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Africa: Economics of Climate Change
Nov 5, 2006 (061105)
(Reposted from sources cited below)
"All countries will be affected. The most vulnerable - the poorest
countries and populations - will suffer earliest and most, even
though they have contributed least to the causes of climate
change." - Stern Review on the Economics of Climate Change
This AfricaFocus Bulletin contains excerpts from a press release,
summary of conclusions, and chapter 3 on the projected impact of
climate change, from the Stern Review on the Economics of Climate
Change. The full Stern report and additional background is
available on http://www.sternreview.org.uk
Another AfricaFocus Bulletin sent out today contains information
from a new report on Africa and global warming from the Working
Group on Climate Change and Development, made up of Oxfam and other
leading development organizations; and from a UN Environment Programme
report on Africa's Vulnerability to Climate Change..
++++++++++++++++++++++end editor's note+++++++++++++++++++++++
Publication of the Stern Review on the Economics of Climate Change
30 October 2006
[excerpts from press release.]
The most comprehensive review ever carried out on the economics of
climate change was published today.
The Review, which reports to the Prime Minister and Chancellor, was
commissioned by the Chancellor in July last year. It has been
carried out by Sir Nicholas Stern, Head of the Government Economic
Service and former World Bank Chief Economist.
Sir Nicholas said today:
"The conclusion of the Review is essentially optimistic. There is
still time to avoid the worst impacts of climate change, if we act
now and act internationally. Governments, businesses and
individuals all need to work together to respond to the challenge.
Strong, deliberate policy choices by governments are essential to
But the task is urgent. Delaying action, even by a decade or two,
will take us into dangerous territory. We must not let this window
of opportunity close."
The first half of the Review focuses on the impacts and risks
arising from uncontrolled climate change, and on the costs and
opportunities associated with action to tackle it. A sound
understanding of the economics of risk is critical here. ...
The Review finds that all countries will be affected by climate
change, but it is the poorest countries that will suffer earliest
and most. Unabated climate change risks raising average
temperatures by over 5 C from pre-industrial levels. Such changes
would transform the physical geography of our planet, as well as
the human geography - how and where we live our lives.
Adding up the costs of a narrow range of the effects, based on the
assessment of the science carried out by the Intergovernmental
Panel on Climate Change in 2001, the Review calculates that the
dangers of unabated climate change would be equivalent to at least
5% of GDP each year.
The Review goes on to consider more recent scientific evidence (for
example, of the risks that greenhouse gases will be released
naturally as the permafrost melts), the economic effects on human
life and the environment, and approaches to modelling that ensure
the impacts that affect poor people are weighted appropriately.
Taking these together, the Review estimates that the dangers could
be equivalent to 20% of GDP or more.
In contrast, the costs of action to reduce greenhouse gas emissions
to avoid the worst impacts of climate change can be limited to
around 1% of global GDP each year. People would pay a little more
for carbon-intensive goods, but our economies could continue to
If we take no action to control emissions, each tonne of CO2 that
we emit now is causing damage worth at least $85 - but these costs
are not included when investors and consumers make decisions about
how to spend their money. Emerging schemes that allow people to
trade reductions in CO2 have demonstrated that there are many
opportunities to cut emissions for less than $25 a tonne. In other
words, reducing emissions will make us better off. According to one
measure, the benefits over time of actions to shift the world onto
a low-carbon path could be in the order of $2.5 trillion each year.
The shift to a low-carbon economy will also bring huge
opportunities. Markets for low-carbon technologies will be worth at
least $500bn, and perhaps much more, by 2050 if the world acts on
the scale required.
Tackling climate change is the pro-growth strategy; ignoring it
will ultimately undermine economic growth.
The Review looks at what this analysis means for the level of
ambition of global action. It concludes that the levels of
greenhouse gases in the atmosphere should be limited to somewhere
within the range 450 - 550ppm CO2e (CO2 equivalent). Anything
higher would substantially increase risks of very harmful impacts
but would only reduce the expected costs of mitigation by
comparatively little. Anything lower would impose very high
adjustment costs in the near term and might not even be feasible,
not least because of past delays in taking strong action.
The second half of the Review examines the national and
international policy challenges of moving to a low-carbon global
Climate change is the greatest market failure the world has seen.
Three elements of policy are required for an effective response.
The first is carbon pricing, through taxation, emissions trading or
regulation, so that people are faced with the full social costs of
their actions. The aim should be to build a common global carbon
price across countries and sectors.
The second is technology policy, to drive the development and
deployment at scale of a range of low-carbon and high-efficiency
products. And the third is action to remove barriers to energy
efficiency, and to inform, educate and persuade individuals about
what they can do to respond to climate change. Fostering a shared
understanding of the nature of climate change, and its
consequences, is critical in shaping behaviour, as well as in
underpinning both national and international action.
