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Wednesday 30 April 2008, 4:52 PM
Lord Stern: Downturn won't affect climate change efforts
Being green is all well and good but how long will companies continue to worry about the environment if the financial downturn affecting the US bites harder and really impacts the UK?
That was one of the questions posed to Lord Nicholas Stern, of Stern Review fame, at a business conference this week held at Wembley Stadium in London. Stern's response was in line with the remit given to him under the terms of the Stern Review, published in 2006, which set out to look at exactly what impact climate change would have on the UK economy.
(photo credit: Nigel Stead/LSE)
Rather than agreeing that companies would indeed cast their high-minded environmental ideals to the wind, if times get harder, Stern claimed that being green is the only economically sound policy in the long run.
"I think that difficult times should not derail this. There will be some ups and downs over the next fifty years but we have to push through that," he said.
Stern's 2050 forecast refers to a time-line he presented earlier on his speech to around 1000 business leaders at the event organised by US software-maker SAS. The Lord and London School of Economics professor claims that rich counties will need to commit to around an 80 percent cut in carbon emissions by 2050 to avoid the 5 degree rise in temperatures that scientists have forecast for the end of the century if we continue to produce carbon at the present rates of growth.
When economies being to shrink, sensible companies look to do two things according to Stern – look hard costs and protect their assets. Reputation is a big asset for many firms and abandoning environmental commitments can have a big impact on how a company is perceived – not something that any firm wants to attract when facing financial pressures.
For its part, business intelligence vendor SAS is hoping to that it will be able to sell its analytics tools to companies who want clearer metrics on how energy efficient there businesses actually are - so is firmly on-side with Stern's message that green doesn't have to be mean when it comes to making money.
Stern's speech at software conference came on the same day that he published a set of proposals for a global deal on climate change at the London School of Economics and Political Science.
The report, Key Elements of a Global Deal, includes input from HSBC, IdeaCarbon, Cambridge University, Lehman Brothers and consultants McKinsey and suggests a set of proposals to "advance the climate change debate" ahead of the United Nations Framework Convention on Climate Change 15th Conference of the Parties in Copenhagen in December 2009.
According a statement issues by the LSE, the report examines the implications of the commitment to cut global greenhouse gas emissions in half by 2050 (taken at the G8 summit in Heiligendamm in June 2007).
Tackling climate change is the only sensible course open for businesses, Stern claimed in his conference speech. Doing nothing would have far more impact on the global economy than spending to tackle climate change, he argued.
"It is not doing anything about climate change that will affect growth. I don't think that this has a negative story, it can be a very positive strategy," he said.
And rather than being the fault of rapacious corporations who have bled the world dry in an extricable drive for shareholder returns, the beast of commerce and financial markets actually hold the key to tackling climate change, says Stern.
"The right reaction is not to abandon markets but fix the problems," he said. The problem is that markets have not been working properly up until now – the underlying economics of business have directly contributed to climate change and global warming by not making polluters pay. "People do not pay for the damage that they do," said Stern.
The other contributing factor is that the last 10 to 15 years have been a period of unparalleled growth. However during this prosperous period, companies have got sloppy when it comes to managing risk. This can be seen in the recent sub-prime mortgage collapse, which was basically built on financial institutions ignoring risk. The same goes for climate change. Just like selling mortgages to people who can't pay them back, businesses and individuals have been generating carbons with no thought about how it might impact them in the long term.
"During periods of growth people get careless. What is happening now is that people are taking risk much more seriously," said Stern.
Stern also couldn't help but use the forum to take a swipe at some of the figures that he wasn't able to comment on when acting on behalf of the government – having discharged his duties to the government and returned to his role as a professor at the London School of Economics. Top of the list was ex-Australian Prime Minister John Howard who Stern described as "appalling" during a panel debate following on from his keynote at the conference. "It's really nice to be outside of politics so you can refer to people like John Howard as appalling."
Stern's views on Howard no doubt stem from the former Australian PM's poor record on the environment – including joining the US in not signing up to Kyoto - which many claim played a big part in his Conservative governments party losing an election last November after 11 years in power.
PreviousComments on this post
I agree, many of these efforts are about saving energy, others are required by law or they're things they can use in marketing campaigns so dropping them wouldn't make much difference.
