Select Committee on Economic Affairs Second Report

CHAPTER 9: Conclusions and Recommendations

Introduction

144.  We welcome the Government's recognition of the central role of economics in considering climate change. But we believe that the Chancellor needs to broaden the scope of the Government's interests, and the Treasury's interests in particular, in aspects of the climate change debate that we feel have not yet been given sufficient emphasis (para 2).

145.  We are concerned that the links between projected economic change in the world economy and climate change have not been as rigorously explored as they should have been by the IPCC. We believe the complex interactions between world economic growth and climate change need additional scrutiny at the international level, and that the UK Government has a role to play in ensuring that this happens. We are also concerned that clearer messages should be conveyed to the public about the likely costs and benefits of climate change control, who will bear those costs and benefits, and when (para 2).

146.  We are not convinced that there is sufficient public awareness of the economics of climate change. Any public misperception on these issues could threaten the political feasibility of getting plans of action put into effect. If climate change is as serious as most scientists claim, and as the Government accepts, then it is important to convey the complementary message that the action to tackle it will also have to be serious and potentially life-changing. It is better to be honest now than to shield the public from the economic realities inherent in the more pessimistic forecasts (para 3).

The uncertain science of climate change

147.  The scientific context is one of uncertainty, although as the science progresses these uncertainties might be expected to diminish and be resolved, one way or the other. Hence it is important that the Government continues to take a leading role in supporting climate science, and encourages a dispassionate evidence-based approach to debate and decision making
(para 18).

148.  We do not believe that today's scientists are "crying wolf" about climate change: they may turn out to have been wrong in some respects, but arguments on which they base their case are better researched than in earlier cases. That said, we have sought to highlight some pressing issues which we believe deserve a further response from the scientific community in order to enhance understanding and resolve current controversies (para 24).

The future impacts of the enhanced greenhouse effect

149.  Whatever the validity of temperature projections, the science of measuring impacts remains speculative. Many of the adverse effects of warming can be offset by adaptation and we believe that the economic and social returns from investing in adaptation should be properly weighed against the cost of mitigation (para 27).

150.  We noted evidence from Professor Paul Reiter of the Institut Pasteur in Paris, which strongly disputed the IPCC's arguments on the likely spread of malaria as a result of warming (para 32).

151.  We draw attention to the fact that, if extreme events are indeed to be considered the most important impacts from climate change, there is uncertainty and controversy about the underlying data required to substantiate this claim (para 37).

152.  How catastrophic threats such as disintegration of Antarctic ice caps should influence decision-making depends on the scale of the effects, their probability of occurrence, and when they might occur. The scale of these events is clearly very large (para 39).

153.  If cataclysmic events which threaten the viability of existing societies are even remote possibilities, it is important that policy makers construct frameworks for analysing and debating probability and risks, since the threats associated with such "doomsday" scenarios are fundamental elements in driving the international discourse (para 39).

154.  We think it important that the IPCC moves towards clearer judgements on the probabilities of the projected global temperature increases (para 41).

155.  We are clear that fuller consideration needs to be given to the literature on the positive effects of warming (para 43).

156.  We conclude that there are weaknesses in the way the scientific community, and the IPCC in particular, treats the impacts of climate change. We call for a more balanced approach and look to the Government to take an active role in securing that balance of research and appraisal (para 44).

157.  The issue of adaptation verses mitigation is clearly one of balance. Most adaptation expenditures would be local, while mitigation requires action on a global scale. Few would suggest doing nothing by way of mitigation, and few would suggest no adaptation expenditures at all. But the policy literature seems to us to be overly focussed on mitigation. We therefore urge the Government to ensure that greater efforts are made to understand the relative costs and benefits of adaptation compared to those of mitigation (para 47).

Forecasting greenhouse emissions and temperature change

158.  Serious questions have been raised about the IPCC emissions scenarios, and a reappraisal of the scenarios exercise is urgently needed (para 60).

159.  We consider the convergence assumptions in the IPCC scenarios to be open to some question. In our view, political factors should not be allowed to influence the scenarios, whether over the issue of convergence or indeed in any other context (para 63).

160.  In general, any change in emissions due to changed economic assumptions will translate into a smaller effect on concentrations and an even smaller effect on temperature. This in no way excuses poor analysis in the emissions scenarios, but it may mean that projections of warming are not themselves greatly affected (para 66).

161.  It appears that the IPCC scenarios are not capturing recent emissions experience in their short term projections (para 68).

162.  We received a significant amount of evidence on the realism of the IPCC emission scenarios, and doubts were raised, particularly about the high emission scenarios. The balance of this evidence suggests to us that the high emissions scenarios contained some questionable assumptions and outcomes. While errors do not translate into equal magnitude errors in concentrations or warming, it seems to us important that the IPCC emissions modellers give serious attention to adopting the correct procedures (para 72).

The costs of tackling climate change

163.  It is very important that a realistic picture of the likely costs be conveyed to, and understood by, people today who will have to pay them. We note the considerable efforts that the IPCC has made in constructing likely cost estimates for the world as a whole. We are far less satisfied with the data currently available on the costs to the UK, and we call for a significantly greater effort to clarify and estimate those costs (para 73).