Effective action requires a global policy response, guided by a
common international understanding of the long-term goals for
climate policy and strong frameworks for co-operation. Key elements
of future international frameworks should include:
- Expanding and linking the growing number of emissions trading
schemes around the world is a powerful way to promote
cost-effective reductions in emissions and to bring forward action
in developing countries.
- Strong targets in rich countries could drive flows amounting to
tens of billions of dollars each year to support the transition to
low-carbon development paths.
- Informal co-ordination as well as formal agreements can boost the
effectiveness of investments in innovation around the world.
- Globally, support for energy research and development should at
least double, and support for the deployment of low-carbon
technologies should increase up to five-fold.
- International co-operation on product standards is a powerful way
to boost energy efficiency.
Action to reduce deforestation:
- The loss of natural forests around the world contributes more to
global emissions each year than the transport sector. Curbing
deforestation is a highly cost-effective way to reduce emissions;
large-scale international pilot programmes to explore the best ways
to do this should get underway very quickly.
- The poorest countries are most vulnerable to climate change. It
is essential that climate change be fully integrated into
development policy, and that rich countries honour their pledges to
increase support through overseas development assistance.
- International funding should also support improved regional
information on climate change impacts, and research into new crop
varieties that will be more resilient to drought and flood.
For media enquiries, please call 020 7270 6280, or email
Stern Review: The Economics of Climate Change
Summary of Conclusions
There is still time to avoid the worst impacts of climate change,
if we take strong action now.
The scientific evidence is now overwhelming: climate change is a
serious global threat, and it demands an urgent global response.
This Review has assessed a wide range of evidence on the impacts of
climate change and on the economic costs, and has used a number of
different techniques to assess costs and risks. From all of these
perspectives, the evidence gathered by the Review leads to a simple
conclusion: the benefits of strong and early action far outweigh
the economic costs of not acting.
Climate change will affect the basic elements of life for people
around the world access to water, food production, health, and the
environment. Hundreds of millions of people could suffer hunger,
water shortages and coastal flooding as the world warms.
Using the results from formal economic models, the Review estimates
that if we don't act, the overall costs and risks of climate change
will be equivalent to losing at least 5% of global GDP each year,
now and forever. If a wider range of risks and impacts is taken
into account, the estimates of damage could rise to 20% of GDP or
In contrast, the costs of action reducing greenhouse gas emissions
to avoid the worst impacts of climate change can be limited to
around 1% of global GDP each year.
The investment that takes place in the next 10-20 years will have
a profound effect on the climate in the second half of this century
and in the next. Our actions now and over the coming decades could
create risks of major disruption to economic and social activity,
on a scale similar to those associated with the great wars and the
economic depression of the first half of the 20th century. And it
will be difficult or impossible to reverse these changes.
So prompt and strong action is clearly warranted. Because climate
change is a global problem, the response to it must be
international. It must be based on a shared vision of long-term
goals and agreement on frameworks that will accelerate action over
the next decade, and it must build on mutually reinforcing
approaches at national, regional and international level.
Climate change could have very serious impacts on growth and
If no action is taken to reduce emissions, the concentration of
greenhouse gases in the atmosphere could reach double its
pre-industrial level as early as 2035, virtually committing us to
a global average temperature rise of over 2 C. In the longer term,
there would be more than a 50% chance that the temperature rise
would exceed 5 C. This rise would be very dangerous indeed; it is
equivalent to the change in average temperatures from the last ice
age to today. Such a radical change in the physical geography of
the world must lead to major changes in the human geography where
people live and how they live their lives.
Even at more moderate levels of warming, all the evidence from
detailed studies of regional and sectoral impacts of changing
weather patterns through to economic models of the global effects
shows that climate change will have serious impacts on world
output, on human life and on the environment.
All countries will be affected. The most vulnerable the poorest
countries and populations will suffer earliest and most, even
though they have contributed least to the causes of climate change.
The costs of extreme weather, including floods, droughts and
storms, are already rising, including for rich countries.
Adaptation to climate change that is, taking steps to build
resilience and minimise costs is essential. It is no longer
possible to prevent the climate change that will take place over
the next two to three decades, but it is still possible to protect
our societies and economies from its impacts to some extent for
example, by providing better information, improved planning and
more climate-resilient crops and infrastructure. Adaptation will
cost tens of billions of dollars a year in developing countries
alone, and will put still further pressure on already scarce
resources. Adaptation efforts, particularly in developing
countries, should be accelerated.
The costs of stabilising the climate are significant but
manageable; delay would be dangerous and much more costly.
The risks of the worst impacts of climate change can be
substantially reduced if greenhouse gas levels in the atmosphere
can be stabilised between 450 and 550ppm CO2 equivalent (CO2e). The
current level is 430ppm CO2e today, and it is rising at more than
2ppm each year. Stabilisation in this range would require emissions
to be at least 25% below current levels by 2050, and perhaps much
Ultimately, stabilisation at whatever level requires that annual
emissions be brought down to more than 80% below current levels.
