Climate change could lead to greatest market failure ever: Nicholas Stern

Stern, who has been tracking the impact of the latest climate science on economics, said the consequences have been far more devastating than he thought.
Climate change could lead to greatest market failure ever, says Nicholas Stern(HT File Photo)
Climate change could lead to greatest market failure ever, says Nicholas Stern(HT File Photo)
Updated on Feb 17, 2019 07:10 AM IST
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New Delhi | ByJayashree Nandi

Climate economist Nicholas Stern said he had understated the risks of climate change and the case for taking action in his landmark 2006 report titled the Stern Review on the Economics of Climate Change that said climate change could lead to the greatest market failure ever.

Stern, who has been tracking the impact of the latest climate science on economics, said the consequences have been far more devastating than he thought.

Today, if ambitions are not raised to meet the target of keeping global warming under 2 degrees Celsius over pre-industrial levels at climate negotiations (COP 26) to be held in 2020, the human cost in vulnerable countries like India will be too high and lead to hundreds of millions of people migrating in search of liveable places.

Nationally determined contributions (NDCs) by 196 countries at COP 21 are not consistent with the Paris target of keeping global warming well below a rise of 2 degrees C.

Countries are expected to raise their ambition in NDCs at COP 26, which will be a critical moment for the planet, said Stern, who is an economics professor at the London School of Economics.

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“In 2005, when we were drafting the review, it was already very clear that unmanaged climate change is extremely dangerous. But the evidence that has come through now in the dozen years since our work has become ever more worrying. Emissions haven’t fallen, temperatures have been rising faster and the consequences have come through quicker than we thought in terms of melting of glaciers, storms, heat waves, loss of ice from the two poles. I underestimated the risks,” Stern said.

On a positive note, however, a lot of progress has taken place in the past 12 years.

“Who would have thought that renewable energy would already out-compete the fossil fuel industry all over the world, including in India? We were being told that solar is expensive, intermittency and storage was a problem. Who would have though India would ban sales of vehicles with internal combustion engine by 2030?” he asked.

The Paris Rule book that lays the road map to implement the Paris agreement has left several loose ends, he said, but all action depends on how countries improve their NDCs in 2020.

“There should be zero fossil-fuel emissions from the power sector by 2050, ideally earlier. We need to greatly expand the power sector because electricity will be very important for transport. Coal has to be left in the soil,” Stern added.

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India will have to improve on its NDC, particularly with air pollution in mind, Stern said while applauding India for taking a leadership position for action on climate change.

“India is changing enormously rapidly, the targets for renewable energy that India set in Paris will be exceeded by far. I hope and expect India will recognise it in the new NDCs prepared next year. In 2015, India still didn’t appreciate (I speak as a friend of India) the awful costs of air pollution,” he added.

But if India and the world failed to recognise the need to limit global warming to under 2 degrees Celsius, vast parts of the Indo-Gangetic plains will become unlivable between the middle and end of the century.

“If the world went on to 3 to 4 degrees Celsius rise in global warming in this century, in India we would see a big part of the snows and glaciers from the Himalayas disappear and the great rivers of the world — Yellow, Ganges, Yangtze, Yamuna, Mekong — which are dependent on glaciers for flow and storage will shrink too. These regions will see droughts, uncontrollable floods, intense landslides and avalanches more frequently. Some parts of the Indo-Gangetic plains will become inhabitable because of a combination of heat and humidity,” said Stern, explaining that India is likely to see extremes because of its vulnerability. “Hundreds of millions of Indians will have to move.”

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Stern believes that GDP loss is not a good indicator of mass destruction of lives and livelihoods climate change can lead to. “For a comparison, air pollution alone is costing India 5 to 10% of GDP through loss of life,” he said.

The costs of transition to a low carbon economy for India will be negative, he said at the release of the New Climate Economy report 2018 in New Delhi.

The report, published by the Global Commission on the Economy and Climate, has concluded that making a transition to low-carbon growth path could deliver a global direct economic gain of $26 trillion through to 2030 compared to business as usual. It also said that ambitious climate action could generate over 65 million new low-carbon jobs in 2030.

Also read| Need new funds for climate action: India

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