Costs ignored, climate change a function of market failure, says Lord Nicholas Stern

Former Chief Economist and Senior Vice-President of the World Bank, and well-known climate change expert Lord Nicholas Stern was in Nagpur this week to deliver a lecture on ‘Forest, Climate Change and Future of Young Indians’.

Written by Vivek Deshpande | Published: March 31, 2017 1:00:11 am
Lord Nicholas Stern, climate change, delhi pollution, pollution in delhi, sustainable development, climate change agreement, product manufacture, product cost, CNG, pollution, use CNG, supreme court, donald trump policies, indian express news, india news, explained Can’t keep debating whose obligation among the developed and developing nations is greater, must work together to fight climate change, says Stern

You have said that climate change is a consequence of market failure. What does that mean?

It means that the price we pay for any product doesn’t take into account the cost of the consequences for climate change the manufacturing of that product causes. For example, if a tonne of coal costs $ 50 in the market, it doesn’t include the cost of two tonnes of CO2 it releases into the atmosphere, which roughly comes to $ 80. Add to it the roughly $ 100 it would cost towards health problems or deaths caused by the pollution. Thus, we actually pay only $ 50 for a tonne of coal, which actually costs more than $ 200 for all the above things taken together. It is in this sense that I say that climate change is a function of market failure.

But if such a huge cost is added to the price, markets might fail to attract consumers. What is the way out?

We have to either pay the entire cost as consumers, or the government has to regulate… Like the Supreme Court in India directed that public transport in Delhi must run on CNG. This shows that there are cheaper alternative ways of doing things. Or the government has to simply come out with a policy that says we cannot do this — inflicting severe costs on people.

All current efforts are directed at slowing down the impact of climate change. Should we not be aiming to stop the impact at a particular level at some time?

What we need to do is try and achieve the “net zero” defined in the Paris Agreement, by 2070. This net zero is balancing the carbon emitted with the carbon sequestered to stabilise temperature rise at 2 degrees or below [from pre-industrial times].

Is it feasible?

Yes, it is perfectly feasible. We can increase energy efficiency by 40% through alternative means of power, more forests is good for development, alternative fuels are also good for development. We can do these three things.

One of the obligations on all countries is to attain the Nationally Determined Contributions (NDCs) to the promised level. Can they do it?

Yes, these are the contributions they have themselves opted to make. So they will do it. They feel this is the best way to develop, and they see it as the best way to protect their children. China, for example, is the biggest emitter (of carbon) today. It says it will peak its emissions by 2030. I guess they will do it by 2022. Because they want cities where they can move, they can breathe. They want an ecosystem that will give them some stability against climate change effects. For similar reasons, I guess, India will also do it quickly. You get two things for the price of one — development and management of climate. The days when countries considered it as a tradeoff between climate responsibility and development are over. This change of understanding is precisely why we got the agreement in Paris and not six years prior to that at Copenhagen.

But what about the views and policies of US President Donald Trump? The US is, after all, one of the main pillars of this climate change framework.

In all his recent interviews, President Trump has recognised the connection between all human activities and climate change. He professes now not to be a climate change denier. But he has just deleted the clean power plant programme of the Obama administration. I think US emissions will keep dropping, but not as fast as desired over the next 2-3 years.

The mitigation of climate change greatly depends on the way we practise our politics, economics and science. Shouldn’t technology be put to greater use?

If you have good economics based on the evidence of bad effects of climate change, then you can bring forth good political decisions, and that in turn brings forth good technology. That is how the interplay among the three factors goes. They don’t work at cross-purposes.

You lay a lot of stress on vegetarianism as one way of mitigating climate change.

There was this report about 8 or 9 years ago where I made a point about vegetarianism. I had said vegetarian food leads to lesser emission of greenhouse gases. But I did not advocate vegetarianism. Diet is an individual choice but it is important to recognise the fact that meat, particularly red meat, comes at a cost to environment.

Which one among the developed and developing worlds do you think has the greater obligation towards climate change goals?

If we look at history, then certainly the obligation seems to be more for the developed world. But if we look at the future, then two-thirds of the current emissions are coming from the developing world. If we keep debating the levels of obligation, then all of us will be in trouble. It is time we all buried the differences on that count and put up a united fight. And we are already doing that to a great extent.

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