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Why Are We Waiting? The Logic, Urgency, and Promise of Tackling Climate Change

The problem of climate change is the most salient environmental problem confronting humankind today. In 2006, the prominent economist Nicholas Stern published a tome on the climate change problem, which is now referred to as the Stern Review (STERN, 2006). This book argued that the damage from climate change was large and that drastic actions were needed to reduce greenhouse gas emissions immediately. The Stern Review has been reviewed trenchantly by eminent economists such as NORDHAUS (2007) and WEITZMAN (2007). The principal problem that economists have with the basic conclusion of the Stern Review stems from this book’s assumptions about the discount rate and the utility function. The book being reviewed here accounts for the post-2007 literature on the climate change problem, but its basic conclusion is the same as that endorsed in the Stern Review. The key difference is that in contrast to the dense Stern Review, this book is a lot more user friendly and its basic argument calling for urgent action now is developed more lucidly. Rather than provide a tedious chapter by chapter review, in what follows I shall sample eclectically from the book’s contents. This ought to give the reader an adequate flavour for the intellectual contributions of the book. The ten chapters are divided into three parts. Part I delineates a planet between peril and prosperity; Part II focuses on the economics and the ethics of climate change; and Part III concerns the ways in which actions around the world may be taken to address the problem of rising greenhouse gas emissions. Chapter 1 quickly gets to the heart of the matter. We are told that ‘the risks over the next hundred years, across all sectors of every economy on the planet, could be immense, as could the risks of severe and extended conflict. And it tells us that delay is dangerous’ (p. 3). Stern goes on to point out that because the outcome of continued greenhouse gas emissions is unclear, the underlying issues involve the management of risk and uncertainty. As an economist, Stern no doubt is aware that risk is not the same thing as uncertainty. Yet, he never clearly explains when we are dealing with risk and when it is uncertainty that we have to contend with. The ‘meat’ of this book lies in the four chapters that comprise Part II. Here the author discusses the many problems he has with integrated assessment models (IAMs). According to Stern, the basic problem with IAMs is that ‘they have assumed strong underlying growth, plus only modest damages from big increases in temperature, plus very limited risk’ (p. 131). Stern approvingly cites the work of other researchers who are critical of IAMs and he complains that the most commonly used IAMs such as the DICE model ‘are not equipped to deal with the kinds of temperature changes and the possible impacts that scientists are worried about’ (p. 141). Clearly, models are stylized representations of reality and, as such, they cannot reasonably be expected to account for every conceivable objection from a given critic. In addition, the IAMs on which Nordhaus and others have based a number of their conclusions that run counter to those of Stern represent the state of the art in economic modelling. Even though most economists find such IAMs to be useful, the author, somewhat unconvincingly, asserts that IAMs ‘mislead and misguide policy discussions [...]’ (p. 148). Discounting is thoroughly discussed by Stern in Chapter 5, under the ponderous title ‘intertemporal values and valuations’ (p. 151). The author does a good job of pointing out that economists are not always as careful as they should be in comprehending the ethical implications of their modelling. However, this discussion does contain some inscrutable assertions. Here are two examples. On p. 154, the author says that when we examine different emissions paths in terms of the consequences and the risks they bring, it follows that ‘there is a very powerful case for strong and urgent reductions of emissions flows [...]’. It is certainly not obvious that this is necessarily the case. Second, with regard to the process of climate change, Stern says that we ‘have a complicated dynamic process, with major and disruptive change, with learning and discovery, and where risk is of the essence’ (p. 155). Even though the author uses the term ‘risk’ here, some thought will convince the reader that what he is really talking about is uncertainty where the pertinent cumulative probability distribution functions are unknown. Regional Studies, 2015