Examination of Witness (Questions 200-219)
PROFESSOR LORD
STERN OF
BRENTFORD
11 MARCH 2009
Q200 Richard Burden: I would like
to ask you to say a little bit more about how you see growth.
You have been very clear in saying you are low carbon growth,
not anti-growth per se, and you have always made the point
that you do not see there being a contradiction of development
in the pro-poor growth and low carbon growth. I would like to
press you a little bit on what you mean by that, because there
are a number of commentators who say there is actually a conflict
there. Either environmental objectives do not get pursued enough
and, when it comes down to it, in the development context fairly
traditional models of growth are pursued or, on the other side
of the argument, that because there is not a framework being developed
of what low carbon growth actually means in a development context,
you could end up with a form of growth that will not actually
be very poor. Do you still think that the two things can be mutually
reinforcing: development, pro-poor growth and low carbon growth,
and, if so, how? What are the things we need to do? What is the
framework we need to develop them?
Professor Lord Stern of Brentford:
I think we have to do both at the same time. The two big challenges
of this century are the fight against world poverty and the management
of climate change, and they are inextricably interlinked. If we
fail to manage climate change, we will undermine development very
drastically, and if we try to put forward a programme for the
management of climate change which is seen to, or does, undermine
the prospects of fighting poverty over the next 20 or 30 years,
we will not succeed in gathering the coalition that we have to
and neither would we deserve to succeed. So from those very basic
perspectives, we have to find it. Can we find it? Yes. A lot of
this is about doing things in different ways which have their
own attractions from the point of view of development. A lot of
the low carbon sources of energy, if used on a major scale, would
give us a form of growth which was cleaner, quieter, more energy
secure and more biodiverse. The kind of growth path we are talking
about is very attractive, for reasons which come through actually
rather sooner than those associated with the management of climate
risk, although, of course, the management of climate risk is enormously
important. The question is: how do we manage the transition from
here to there? There will be some costs along the way. I do not
want to pretend that we can switch over from a high carbon growth
story to a low carbon growth story without incurring some investments
involved in managing that transition. In the medium term, over
20 or 30 years, there will be some investment costs as we learn
and as the costs of action come down. Because the technologies
are changing very rapidly, the more we put into them the more
rapidly those costs will come down. The policy here is about getting
between where we are now and the low carbon growth path which
is so attractive, managing the costs of that transition and seeing
how to do it in a way that makes the most of the growth opportunities
that are there.
Q201 Richard Burden: That is helpful.
One of the things I am trying to get at, though, is how we can
try to make sure that in making that transition in practical terms—not
in theory, but in practical terms—that the burden of that
does not fall on the poorest and most vulnerable, whether it be
in the least developed countries or actually parts of the population
that may be middle income countries. What are the things we need
to be doing to make sure that they are not the ones that are suffering?
Professor Lord Stern of Brentford:
We need substantial finance. There will be important mitigation
investments that need to be made, and in some cases in the short
run, and in some places, they may cost more than the others. There
will be places where wind power, solar power, ground source heating
and geothermal, at least in terms of investment costs early on,
cost more than a coal-fired power station, and what we have to
do is to come up with incentive and financing mechanisms so that
people in the developing world are financially supported to make
those changes. Adaptation, what I prefer to talk of as development
in a more hostile climate, is expensive. When we worked on the
Millennium Development Goals, and I was involved as Chief Economist
to the World Bank in the Monterey Conference on Financing for
Development in 2002, and I directed the writing of the report
on the Commission for Africa which reported for Gleneagles, so
I was there and I know, we did not take climate change into account
as, in my view, we should have done, even with what we knew then—we
know more now—and we have to recognise that, had we taken
it properly into account at the time we did those 2002 numbers
for Monterey and the 2005 numbers for Gleneagles, we would have
come up with higher numbers. The Human Development Report estimates
around $85 billion a year by 2015 is the extra cost of moving
towards the Millennium Development Goals in the context of a more
hostile climate brought about by climate change. So resources
are very important here, and they are not small. I wanted to emphasise
the advantages that come with them beyond simply managing the
risk of climate change, and there are many others I could go on
to in terms of the empowerment that comes with being not directly
dependent on a grid, and I have worked a lot in rural India and
urban India. You would not want to be dependent on the grid because
somebody has got their hands on your switch, and not just India
but many other countries around the world. There is some empowerment
too which comes from being independent. So this has quite a lot
of different aspects to it, but, basically, there will be some
investment costs up front in mitigation where we have to find
financial mechanisms, often market mechanisms, to help supply
those finances, and we have to recognise that the numbers we were
talking about on development support are too small when you look
at the challenge of development in a more hostile climate, or
adaptation, as it is sometimes called.
