Select Committee on Economic Affairs Minutes of Evidence

Examination of Witnesses (Questions 389-399)

Professor Paul Ekins

22 MARCH 2005

  Q389Chairman: Good afternoon and welcome to the Committee. Thank you for sparing the time to come to talk to us and for the written evidence which has been circulated to the Committee. We are hoping that you can help us further by answering some of our questions but is there anything you want to say before we start or would you like to go straight into questions?

  Professor Ekins: I am very happy to go straight into questions.

  Q390Chairman: One of our main concerns in this inquiry is, however inexact it will be, the costs and benefits of tackling climate change. Can you offer us any advice on the relative magnitudes or is it misguided to think that any direct comparison on costs and benefits can be made?

  Professor Ekins: I will try to answer the second part of the question first, if I may. In any economic matter, it is clearly not misguided to ask for some insights into the costs and benefits of the matter in question. Climate change is largely a result of economic activities and it will have considerable economic impacts on some estimates of what those impacts are likely to be. It is perfectly sensible to try to estimate the costs and benefits of climate change. At the same time, it is clear to me that climate change is more than just an economic matter; it is also a moral matter to do with whether present generations have rights to inflict climate instability on future generations and whether people living in rich countries have rights to the majority of emissions which cause climate change with impacts on people living in poor countries who have very few benefits from those emission-causing activities. There are important justice issues as well as economic issues. Those are not possible to take into account by considering costs and benefits of climate change. One then has the very serious practical issues to do with estimating these benefits and costs. As I am sure you must know by now, both sides of the equation are unfortunately afflicted with great uncertainty. For my money, the costs of abatement—of reducing emissions in order to mitigate climate change—are rather easier to estimate certainly in the near term. There are of course uncertainties as to how technologies will develop and what new technologies will be invented which may help us to reduce emissions in the future. With regard to the costs of the damages from climate change, I take those to be very uncertain indeed. One paper I saw recently that was reviewing a subject put them at anything between nought—in other words, no damage—and £1,000 per tonne of carbon, which is three orders of magnitude, which is rather large. I am doubtful about how useful a number that ranges through such a wide range as that is for policy purposes. Where one comes down in that range seems to depend largely on one's perceptions of the desirability of inflicting risks of possibly very large costs. You will be aware of some speculation as to what rapid climate change might mean. The Government's chief scientific adviser has talked about it in quite graphic terms over the last few months. If one takes these potentially catastrophic impacts seriously, one can arrive at these quite high numbers. If, on the other hand, one thinks that they are so unlikely that they can be largely dismissed then one can arrive at very low numbers. I am very sceptical about attempts to put numbers on the damage costs of climate change. I made that position quite clear when I reviewed some papers that Defra were circulating on the subject recently.

  Q391Chairman: Can I ask for your view on the moral questions that you raise? We have had very distinguished people here who say that there is a moral question and, as they would pose it, it is: should we be spending the money to deal with the problem of the poor people in the world 50 or 100 years from now when, based upon all the forecasts, they are going to be as rich as the United States is going to be in 50 or 100 years' time, if you take the IPCC process, or would we be better to spend the money now on helping those who are clearly poor at the moment and have all sorts of needs that require resources to put right? That was the moral question that was put to us and I do not know if you want to comment.

  Professor Ekins: I am aware of that question. I believe some distinguished economists have considered it in some detail in Copenhagen recently. My problem with it is that I do not think that is the political choice before us. I do not see any significant political process that is saying, "Let us greatly increase the economic development aid that we give to poor countries because it is a good thing in itself and because this may go some way towards enabling these people to endure climate damage in the future." Quite the reverse. With some honourable exceptions, economic development aid budgets are declining round the world. Therefore, I do not see that bargain being struck. I think those who put forward that as a bargain that might be struck, if I may say so, were not terribly aware of the sorts of political processes that operate in the real world. There is also an issue of responsibility. It may be that we do not have a moral responsibility to help poor people. That is very often referred to as charity and that is something which comes out of individual conscience. On the other hand, it may be that we do have a moral responsibility not to damage the life prospects of poor people. I take the continuing carbon emissions from the rich parts of the world, which are in excess in per capita terms to those in poor parts of the world, as potentially very materially damaging the prospects of poor people, not just for future generations but in the current generation, perhaps in relatively few years and it is perhaps already happening. There are people in the small island developing states, who run risks of being inundated, who consider very strongly that their life prospects are being damaged now by activities which are primarily benefiting those in rich countries. The nature of the moral argument is rather different but even if it were not I do not see the political processes afoot that would allow that sort of choice which you have put to me.

