world by any other pathway than that of deep and fundamental changes in how we live. The opportunity is that this could lead us "to a world of greater human fulfillment," he adds.

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Marjorie Kelly (MKelly@Tellus.org) is a senior associate at Boston's Tellus Institute, a 30-year-old nonprofit research and consulting organization focused on creating a Great Transition to a society of sustainability and well-being. Kelly previously was editor for 20 years of Business Ethics magazine.

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