Examination of Witness (Questions 192-199)
PROFESSOR LORD
STERN OF
BRENTFORD
11 MARCH 2009
Q192 Chairman: Good afternoon, Lord Stern.
Thank you very much for coming to give us evidence. Clearly your
report has had quite a lot of reverberations around the world
in terms of stimulating debate, and not everybody, obviously,
agrees with all of your conclusions and recommendations, but since
you first published it, clearly the economy worldwide has moved
into downturn. I wonder if you might initially indicate how you
feel that that is going to affect both your recommendations and,
given that you are just about to go off to Copenhagen, what you
think it does to the likelihood, or not, of securing agreement
in Copenhagen given, as an add on, the suggestion this morning
that what America would be required to do is undeliverable because
it would promote a revolution if they tried it, and that might
prejudice anybody else's preparedness to agree to deeper cuts.
Professor Lord Stern of Brentford:
The first thing that has happened since the report came out that
I would want to underline is that the scientific evidence is telling
us that the problem is more severe than we described in the report.
Emissions are growing faster, the absorptive capacity of the earth
is less and some of the effects seem to be coming through faster,
so from that perspective, looking back, I think I underestimated
the risks. The second thing that has happened since it came out
is that technical progress has been spectacularly rapid and the
number of new ideas coming to forward on low carbon technologies
is quite remarkable, and that is moving at a very encouraging
rate. The third thing is the development of international commitment
on this issue has been strong whether you look in the developing
world or particularly in the United States of America. So I think
those three pieces of context are crucial before stepping into
the global downturn, which is, indeed, very important, but I think
the risk story and the movement of technology and the deepening
commitment, all those three things, have made it more likely that
we will get a deal. I am not saying that that probability is anywhere
near 100 %, it absolutely is not, but those three things have
made it more likely. What is the role in that context of the most
serious economic crisis we have seen for 80 years? My own view
is that, if we think carefully, we would recognise this as an
opportunity to accelerate towards the low carbon growth path that
we as a world are going to have to follow. Why? Because resources
are cheaper when some of them are idle. So resources are cheaper
and there is opportunity to bring forward investments in low carbon
energy. Insulation is a striking example, but so is various aspects
of green infrastructure. To introduce taxes or prices through
trading is also easier when prices of hydrocarbon are lower, as
they are during a recession, so there are some aspects of this
that should make policy-making easier. We should be drawing a
conclusion from this that, if we delay action on risk, the consequences
of our delayed action become more serious. That surely would be
one lesson that we learn from this economic crisis. Another lesson
we should learn from this economic crisis is that we should be
looking for a way out of this which lays the foundation for a
continued period of growth. After the.com crisis, we ended up
creating the bubble conditions which took us into the next crisis.
My own view is that there is a whole collection of powerful reasons,
along the lines I have just described, why this should be an opportunity
to accelerate action. So I think the crisis would become a difficulty,
which of course is a fundamental difficulty for everything, but
the crisis would become a particular difficulty for the climate
change agenda and the agreement in Copenhagen only if we let it
become so by not recognising the logic of the argument. In other
words, it would be confused analysis that would take us to the
view that we had to postpone until we sorted this one out.
Chairman: So you remain resolute in proving
that economics does not have to be a dismal science in that context.
I am going to ask Mark Hendrick to come in, because he has got
a supplementary which follows on from what you have just said.
Q193 Mr Hendrick: Would you say that
the economic downturn in itself will provide incentives for countries
to cut greenhouse gas emissions, and, if so, which countries do
you think could make best use of it and what particular sectors
of industry do you think could take action?
Professor Lord Stern of Brentford:
There is one unwelcome reason for cutting greenhouse gases, which
is a sharp reduction in output and economic activity, and I would
not want to recommend that as a way of cutting greenhouse gases—this
is about low carbon growth, not about low growth—but your
question was about the incentives to cut. I think I gave part
of the answer in my earlier remarks, that some of the kinds of
things you would want to do, for example, insulation, make sense
still more strongly now when the resources used in investing in
that insulation have a lower value but the returns that to that
insulation, which would last over many, many years—things
like that, by lowering the cost in a context where the returns
to that investment would be likely to be fairly similar—would
give an incentive in countries where that kind of energy efficiency
investment is there, and Northern Europe and, indeed, the UK would
be examples of that one, but otherwise I think it would be largely
of the kind of examples I gave in my answer to the previous question,
which is that this is a good time to invest more generally and
that we ought to be, as we are thinking through the recession,
thinking about the longer term growth path, but everybody has
an incentive to be energy efficient—the United States, China,
Europe. We all have an incentive to find low carbon growth; we
all have an incentive from the perspective of the world to help
fight deforestation. Those are the three very big areas of activity,
and I think we all share quite strong incentives, so I am not
sure I would go too strongly about how this radically shifts the
pattern.
