Warming World, Cooling Profits?

Climate change could send the global economy into a serious recession, according to a report released today by United Kingdom chief economist Nicholas Stern. The study also makes recommendations on ways to slow and potentially stop further climate change.

Most studies on the effects of global warming have predicted that the detrimental effects on the world's economy will be minimal to modest. Those forecasting a more radical impact assume that changes in weather patterns will wreak havoc on fishing and farming and will displace millions of people via hurricanes, droughts, floods, and other extreme weather events. Yet even these studies don't go far enough, according to Stern's report. Part of the problem, he and colleagues note, is that previous economic studies underestimated the rise in global temperatures caused by climate change. Using a more accurate estimate, the group predicts that climate change could slash the global gross domestic product by 5% to 20%.
On the positive side, countries could reduce this loss to 1% by investing in more environmentally friendly technologies, according to the report. Toward that end, Stern's team calls for an integrated international approach to tackling global warming. But it also reminds rich nations that they have to bear the brunt of the economic investment, especially those in Europe and North America that are responsible for 70% of all carbon dioxide emissions to date.
"There is much in the report that most people can agree with, such as sustained investment in research on developing new carbon free technologies," says economist Richard Richels, director of global climate change research at the Electric Power Research Institute, a non-profit based in Palo Alto, California. But he notes that the report makes certain assumptions to calculate the costs of curbing global warming, such as assuming that countries will adopt the cheapest ways to reduce emissions. This might not always prove feasible, he says, in which case he says the costs would be much higher. "This is not an argument for inaction, but can affect what is realistic in the short term."