  Q392Lord Lawson of Blaby: You obviously feel these moral issues very strongly and in your eyes they are paramount. It does raise doubts in my mind. First of all, you say there is a moral obligation to help poor people but, as the Chairman pointed out, what we are talking about here is taking measures to help poor people who in 100 years' time will be considerably less poor than the people in the developed countries are today. This is not helping poor people; this is helping people who may be relatively poor. If there is a cost to development in the measures that are chosen, that means their rate of economic development in these countries will not be as great as it would otherwise be. What is the morality in a world economy, of which they are an important part, developing more slowly and less successfully than might otherwise be the case? In other words, the morality is very difficult. You say you see no prospect of that deal coming to light, but if that deal that the Chairman outlined is desirable, then surely it is right to try and educate public opinion and make that a political reality, because it is clearly not an impossibility.

  Professor Ekins: On the second point, yes, to those who wish to work politically for such a deal to be acceptable I would wish God speed. I would very much hope that the two Houses of Parliament in this country would be part of that. For my money again, there is a rather stronger possibility of recognising that the International Framework Convention on Climate Change, which has already been put in place, is an instrument whereby the global community can come together and talk about a particular issue which on some estimates is putting a threat on the lives not just of poor people but of medium poor people and even rich people in all countries, because the potential for a seriously unstable climate is likely to affect everybody. At the moment, that is the best prospect for averting that particular threat but I would not want to stop anyone who wanted to work seriously for the other part of it.

  Q393Lord Marsh: Is not one of the problems with that that, first of all, some relatively poor countries—I was about to say China but China is not really poor—are massive polluters? They would not want to join in presumably, but also the political scenario that we have been discussing would almost always mean that an enormous amount of pressure would come on the United States as the people who were underwriting it.

  Professor Ekins: The United States per head of population do produce by quite a large margin the largest emissions of greenhouse gases. Therefore, in a sense it is quite right, if that is the cause of the problem, that the focus should be on them to provide some part of the solution. Everyone recognised that the Kyoto Protocol, which of course excluded China and other developing countries from making commitments, was only a beginning. Had the developed countries embraced the Kyoto Protocol with a little more enthusiasm than some have, had they made great strides towards reducing their greenhouse gas emissions and had they begun to show that decent, civilised life was possible while you are reducing your carbon emissions, which I believe to be the case and which I believe in many ways to be the strategy of this government, for the next round the developing countries might have been much more likely to participate. China clearly does produce large emissions in absolute terms but it has rather a large population. It still produces fewer emissions in absolute terms than the United States does, which has a far smaller population. I do not think it is therefore unreasonable for those countries to suggest that developed countries need to take a lead in this matter. Some of them indeed are trying to do that. Coming back to the moral question, assumptions about continuing and indefinite economic growth are fine and certainly they bear out our experience of the last 150 or so years. They are not however necessarily characteristic of the human condition. There are some parts of the world which do not experience economic growth. There is a lot of focus at the moment on Africa. As you probably know, such estimates as have been made for climate change suggest that Africa might be quite badly impacted by climate change and that might make it even less likely that it would achieve economic growth. I do not think we can necessarily assume that poor people in poor countries are going to be that much richer than we are now although I very much hope that that will be the case. I am also not convinced necessarily that actions to reduce emissions in developed countries would slow the rate of economic growth in developing countries. Indeed, I have heard it said that one of the results of such actions might be that relatively carbon intensive activities would move to developing countries and might even increase their rate of economic growth. That would also increase their emissions and that would serve to undermine the emissions reductions in rich countries. What it would also do is move the per capita emissions between the rich parts of the world and the poor parts of the world closer together and might make it easier to argue for a kind of global compact to reduce greenhouse gas emissions, because clearly this is a global problem and it is very unlikely even that a reasonable number of countries coming together can resolve it if some of the major polluters remain outside any meaningful framework.

  Q394Lord MacDonald of Tradeston: Economic progress over the centuries has destroyed and disrupted many cultures and we still lose many languages by the year. No doubt we have lost many species as well. Do you see climate change being different in kind from what has been happening over the centuries in that progress, and how would you measure the loss of species or cultures? Would that be a moral, a political or an economic issue for you?