Q202 Mr Singh: To what extent should
developing countries now be building resilience to climate change
into their development plans, and, if that is what they should
be doing, what are the steps that they should be taking?
Professor Lord Stern of Brentford:
I think it is crucial that they do, because it makes no sense
to make your plans in the context of an assumption that the climate
will be like it was in the past when it is not going to be like
it was in the past; so I think there is no alternative to bringing
it in. The first thing you need is information. There are no certainties
here, but you need information on the probabilities of different
kinds of outcome. It looks as if south-west Africa is becoming
much dryer and south-east Africa is becoming much wetter—looks
as if—and what we want is those who are concerned, and obviously,
in the first place, the people who live there, to try and understand
as best they can what the different likelihoods are—we are
not going to do better than probabilities, but what the different
likelihoods are of those different kinds of changes. You cannot
plan agricultural extension, you cannot plan an urban sewage system,
you cannot plan an irrigation system without some knowledge of
the different kinds of possibilities that there would be, so that
information story is absolutely crucial, and we have very good
climate science research in the UK—outstanding. I am not
a scientist, I am just a consumer of the science, but I think
investment in the climate science in the UK, because you need
the global model, because it is a global system, of course, the
climate and the weather, whilst at the same time supporting observation
stations, supporting local modelling of particular aspects of
the climate in a way that can integrate with these global models.
The Hadley Centre is working in that direction. I would say more
power to their elbow, because without that information it is very
difficult to make the kinds of investments that are necessary.
With that kind of information, and we are going to have to guess
as best we can now, we cannot wait for it all to be refined because
the investments in irrigation, agriculture extension, and so on,
come now, the investments in urban infrastructure come now, so
we have to try to think how best to use that information as well,
and, thirdly, we have to recognise that development, as I said
before, in a more hostile climate costs more and they will need
extra support for that.
Q203 Mr Singh: Are we clear and are
developing countries clear about the adaptation measures that
are required and the costs of adaptation measures, and how are
the donors working with the governments of developing countries
to build that into development plans?
Professor Lord Stern of Brentford:
Increasingly developing countries are doing their best to understand
the implications for them, and that is why I emphasise so strongly
the information side of this story, and there is great variation.
The number of observations that you have for Ethiopia are tiny
compared with the number of observations you have for, say, France.
Take countries of comparable size and population: if you look
at the most vulnerable point in the world in terms of its consequences
for human kind, it is probably the few hundred square kilometres
in the Himalayas that feeds the Yellow River, the Yangtze, the
Brahmaputra, the Ganges, the Jomuna and the Indus—if you
go round, that is where they all start—and the number of
observation stations there about what is happening is very thin,
and those countries have to struggle to understand what those
consequences might be and they need to know what is happening
in the Himalayas. These are the kinds of information that is crucial.
Are they working on it? Yes, they are, but with great difficulty,
because the information is weak, and that is something which we
can all work to support, but, as I said, you have got to use the
information and you have got to face up to the reality that development
is going to cost more.
Q204 Mr Singh: Are there implications
for DFID there then, in terms of how they refocus the emphasis
of their work, and so on?
Professor Lord Stern of Brentford:
Yes. I do not speak for DFID, I have lots of friends who are in
DFID and I stay close, but I do not have a comprehensive view
of what they do, but I do know, through direct interaction, that
they are very much seized of these issues. I know that they are
investing, for example, on the information front in Africa and
they are working strongly on this. In their White Paper of two
years ago there is a chapter on climate change, so I think that
DFID probably ahead of most, but we are all, as it were, playing
catch-up here because of trying to understand just what these
consequence are and likely to be and acting on the risks.
Q205 Mr Singh: Do we have any idea
of the current cost in terms of the impact of climate change.
Professor Lord Stern of Brentford:
Yes.
Q206 Mr Singh: Have we any words
to describe what the costs might be in the future and how do we
plan for that? How do we get that into our planning?
Professor Lord Stern of Brentford:
For example, the World Development Report this year is on climate
change, and I was last week with a team in the World Bank that
is working on it, and this will, indeed, be the kind of issues
where they try to move forward. What you will get is—. I
gave you the Human Development Report figure. That is a couple
of years old now. About 85 billion extra cost by 2015 as you run
it forward. That is only a bet on 0.8 degrees centigrade, which
is really small. It is big in terms of the reality of what it
does to the world, but it is small in relation to what might happen
to us. So these costs will be in their trillions, for sure, as
you let it run forward 20 or 30 years, even if we are sensible
with what we do. Of course there will be many more trillions if
we do not act responsibly. So I think you are going to see these
kinds of calculations come out, but I would focus particularly
on the importance of understanding, country by country or region
by region, what these consequences are like rather than just going,
as it were, for aggregate numbers.