Chairman: Stop there. We will vote and
return as quickly as possible. As soon as we are quorate we will
recommence.
The Committee suspended from 2.11 pm to 2.19 pm
for a division in the House.
Chairman: Could we resume? There is the
threat of another division, so we will just have to do our very
best.
Q194 Mr Hendrick: Lord Stern, I am
sorry about the interruption. Following on from our previous question
in terms of action that can be taken, obviously the committee's
focus is on developing countries. I know you mentioned China and
particularly one of the measures you mentioned was energy efficiency
and loft insulation. Obviously that is not as much of an issue
in places like Africa, where they do not have heating, they are
looking at possibly cooling. What particular technologies do you
think could be of best use at this moment in time and do you think
that there are incentives there given the current economic downturn?
Professor Lord Stern of Brentford:
In Africa there would be opportunities, where the infrastructure
investment is mostly to come, to invest in much lower carbon infrastructure.
So it would seem the arguments for switching now to solar energy,
concentrated solar, for new power stations in much of Africa would
be pretty powerful, and some people have looked at that and said
that they are already, even without a carbon price, looking more
attractive than coal-fired power stations. So for countries in
which, as it were, the infrastructure is much less strong and
whose investments there will be coming strongly in the future
particularly if they have a lot of solar potential, I think that
would be one area, but I would not link that so much to the depression,
or the recession, or the slowdown, whatever word we are allowed
to use, because I think this is a story of basic growth and development
decisions. Looking forward to the context of low carbon growth,
countries are highly differentiated in their opportunities and
where they start, but I think that is a more medium-term, basic
strategic development question than a slow-down question.
Q195 John Battle: I wonder if I could
ask you about the repayments, if you like, for the polluter. If
the polluter should pay, who should pay the cost of the damage?
Recently there have been some remarks in the press that, for example,
we import things from China. For simply saying that China is behind
us in their effects in polluting and not doing enough to combat
climate change, we should pay the price for the clean up of China
because we import their goods. What would be your response to
those interlocking arguments that are really saying we are the
cause of the problem? It starts to echo a bit like the reparation
payments for history, but I wonder what your response would be.
Professor Lord Stern of Brentford:
There are a number of bits to that. The first thing is to get
the incentives right. Without some kind of price on greenhouse
gases, and there are various ways of doing that which we could
discuss, you have an enormous market failure. So the first part
of the story is to correct the market failure and get the markets
to work well, and you need a price on the damage to do that. That
is for efficient operation of markets from now on, that is an
argument about market incentives and fixing markets; there is
a separate story, which has more to do with rights and justice,
which is looking backwards and saying: who is responsible for
what? The way in which I think that best comes in is through the
rich countries taking very strong targets, because they are responsible
for more of the stuff that is in the atmosphere, they are pumping
it out much more rapidly because they have much higher emissions
per capita and they have got the technologies and they have got
the wealth, but I think they are two separate kinds of questions,
although they have some relationship. The last part is how do
we get an understanding of what the consequences of my actions
now really are in terms of the production that comes forward to
meet the demands that I expressed? I think both production and
consumption are relevant. I would not turn it into a horse race,
one against the other. When the international division of labour
changes, as it has changed quite dramatically over the last two
or three years, there are gains to the producer and there are
gains to the buyer; so those people who produce stuff which is
more polluting than elsewhere have some gains from that international
division of labour. On the other hand, those people who are consuming
and demanding are also gaining from those products. So I actually
think that we should look both at the emissions that originate
in a country and that come afterwards.