  Professor Ekins: I am not a climate scientist. I am an economist so I must take these issues on climate impact a bit on trust. I listen therefore to people either who are climate scientists or who seem probably to understand climate science better than I do, people like the government chief scientific adviser. He certainly takes the potential impacts of climate change very seriously indeed. He has called it the most serious threat facing humanity in the long term. I listen to that. I then listen to what some of the impacts might be. I note that climate scientists now are talking about there being no ice on planet earth, which is a condition which I believe has not existed on planet earth before. This is not something I remember them talking about 15 years ago and it is still not something that is given very great credence in the last IPCC report. I notice that these kinds of catastrophic scenarios are coming up in discussions by climate scientists rather more often than they did. That, as you probably know, would result in a sea level rise of many tens of metres. In papers that I have read about damages to climate change, the authors have been speculating quite seriously about the possibility of having to relocate the world's great coastal cities, for example. That would include London because although we are not exactly coastal we live on a major coastal, tidal river and it is very unlikely that we can build a Thames barrier that would withstand, say, 60 metres of sea level rise, which is the kind of number that might occur if all the ice on earth were to melt. These are very big effects and they do seem to me to be qualitatively different as well as quantitatively different to the sorts of ongoing, incremental changes which we have been experiencing in the past and which one may or may not regret but they nearly always seem to come with some benefits attached to them as well. Some people regret the loss of species, cultures and languages very much and other people seem to live perfectly well without them. That seems to be all part of the run of changes in societies but these kinds of changes may well not be incremental. They may well be quite sudden and they may well be rather larger than we have become used to trying to cope with. Therefore, it is not surprising that people talk in terms of precautionary action to try to stop them happening.

  Q395Lord Elder: My question relates to the issue of how to persuade UK taxpayers to meet these costs. How would you go about persuading UK taxpayers and what argument would you give them to face up to the reality that we are asking current taxpayers to meet a cost when they do not necessarily see a benefit, apart from this rather feeble future? It is certainly not financially obvious why they would regard it as beneficial to meet the costs now with no obvious comeback. How do you think policy makers should go about convincing UK taxpayers that it is a good idea?

  Professor Ekins: It is difficult for policy makers. The world's politicians who are interested in trying to make that case are finding it difficult. They could make the case a bit harder than they currently have for just how much a stable climate benefits us. These various terms of climate change and global warming can sometimes in popular parlance be a little misleading. There are many moments in the winter when I am sure all of us would think a little global warming would be a good thing. I have heard that in newspapers. It seems to me to rather undermine the seriousness of the prospect because climate instability is what we are likely to be talking about. Those kinds of arguments could be made more strongly. Then we come to this issue of costs. I am sure you have had lots of costs presented to you and different economists tend to have different opinions about that, as about many things. I am an economist so this is something I try to look at quite closely. If I thought that the kind of objective of the White Paper of putting this country on a 60 per cent carbon reduction trajectory by 2050 would be the end of civilised life as we know it, I cannot imagine any politician would be able to sell it to the public because of the benefits being uncertain and the costs being all too real. This was the purpose of submitting the evidence to you that I did submit: the Government did not do a bad job in estimating the costs of moving towards that sort of 60 per cent reduction. If you remember, it estimated that it might cost this country between half and two per cent of its gross domestic product. Two per cent of a large number by 2050—and the GDP of the UK, if we get the economic growth that everyone anticipates, will be several trillion—would be many billions. That seems like a lot of money. On the other hand, you could express that cost in a number of different ways. One way is that, if the economy is growing at two per cent, it means this country will reach in 2051 a GDP which it would otherwise have reached in 2050. In other words, we will have sacrificed one year's incremental growth. I am not saying that is nothing but if you express the cost like that and people imagine it is not billions of pounds being extracted out of their bank accounts here and now, but they perceive that these costs would be widely shared over the economy as a whole and the benefit would be climate stability if all other countries signed up to a similar package, perhaps the basis of a political deal between this government and the people might be struck.

  Q396Lord Elder: Are you saying that instability would be an easier thing to sell at the moment than the more qualifying climate change with 20 metres of sea rising?

  Professor Ekins: It is what climate scientists think is currently more likely, which is a very important point. All the catastrophic stuff is important to take into account and it does justify to some extent precautionary action, but climate scientists still think it is relatively unlikely and it is certainly not going to happen by 2050. I say "certainly". Nothing is certain in this world. Having looked at the way in which climate science has developed since 1990 when I started looking at these issues, I have been very struck at the rate at which climate scientists have become more concerned about this issue. Even so, the current prospect is much more to do with unstable climate, more water falling more quickly, causing floods, for example, or less water falling over a period of time, causing droughts in certain parts of the country, getting water stress in summer in parts of England that do not appreciate water stress—those sorts of issues rather than the big issues which I was talking about.

  Q397Lord Elder: The other problem in convincing people seems to me that unless everyone else is doing much the same there is not much point in the UK doing it.

  Professor Ekins: This is a problem of collective action but I rather thought that is what governments were invented to address. They were invented to deliver collective goods which individuals acting for themselves could not achieve. The political process by which they might achieve this is obviously a very complex one, as anyone who has even begun to look at these climate negotiations can appreciate. I do not think one ought to underestimate the possible power of firm leadership and that is what is required among countries which seek to move in this direction.