Q207 Mr Singh: I think a DFID study
of Kenya showed the costs at 5 % of GDP—
Professor Lord Stern of Brentford:
Already.
Q208 Mr Singh: —already. Is
that just for droughts and the famines?
Professor Lord Stern of Brentford:
I find the number in a plausible range, but, since I have not
studied that DFID study, I should not comment on what it includes
and what it does not include, but those kinds of number of damage
now do not surprise me. Remember that we are talking about much
bigger damages down the track.
Q209 Chairman: Just on that point,
to some extent you have acknowledged the updated figures such
as the UNDP figure in your answer just now, but the problem is
that virtually no money is actually being provided. Various reports
suggest that even the UK has only delivered $300 million out of
a pledge of 1.5 billion. So, if we are talking about anything
up to 86 billion a year being required for adaptation and a few
hundred million is all that is actually being delivered by the
developed countries, does not the gap suggest that we are not
really beginning to engage?
Professor Lord Stern of Brentford:
I do not think, as a community of people who are interested in
development, we have factored this kind of challenge in to the
extent that we should. I think increasingly people are becoming
much more strongly aware of the issue and its implications for
resources, and when you do that I think it becomes clear that
we cannot within the United Nations Framework Convention on Climate
Change generate the kind of resources that will be required for
development in a more hostile climate. The conclusion I draw from
that is that we have to think through its implications for development
funding of the traditional ODA kind as well.
Q210 Chairman: We are going to come
to that.
Professor Lord Stern of Brentford:
We are going to have to face up to larger numbers.
Q211 Chairman: I was going to say,
large numbers are what the governments are talking about for bailing
out banks, and so on. Is the urgency of the situation not such
that actually the economic stimulus and climate change should
be one and the same thing in the present circumstances? That seemed
to be the implication of your opening analysis.
Professor Lord Stern of Brentford:
Yes, I have written a paper with colleagues at the Grantham Institute
and the London School of Economics that the world needs a stimulus
now of at least two trillion dollars to actually be spent in real
terms in the next year or two, and within that at least 400 billion
could go under a green hat as a green part of the stimulus. That
is looking at it in aggregate terms and bottom up. So I do think
that investment in new technologies, energy efficiency, bringing
forward green infrastructure, and so on, should be a very big
part of the stimulus. The adaptation story is a little different.
What we are talking about here is short and medium term investment,
particularly in the developing world, and I think we should not
see that only as a matter of a stimulus package. I think it is
still more important to see it in terms of our medium and long
term commitments to development, because this problem stays with
us. It is not a problem that is just here for the period of recession.
Q212 Chairman: Do you have a figure
for the UK in that?
Professor Lord Stern of Brentford:
For what?
Q213 Chairman: You said 400 billion
was a global figure.
Professor Lord Stern of Brentford:
I was talking about world stimulus, yes.
Q214 Chairman: You have not got in
your own mind a figure?
Professor Lord Stern of Brentford:
I am sure there will be more coming in the Budget, and let us
look at it then. I am not sure, because I do not know what is
in the Budget. I should say, but I would hope that there will
be more coming on stimulus and the green stimulus, and I believe,
from what the Government has said, that that is likely to be the
case, but I left the Treasury two years ago, so I do not know
what they would do, and when I was in the Treasury more than two
years ago, if you had asked me just before the Budget, I would
not have been able to tell you.
Q215 Chairman: You are free now.
Professor Lord Stern of Brentford:
Yes. I have indicated where I think it should go.
Q216 John Battle: I was always intrigued,
and you made me think of it last time I heard you speaking—I
cannot think who it was—of an old philosophy about unknown
unknowns. I kind of think the only thing we know about recessions
globally is that the poor always suffer the most, and what I found
most encouraging about the present agenda, if you like, is that
the sustainable development, the whole question of climate change
and living within our limits is coming together with the agenda
to root out poverty internationally. I find it quite encouraging
if those agendas converge, but my biggest struggle on this committee
in Britain, and elsewhere (and Britain has got a good track record)
is every time we have a G8, as one is coming up, and Gleneagles,
commitments are made and people say, "Oh, yes, we will make
a contribution", but then the disbursements never quite keep
with the promises and the pledges, and I worry again we will go
through that process. I wonder if I can make a particular comment
and ask you about Copenhagen, because already some people are
writing off Copenhagen and saying we are further away in terms
of targets than we thought we were, and I just wonder whether
you could encourage me to say that there are real prospects for
a new framework at Copenhagen. What are the chances of a new adaptation
from it actually being agreed and the level of funding being pledged?
