The Stern Review: Another dodgy dossier

[Diamond]

The Stern Review gets short shrift even from scientists who believe that anthropogenic global warming is a serious threat.

The BBC (wonder of wonders) investigates:

When the Stern Review into the Economics of Climate Change came out last year, it was showered with praise.

UK Prime Minister Tony Blair called it, "the most important report on the future ever published by this government".

But expert critics of the review now claim that it overestimates the risk of severe global warming, and underestimates the cost of acting to stop it.

The message from the report's chief author, the economist Sir Nicholas Stern, was simple: if we did nothing about climate change, it would cost us the equivalent of at least 5% of global GDP each year, now and forever.

But if we acted today, we could prevent a catastrophe.

This point was emphasised at the report's launch by Mr Blair who warned we would see the disastrous consequences of climate change - not in some science fiction future, but in our lifetimes.

These figures sounded scary and imminent. But if you read the report in detail, that is not what it actually says.
The 5% damage to global GDP figure will not happen for well over one hundred years, according to Stern's predictions. And the review certainly does not forecast disastrous consequences in our lifetimes.

'Cherry-picking'

The report may have been loved by the politicians and headline writers but when climate scientists and environmental economists read the 670-page review, many said there were serious flaws.

These critics are not climate change sceptics, but researchers with years of experience who believe that human-induced climate change is real and that we need to act now.

Richard Tol is a professor at both Hamburg and Carnegie Mellon Universities, and is one of the world's leading environmental economists.

The Stern Review cites his work 63 times; but that does not mean he agrees with it.

"If a student of mine were to hand in this report as a Masters thesis, perhaps if I were in a good mood I would give him a 'D' for diligence; but more likely I would give him an 'F' for fail.

"There is a whole range of very basic economics mistakes that somebody who claims to be a Professor of Economics simply should not make," he told The Investigation on BBC Radio 4.

You can hear the entire program on the Internet here

 

[a_unique_person]

So you believe their integrity now?

 

[Diamond]

So you believe their integrity now?

Generally no. The BBC was at the end of a long line of economists and scientists who put themselves on record as calling the Stern Report what the BBC belatedly investigated. One half-reasonable report does not make the BBC's credibility that much better. It was one programme, but meanwhile the alarm bells are rung and the contrary evidence is ruthlessly suppressed.

Like you, the BBC can't give up Hockey Sticks, no matter how thoroughly debunked they are. Which is why when you go to the link above, click on "The Evidence" and "Long Term High" you can see the wretched fraud all over again.

If you want to know here are some more people who don't listen to dossiers trumpeted by Tony Blair. Read about them from the BBC? No.

World Economics

The Stern Review systematically overstates projected costs of climate change, partly though by no means wholly as a result of its failure to
acknowledge the scope for long-term adaptation to possible global warming. [It] underestimates the likely cost-including to the world's poor-of the drastic global mitigation programme that it calls for [and] proposes worldwide adoption of a specially low rate of interest for discounting the costs and benefits of mitigation, on the basis of inadequate analysis and without regard for the problems and risks that would result. So far from being an authoritative guide to the economics of climate change, the Review is deeply flawed. It does not provide a basis for informed and responsible policies.

William Nordhaus, Yale:

http://www.econ.yale.edu/~nordhaus/homepage/SternReviewD2.pdf

The Stern Review is a Prime Minister’s dream come true. It provides decisive and compelling answers instead of the dreaded conjectures, contingencies, and qualifications. However, a closer look reveals that there is indeed another hand to these answers. The radical revision of the economics of climate change proposed by the Review does not arise from any new
economics, science, or modeling. Rather, it depends decisively on the assumption of a near-zero social discount rate. The Review’s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of discounting assumptions that are consistent with today’s market place. So the central questions about global-warming policy – how much, how fast, and how costly – remain open. The Review informs but does not answer these fundamental questions.

Patha Dasgupta, Frank Ramsey Professor of Economics, University of Cambridge

http://www.foundation.org.uk/events/pdf/20061108_Dasgupta.pdf

Are the numbers taken in the Review to reflect the two ethical parameters compelling? I have little problem with the figure of 0.1% a year the authors have chosen for the rate of pure time/risk discount (delta). But the figure they have adopted for eta - the ethical parameter reflecting equity in the distribution of human well-being - is deeply unsatisfactory. To assume that eta equals 1 is to say that the distribution of well-being among people doesn't matter much, that we should spend huge amounts for later generations even if, adjusting for risk, they were expected to be much better off than us. To give you an example of what I mean, suppose, following the Review, we set delta equal to 0.1% per year and eta equal to 1 in a deterministic economy where the social rate of return on investment is, say, 4% a year. It is an easy calculation to show that the current generation in that model economy ought to save a full 97.5% of its GDP for the future! You should know that the aggregate savings ratio in the UK is currently about 15% of GDP. Should we accept the Review's implied recommendations for this country's overall savings? Of course not. A 97.5% saving rate is so patently absurd a figure that we must reject it out of hand. To accept it would be to claim that the current generation in the model economy ought literally to impoverish itself for the sake of future generations. The moral of such finger exercizes such as the one above is that we should be very circumspect before accepting numerical values for parameters of which we have little a-priori feel. What we should have expected from the Review is a study of the extent to which its recommendations are sensitive to the choice of eta. A higher figure for eta would imply greater sensitivity to risk and inequality in consumption, meaning that it could in principle imply greater or less urgency in the need for collective action on global warming. Whether it is greater or less would depend on whether or not the downside risks associated with the warming process overwhelm growth in expected consumption under business as usual. To put it more sharply, a higher value of eta could imply that the world should spend more than 1% of GDP on curbing emissions, or it could imply that the expenditure should be less. Only a series of sensitivity analyses would tell. Curiously, the Review doesn't report any such sensitivity analysis.

But the problem is AUP, that the belief engine is very easy to turn on and very difficult to manoevre or steer. Which is why, having believed in something so passionately because it accords with what some innately believe must be the truth, even thorough independent analyses won't cause so much as a pause for thought.