Q196 John Battle: I think I agree,
because I think we are still living in a nineteenth century version
of what produce and consume is, and by that I mean there is a
kind of traditional view, particularly in the media, that China
is now a factories place, whereas Leeds is a service sector, for
example. They will be the heavy producers, we import from them
and, therefore, we should help them clear up. If I give another
example to push the point a bit further, because I am looking
at whether a framework of consumer accounting would help at all
to provide direct benefits to developing countries. If I give
the example of soy production in Brazil, the rain forest is being
cleared for soy production which is for export to fatten up pigs,
cattle, hens and chickens here for us to consume. If you push
the carbon footprint back or, rather, the analysis of that food
production, obviously soy production is destroying the rain forest,
which is the carbon sink, so who should pay there? I am looking
to see whether, accepting your point, and producers are the consumers,
but should there be a framework of consumer accounting that would
provide some direct benefit back to developing countries, for
example?
Professor Lord Stern of Brentford:
I tried to describe that in what I said. If you are looking at
how much each country emits, I think it would be quite valuable
to have two sets of accounts. One would be the production side
and the other would be the consumption side. In the case of the
UK, I myself have not run the numbers, but some people have, and
you would find that from the consumption point of view of accounting,
the UK's emissions per head, which are 11 or 12 from a production
point of view, would be considerably higher. I think both those
figures are relevant to assessing what our contribution is going
forward and what our responsibility is looking backwards.
Q197 John Battle: It might mean that
that would be a much greater price on the north world than the
south world in the end.
Professor Lord Stern of Brentford:
It would be. If you decided that each person had a fixed amount,
there are many ways of doing this but, for the sake of this argument,
if you decided that people would have, say, a roughly similar
amount of quotas, then how much would we have to buy as the UK,
we would have to buy more if the calculations on what we were
actually emitting were done on a consumption basis than a production
basis.
Q198 John Battle: It would also mean
as well as switching the light switches off and making personal
contributions, some people might have to ask questions about how
many over fed chickens they consume at the expense of the rain
forest. So putting the chain right back through, there could be
some quite big questions.
Professor Lord Stern of Brentford:
Yes, but if you are not a vegetarian, then the ranking on the
meat you should worry about is that beef is the most problematic,
then pork, then chicken, and then, of course, not eating meat
at all.
Chairman: A supplementary from Hugh Bayley.
Q199 Hugh Bayley: Your report was
based on the best science available at the time, but my instinct
is that the scientists are predicting greater impacts. There was
a report on The Today Programme suggesting that sea levels
will rise further than was predicted against a two degree average
increase in global temperatures. Do you share that view, that
the scientific base is harsher now than it was at the time you
wrote your report, and to what extent would it be possible to
update periodically, as the science changes, the findings in your
report? For instance, on the basis of the science at the time
you wrote the report, you said that 145 to 220 million additional
persons could fall below the two dollar poverty line—updating
indicators like that.
Professor Lord Stern of Brentford:
In my opening remarks I did emphasise that emissions are increasing
faster than we thought, the absorptive capacity of the planet
is less than we thought, therefore the stocks are going up faster
than we thought and, further, given any stock or temperature level,
some of the effects seem to be coming through faster than we thought.
So I do, indeed, agree that the emergence of further evidence
on the science over these past two or three years has made it
look more worrying than we set out—I should say, even more
worrying than we set out in the report—and that is why I
think that our targets for the levels below which concentration
should be held should be stronger than we suggested in the report.
In the report we suggested trying to make sure concentrations
stayed in the region of 450 to 550 parts per million CO2 equivalent,
and I think I would now argue that 500 is the maximum emission,
to try to keep things below that, and then over time bring it
on down from there. We are 435 at the moment and we will be at
450 in six or seven years, but I think we could keep it below
500 and bring it down from there. So I would both argue that the
risks are bigger and because of that the targets should be tougher
than was set out in the report. Do we plan to periodically update
it? I have got a book coming out on 2nd April called A Blueprint
for a Safer Planet. Doubtless the committee will buy copies
and circulate them around the membership! I have tried to articulate
the kinds of things I have just described in that book, but it
is only 200 pages. It is supposed to be a wider circulation. Do
we plan update all the numbers in the Stern Review periodically?
I think that probably would be beyond me, but I do know that the
work continues and there is a tremendous amount coming out, but
I think one has to rely on the profession more generally. I do
not think there will be a Stern second edition in that sense.
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