The Committee suspended from 4.04 pm to 4.14 pm for a division in the House

  Q398Lord Goodhart: Some people say that the Kyoto Protocol does little or nothing about rates of global warming and it would not make much difference even if the USA did sign up to it. What do you think will happen after Kyoto? Will there be an agreement that will simply tighten emissions targets or do we need something of a different order that may result in being able to get the US and other countries into an agreement about what we should do?

  Professor Ekins: On your first point, if Kyoto was it, it would make absolutely no difference to anything in terms of what was likely to happen to climate change. It only makes sense as part of an ongoing process as I think I intimated earlier on. There was a perception among the optimists of the Framework Convention that Kyoto would bring developed countries on board. Those countries that had originally signed it would ratify and, on the basis of that start, there would be further emission cuts from the developed countries, the developing countries would be drawn into at least discussions about cuts, if not cuts themselves, and there perhaps would have been a third phase whereby developing countries would have come in and taken on target commitments themselves. That is probably a bit too neat and tidy for global, political processes. There were many who did not think anything would happen to Kyoto at all and thought it would simply not come into force because of insufficient ratification. I think it is probably a good thing that that is not the case. It is at the moment the only game in town and the countries that have ratified it and are being bound by it had better do their best, if they want anything else to come out of it, to meet various targets which they have now taken upon themselves. For the future, if a reduction in emissions is the purpose of the Convention—and that is how it has been largely defined—it is difficult to imagine how that can be achieved without some form of target setting and agreements on emissions reductions all round etc. It may be that one will need to focus on the means to achieve reductions for a little bit in order to try to convince the United States, if that is the country that needs convincing, that this need not necessarily mean the complete end of the American way of life, although it may well mean the end of some aspects of the American way of life, if we were to get serious carbon reduction, and it would mean the end of some aspects of other ways of life probably. Cheap air travel springs to mind. Undoubtedly technology can achieve quite a lot and we could probably increase the rate of development of low carbon technologies if there was a greater effort put into that. The United States is quite good at developing some new technologies, but not all, and if it was prepared to spend large sums of money in that direction in some globally coordinated way that would be an alternative way perhaps to see whether one could draw some of the sting from perceptions that these carbon reductions are going to be excessively costly. That was one of the strong perceptions underlying the Bush administration's decision to withdraw from Kyoto.

  Q399Chairman: You are a member of the Royal Commission on Environmental Pollution and it is the Commission's past work, as I understand it, that prompted the government's 60 per cent CO2 reduction target for around 2050. What is your justification for this figure and can you tell us how the Commission went about assessing the costs of achieving it?

  Professor Ekins: I was not a member of the Commission at the time that it produced that report, so obviously I was not privy to the discussions that it had. I was appointed in 2002 and the report was published in 2000. However, as you kindly sent me notice of the question, I did go back to the report and have a look at it. I know it reasonably well anyway, so I am able to answer the questions that you put to me, but I should stress that I was not a Commission member who took the decisions to proceed in the way that they did. The 60 per cent figure came out of a perception that the concentration of carbon dioxide in the atmosphere should be stabilised at 550 parts per million. This obviously relates to the complexities of climate science. They did some calculations to show that if a country like the UK were to contribute to such a stabilisation, which is about twice the pre-industrial concentration of carbon emissions in the atmosphere so it is already a very considerable increase over what it used to be, there was a perception by climate scientists that that might be tolerable, whatever that might mean. They thought that a 60 per cent cut by 2050 and an 80 per cent cut by 2100, which is not something the Government has yet pronounced on, if adopted by other developed countries, would allow some growth in developing countries etc, and would enable stabilisation at that level. That was the motivation behind it. They did, as you would expect, consider the issue of economic appraisal and there is a section in the report on economic appraisal. They noted, as I did right at the beginning, the very great uncertainties in this area, which in 2000 were even greater than they probably are now because quite a bit of science has been done in the interim, especially in respect of the estimates of the impacts of climate change. They also came down quite firmly on the sorts of moral points that I align myself with, which were that the present generation had a duty not to cause dangerous climate change and therefore we should put ourselves on that 60 per cent carbon reduction trajectory. There is rather little economic appraisal in that report for those reasons. The great thrust of the report is to say, having decided on 60 per cent, what were the ways in which society might achieve that and the Commission elaborated four scenarios with combinations of nuclear power, renewables, carbon capture and storage from fossil fuel stations and energy efficiency. That is the pathway towards the 60 per cent carbon reduction target. That is the way it was enunciated without any estimate as to what the costs of achieving it might be.

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