I am not sure that Lord Stern is not being a bit over optimistic about how green planning will be hit by a recession or downturn. I think that many of the energy and cost saving projects will continue as they are not altruistic or really enviromentally motivated - but rather about reducing expenditure at the end of the day.
However some a lot of truly green or carbon cutting projects require up front investments - that may or may not reap returns over time - and as capital becomes more scarce it will be interesting to see if these projects are increasingly shelved.
We have seen this week that Shell has pulled out of a big wind farm project:
Shell pulls out of big wind farm
http://news.bbc.co.uk/1/hi/business/7377164.stm
It is interesting that Lord Stern describes John Howard as “appalling”. Whatever you think of John Howard, his government did launch the ground-breaking Global Initiative on Forests and Climate in March 2007 to help address the problem of global deforestation. Some people might argue it was an electoral ploy during a difficult election year, but nevertheless, the launch of the Global Initiative on Forests and Climate, and the High Level meeting on Forests and Climate held in July 2007, raised the profile of the problem of global deforestation. This issue was on the agenda of the Asia-Pacific Economic Cooperation economic leaders’ meeting hosted by Australia in September 2007. I suggest this recognition was useful for the UN Climate Change meeting in Bali in December 2007, when delegates agreed to discuss the inclusion of forest protection in the post-2012 climate change agreement.
Many people may be unaware that the Kyoto Protocol actually deliberately excluded protection for forests. Kyoto negotiations focused on establishing a model for limiting fossil fuel/industrial emissions. Due to the complex political agendas of international governments and NGOs during negotiations, protection for forests was deliberately left out of the Kyoto Protocol. (For a very interesting perspective on the exclusion of forests from the Kyoto Protocol refer to this paper by Philip Fearnside - Environmentalists split over Kyoto and Amazonian deforestation, Environmental Conservation 28 (4): 295-299 2001).
As well as excluding protection for forests, I would argue that Kyoto has actually exacerbated the problem of global emissions. For example, the European Union is trying to meet its Kyoto obligations by decreasing its emissions by using “green” biofuels including palm oil. Perversely, Indonesia’s emissions are increasing due to rampant destruction of rainforests to accommodate oil palm plantations. And of course, as a developing country, Indonesia doesn’t have an emissions target under Kyoto. (Indonesia is currently the world's third highest emitter due to deforestation, peatland degradation and forest fires.)
It is horrifying to think of the millions of hectares of rainforest and biodiversity that have been lost over the past years, with no mechanism in the Kyoto Protocol, “the only game in town”, to protect them.
The US (and Australia’s John Howard, prior to the last election) is constantly demonised because they won’t ratify Kyoto. However, I agree with the US stance – there’s no point to a climate change agreement that doesn’t include all the major emitters, including developing countries with super fast-growing economies and enormous populations.
And it looks like the US (and John Howard) were right all along… Nicholas Stern’s latest climate change report states: “The developing countries, which by 2050 will account for around eight billion out of a world population of nine billion, and the greater part of global emissions, will have to be fundamentally involved in achieving global emission reductions.” (Refer to: Key Elements of a Global Deal on Climate Change - 30 April 2008: http://www.lse.ac.uk/collections/pressAndInformationOffice/newsAndEvents/archives/2008/globaldeal.htm )
Australia’s version of Stern, Professor Ross Garnaut, also makes this point: “…developing countries will need to bring down emissions very substantially below business as usual, with limited prospects for growth in per capita emissions. Cuts of such dimensions will not be made in a framework of voluntary action. They will only be made if major developing countries also become subject to demanding and binding targets. Refer to: Emissions in the Platinum Age: The implications of rapid development for climate change mitigation – 2 May 2008 http://www.garnautreview.org.au/CA25734E0016A131/WebObj/OXREP_paper_2-05-08/$File/OXREP_paper_2-05-08.pdf )
It is unfortunate that such an adversarial attitude has developed under Kyoto. It would be helpful if more was done to encourage and foster a more cooperative and collaborative relationship between all countries to achieve a fair and effective new climate change agreement. After all, we’ve only got one world and we all have to look after it.