Do you think we are further away from it or are we creeping nearer
to it? I suspect we may be encouraged by the rhetoric, and I use
that word positively, that the climate change agenda is tackling
poverty, sorting out the world recession and the banks may all
be on the agenda as items at the G8, but what can we sharpen up
at Copenhagen and really start to get to grips with making this
happen?
Professor Lord Stern of Brentford:
I agree with you. It is the poorest people in the world that are
hit by weather and climate catastrophes, by inadequate development
and by recessions, and we have to look at those three things together,
and I have covered that, but it is terribly important. I share
your encouragement. Actually, increasingly people are looking
at those things together. I do want to say that I have sat in
international institutions for ten years and looked at the UK
from the outside, and DFID is, by some way, the best bilateral
agency in the world and we all have ideas for helping it along,
making it even better, but we should not lose track of that and
we should not lose track of how far we have come on increasing
development assistance in the UK. There is very strong cross-party
support for the objectives of increasing to 0.7 % by 2013, which
we were articulating in 2005. I think it is very important that
we have got that cross-party support for that and I find it very
encouraging, and I believe that the UK, under whatever government
it is, will stick to that. So as we look for more, I think it
is important to recognise that, whilst historically we have not
been up there with countries like Denmark or the Netherlands,
we are moving in a good direction. It is vital, for the reasons
we were just discussing, that we keep going and raise our sights
still further. I think that governments do have to be held to
account for the commitments that they make, I think in this area
governments also have to be held to account for commitments that
their predecessors have made, because the relationship with a
developing country and its national institutions are long term
relationships and they cannot just be switched on and off, and
I think it is important, as we think about what might come out
of the G20, that we also think about institutional structures
and political structures for monitoring commitments and delivery
on commitments.
Q217 John Battle: In Copenhagen do
you think there will be the adaptation money there?
Professor Lord Stern of Brentford:
In answer to a previous question, I think I said that we do need
adaptation funding to come out of Copenhagen, but that is environment
ministers. They cannot make ODA promises, and I think that at
the Prime Ministerial and Presidential level we have to make sure
that this is part of the understanding around Copenhagen. If we
go for it in Copenhagen, we have got a good chance. The most damaging
part of Copenhagen would be people saying it is all too difficult;
let us do it later. If we want to do it, we can do it as a world,
and we are part of the UK and it is our job to support the UK,
pushing for very strong agreement.
Q218 John Battle: You do not want
Copenhagen to replicate the problems with the trade rounds in
Doha. You have got a positive track, I think.
Professor Lord Stern of Brentford:
It is very dangerous that that happens, because in a trade negotiation
you can pick up five years later roughly where you were before;
not with climate change.
John Battle: Exactly.
Q219 Richard Burden: It is on the
point really. If tackling climate change and combating global
poverty have really got to be two sides of the same coin and more
investment needs to be put into all of that, should ODA in the
future include adaptation—it is actually in front of ODA—so
that you increase the whole thing and it is actually seen as one
funding stream rather than separate, so it comes under one minister,
and so on?
Professor Lord Stern of Brentford:
At one level it is unavoidable, because you cannot separate out.
You cannot say this amount of this irrigation system I have been
building is for climate change and this amount is for our battle
against world poverty, as it might have been had the climate not
been changing. It is very difficult to separate out those two
kinds of things, and you can be disruptive and diversionary if
you try too hard. So I think it is extremely important that the
use of funding, whatever hat it sits under, is one which—.
You can have an adaptation hat and you can have a standard ODA
hat, but it has got to be used in a way makes it easy to integrate
those things. You could, for example, have another window alongside
the IDA window in the World Bank so that the people who were looking
after those two windows were, roughly speaking, the same people,
so that we could be sure that these things were being well blended.
They have got to be blended with private investment, they have
got to be blended with any of the guarantee instruments that any
of the international institutions can use. It is extremely important
that we do not lose the ability to bring that funding together
in as easy a way as possible; so I am quite worried about excessive
separation of streams. National income accounts are done in various
kinds of ways, and I could give you an essay on how to see adaptation
funding as a separate category in the national income accounts
and I could give you another essay on how to see national income
accounts putting adaptation and development funding in the same
classification, and I would be worried if we got stuck on what
is simply an accounting convention which can be done this way
or can be done that way. It would be a very strange world if we
let that have some kind of real policy significance. I fear that
it might, but we should not let it.
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