Memorandum by Christopher Beauman, former
Adviser, Central Policy Review Staff, Cabinet Office
1. I have followed closely the very interesting
Hearings of the Committee, in person and through transcripts.
It would be presumptuous to second-guess the wide range of expert
and distinguished witnesses. However as an interested layman,
I would like to comment briefly on three related topicsthe
IPCC process and the accessibility of scenarios, the role of economists,
and, briefly, the contribution of Bjorn Lomborg, and to make two
recommendations.
IPCC/SCENARIOS
2. It has clearly emerged that the IPCC
is a systematic, broadly-based international process, with all
the strengths and weaknesses that that implies. The weaknesses,
from viewpoint of economics and of public policy, chiefly concern
the ponderousness of the process, and the difficulty of understanding
the underlying assumptions within it. This is important because
the IPCC process is the foundation both for intergovernmental
agreement on climate change and for the mobilisation of domestic
support for action.
3. One example may make the point. In October
2003 Goldman Sachs published a much-discussed report "Dreaming
with BRICS: The Path to 2050" which suggested that China
might overtake the US economy in size in around 2041, and that
by 2050 China's per capita income would be close to that of the
US in 2000. Subsequent to that report the explosive growth of
China's economy has had a dramatic and unpredicted effect on commodity
markets, and China's production of steel, 114mt in 1998, is no
longer on a expected trajectory of doubling during this decade,
but will almost certainly have tripled by 2006. This obviously
has a giant effect on China's emissions of CO2, directly, and
indirectly though its carbon-intensive power industry, andalong
with all the parallel developments in Chinait raises the
base from which China's sizeable emissions will continue to rise
towards 2050.
4. The implications of these developments
will have been very quickly absorbed by major UK multinationals
like BP and RTZ, and factored into large investment programmes
to meet the markets of the coming decade or two. But it is not
clear how and at what speed the IPCC process can deal with absorbing
new economic information of this kind. Yet the credibility of
the underlying assumptions, especially on the six major emitters,
the US, China, the EU, Japan, Russia and India, is essential to
the strength of the case for action on climate change.
5. If the UK is to play a leading role both
in international agreements and in exemplary action, then it also
needs to lead on the analytical underpinnings, especially where
they are controversial. When the Chancellor of the Exchequer publishes
the UK Budget, he also publishes a Red Book of assumptions, which
are then scrutinised and criticised by a range of independent
commentators. The US National Intelligence Council published in
December 2004 its latest scenario-based geopolitical "Mapping
the Global Future", based on widespread consultation. What
we need is an equivalent UK publication for climate change, in
order to stimulate over years much greater understanding both
domestically and internationally, and to provide some common ground
for the discussion of potential tipping-points. It should also
be accessible: rather than the style of the IPCC's publications,
which are more cited than read, a good model would be the reports
of the Royal Commission on Environmental Pollution.
I would, therefore, RECOMMEND that the UK should
develop the capability to present and publish the latest information
and assumptions on likely international developments in long-run
economic growth, in the stock and flow of GHG emissions, and the
implications for the range of temperature changes, in comprehensible
scenario form, designed for accessibility and for public discussion
and debate.
ROLE OF
ECONOMISTS
6. Unfortunately economists have, so far,
badly lagged the climatologists. As Dieter Helm has written "the
usual economists' toolbox looks puny against the scale of this
challenge". In "Economic Models of Climate Change: a
critique" (2003) Stephen DiCanio wrote that "The climate
problem hinges on issues which are very poorly handled by conventional
energy economicsmatters of distributional equity, nonmarket
environmental quality, intergenerational fairness, and the internal
workings of firms".
7. In the UK there appear to be only two
well-recognised economists with a solid reputation in this area,
David Pearce and Dieter Helm. For much of the analysis, the UK,
like China or India, has to depend on a small number of US economists
eg at Yale and Stanford. It would appear that the latest efforts
of the ESRC have been focussed on establishing and supporting
the Tyndall Centre, which is becoming an important climatological,
rather than economic, centre.
8. The big gap appears to be the economic
analysis of possible catastrophe. Much of the economic analysis
assumes gradual change. Yet one of the main talking-points at
the recent Exeter conference was the wide range of possible global
and regional catastrophes being assessed by the climatologistsover
various time-scales. William Cline was on to this in his 1992
"The Economics of Climate Change", but most subsequent
economic analysis appears to have downplayed or ignored this.
9. This is where an integrated analysis
needs to take account of the relationship between economic growth,
the stock and flow of emissions, and the climatologists' evolving
views on tipping-points. It needs to absorb the latest empirical
climate research as it emerges year-by-year. And it may, as one
witness suggested, need to draw, for its intellectual underpinnings,
on the well-developed work in the financial analysis of futures
and options. Only then will there be a robust base for public
policy.
I would, therefore, RECOMMEND that the ESRC
substantially enhance its support for the economic analysis of
climate change, in order to build a UK cadre of recognised economists
in this field who can aim to match or surpass those of the US
and can lead the domestic and international debates on public
policy.
BJORN LOMBORG
10. Bjorn Lomborg has played a significant part
in stimulating debate, and his charm and energy make him on first
impression a persuasive figure. But it is now clear that much
of his effort is misguided or worse. This emerges from an analysis
of his 2004 so-called "Copenhagen Consensus", involving
an array of economists, including two major figures, Thomas Schelling,
who first suggested that developing countries might benefit more
from increased aid than from action on climate change, and Robert
Mendelsohn, described by The Economist as "a conservative
Yale economist who was an official `critic' of the climate paper
in this process". The outcome of the Copenhagen Consensus
was an agreed ranking of climate change as one of the least important
major global challenges. According to The Economist of 5 February
2005, Schelling has now said that "presenting climate change
at the bottom of the list "(for investment) "as `bad'
is misleading", and Mendelsohn went further, worrying that
"climate change was set up to fail."
11. It appears that the "set-up"
was based in part on the disjunction between the original question
for the Copenhagen Consensus participants, who were asked for
the ranking of a hypothetical $50 billion of investment to address
global problems "over four years" (see B LomborgGlobal
Problems, Global Solutions (2004) p 3), and the conclusions (eg
p 605) and subsequent publicity which made little or no reference
to "over four years".
12. This shows the importance of the twin
recommendations set out above. Without (a) an authoritative, accessible
publication of latest information, developments and scenarios,
and (b) a broad and international range of leading economists
integrating the evolving research of climatologists into economic
analysis and recommendations for public policy, the whole debate
is vulnerable to being hijacked or unhelpfully politicised.
17 March 2005
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