164.  Given the wide array of potential technologies, we are surprised that the Government's Energy White Paper should place such emphasis on just one technology, wind energy (para 83).

165.  In our view, it would be unwise to close the nuclear energy option. It is prudent to maintain as wide an energy portfolio as possible. We argue that the current capacity of nuclear power, before further decommissioning occurs, should be retained (para 84).

166.  We are concerned that UK energy and climate policy appears to rest on a very debatable model of the energy-economic system and on dubious assumptions about the costs of meeting the long run target of 60% reduction in CO₂ emissions. We call on DTI and the Treasury to improve substantially (a) the cost estimates being conveyed to the public and (b) the manner of their presentation. We believe that the Treasury should be more active in scrutinising and publicising these costs and benefits, in association with Defra and DTI (para 94).

The benefits of climate change control

167.  Research suggests that, in terms of percentages of world GNP, monetised damage is relatively low, even for warming of 2.5^oC. The damages are not evenly spread. In general, developing countries lose more than developed economies. Some models suggest no real net damage to rich countries
(para 99).

168.  The evidence presented to us indicates that the estimates of monetised damage are highly controversial within IPCC deliberations (para 101). We urge the Government to press the IPCC for a proper detailing of the estimates and for a discussion of the uncertainties in the next IPCC Assessment Report in 2007 (para 101).

169.  While we agree with others that the monetised benefit estimates for controlling global warming are uncertain, we are concerned that the IPCC appears to be playing down these estimates in favour of often detailed descriptions of individual impacts that cannot be brought into comparison with the likely costs of control. Perhaps one reason for this lack of emphasis is that the economic measures of damage give the impression that the benefits of warming control are smaller relative to the costs (para 105).

170.  We urge that explicit comparisons be made between the monetary cost of adaptation measures and their benefits. While we were reassured by Defra that they would be pressing for a higher profile for the economics in the IPCC's Fourth Assessment Report, we consider that the Treasury has a duty to reinforce Defra's intent. Indeed, given the potential importance of this issue, both in terms of public expenditure and of overall economic cost, the Treasury should become directly involved itself, making its own economic assessment of the issue (para 105).

The IPCC process

171.  We can see no justification for an IPCC procedure which strikes us as opening the way for climate science and economics to be determined, at least in part, by political requirements rather than by the evidence. Sound science cannot emerge from an unsound process (para 111).

172.  The IPCC Summary for policy makers says that economic studies underestimate damage, whereas the chapter says the direction of the bias is not known (para 114).

173.  We are concerned that there may be political interference in the nomination of scientists to the IPCC. Nominees' credentials should rest solely with their scientific qualifications for the tasks involved (para 116).

174.  The IPCC process could be improved by rethinking the role that government-nominated representatives play in the procedures, and by ensuring that the appointment of authors is above reproach. At the moment, it seems to us that the emissions scenarios are influenced by political considerations and, more broadly, that the economics input into the IPCC is in some danger of being sidelined. We call on the Government to make every effort to ensure that these risks are minimised (para 118).

UK policy and the international negotiations on climate change

175.  We note that the compliance mechanisms in the Kyoto Protocol are very weak and even counter-productive. We heard from several witnesses that the Kyoto targets themselves were going to make little difference to rates of warming (para 122).

176.  We consider that the "beyond Kyoto" negotiations, which start this year, will have to take a far more innovatory approach than simply assuming that the Kyoto targets will be tightened (para 123).

177.  The US has repeatedly stressed the role of technological change in securing greenhouse gas emission reductions. While the Kyoto Protocol should, in principle, encourage technological change, we are not convinced that it has sufficient focus on this central issue (para 132).

178.  We argue that the present "more of the same" approach, relying exclusively on targets for emissions reductions, may not tackle the global warming threat. We urge the Government to help broaden the debate through its membership and current presidency of the G8 and using its position of being internationally respected in the scientific world (para 133).

179.  It could be argued that it is late in the day to be suggesting a significant change of focus in the climate negotiations. But we fear that the "more of the same" approach, focusing on emissions targets, will fail
(para 136).

180.  Climate adaptation should become one of the mainstream elements of investment decisions, particularly with respect to infrastructure, housing, coastal development and international development assistance (para 137).

181.  We urge a thorough review of the Climate Change Levy regime, with the aim of moving as fast as possible to replacing it by a carbon tax (para 140).

182.  There appears to be growing support for the idea that Kyoto-plus should focus on technology and R & D (para 141).

183.  The International Energy Agency has estimated that the R & D expenditure needed, if carbon-free energy is to become economically viable through the use of solar photovoltaics, biomass and carbon sequestration, is around $400 billion. The IEA programme would cost about the same now as the 1963-73 US Apollo programme that put man on the moon cost then—1% of world GNP. Such an R & D programme would be a true global public good: one in which everyone would have a share of the benefits. This is an illustration of what international negotiators might now consider—an agreement on technology and its diffusion (para 142).

184.  The important issue is to wean the international negotiators away from excessive reliance on the "targets and penalties" approach embodied in Kyoto. Hence there should be urgent progress towards thinking about wholly different , and more promising, approaches based on a careful analysis of the incentives that countries have to agree to any measures adopted (para 143).

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