This is a major challenge, but sustained long-term action can
achieve it at costs that are low in comparison to the risks of
inaction. Central estimates of the annual costs of achieving
stabilisation between 500 and 550ppm CO2e are around 1% of global
GDP, if we start to take strong action now.
Costs could be even lower than that if there are major gains in
efficiency, or if the strong co-benefits, for example from reduced
air pollution, are measured. Costs will be higher if innovation in
low-carbon technologies is slower than expected, or if
policy-makers fail to make the most of economic instruments that
allow emissions to be reduced whenever, wherever and however it is
cheapest to do so.
It would already be very difficult and costly to aim to stabilise
at 450ppm CO2e. If we delay, the opportunity to stabilise at
500-550ppm CO2e may slip away.
Action on climate change is required across all countries, and it
need not cap the aspirations for growth of rich or poor countries.
The costs of taking action are not evenly distributed across
sectors or around the world. Even if the rich world takes on
responsibility for absolute cuts in emissions of 60-80% by 2050,
developing countries must take significant action too. But
developing countries should not be required to bear the full costs
of this action alone, and they will not have to. Carbon markets in
rich countries are already beginning to deliver flows of finance to
support low-carbon development, including through the Clean
Development Mechanism. A transformation of these flows is now
required to support action on the scale required.
Action on climate change will also create significant business
opportunities, as new markets are created in low-carbon energy
technologies and other low-carbon goods and services. These markets
could grow to be worth hundreds of billions of dollars each year,
and employment in these sectors will expand accordingly.
The world does not need to choose between averting climate change
and promoting growth and development. Changes in energy
technologies and in the structure of economies have created
opportunities to decouple growth from greenhouse gas emissions.
Indeed, ignoring climate change will eventually damage economic
Tackling climate change is the pro-growth strategy for the longer
term, and it can be done in a way that does not cap the aspirations
for growth of rich or poor countries.
A range of options exists to cut emissions; strong, deliberate
policy action is required to motivate their take-up.
Emissions can be cut through increased energy efficiency, changes
in demand, and through adoption of clean power, heat and transport
technologies. The power sector around the world would need to be at
least 60% decarbonised by 2050 for atmospheric concentrations to
stabilise at or below 550ppm CO2e, and deep emissions cuts will
also be required in the transport sector.
Even with very strong expansion of the use of renewable energy and
other lowcarbon energy sources, fossil fuels could still make up
over half of global energy supply in 2050. Coal will continue to be
important in the energy mix around the world, including in
fast-growing economies. Extensive carbon capture and storage will
be necessary to allow the continued use of fossil fuels without
damage to the atmosphere.
Cuts in non-energy emissions, such as those resulting from
deforestation and from agricultural and industrial processes, are
With strong, deliberate policy choices, it is possible to reduce
emissions in both developed and developing economies on the scale
necessary for stabilisation in the required range while continuing
Climate change is the greatest market failure the world has ever
seen, and it interacts with other market imperfections. Three
elements of policy are required for an effective global response.
The first is the pricing of carbon, implemented through tax,
trading or regulation. The second is policy to support innovation
and the deployment of low-carbon technologies. And the third is
action to remove barriers to energy efficiency, and to inform,
educate and persuade individuals about what they can do to respond
to climate change.
Climate change demands an international response, based on a shared
understanding of long-term goals and agreement on frameworks for
Many countries and regions are taking action already: the EU,
California and China are among those with the most ambitious
policies that will reduce greenhouse gas emissions. The UN
Framework Convention on Climate Change and the Kyoto Protocol
provide a basis for international co-operation, along with a range
of partnerships and other approaches. But more ambitious action is
now required around the world.
Countries facing diverse circumstances will use different
approaches to make their contribution to tackling climate change.
But action by individual countries is not enough. Each country,
however large, is just a part of the problem. It is essential to
create a shared international vision of long-term goals, and to
build the international frameworks that will help each country to
play its part in meeting these common goals.
Brief Excerpts From Chapter 3:
The Impacts of Climate Change on Growth and Dewelopment
Climate change threatens the basic elements of life for people
around the world access to water, food, health, and use of land and
the environment. On current trends, average global temperatures
could rise by 2 - 3 C within the next fifty years or so,1 leading
to many severe impacts, often mediated by water, including more
frequent droughts and floods (Table 3.1).
Declining crop yields, especially in Africa, are likely to leave
hundreds of millions without the ability to produce or purchase
sufficient food - particularly if the carbon fertilisation effect
is weaker than previously thought, as some recent studies suggest.
At mid to high latitudes, crop yields may increase for moderate
temperature rises (2 3 C), but then decline with greater amounts of
Climate change will increase worldwide deaths from malnutrition
and heat stress. Vector-borne diseases such as malaria and dengue
fever could become more widespread if effective control measures
are not in place. In higher latitudes, cold-related deaths will
Declining crop yields are likely to leave hundreds of millions
without the ability to produce or purchase sufficient food,
particularly in the poorest parts of the world. Around 800 million
people are currently at risk of hunger (~ 12% of world's
population), and malnutrition causes around 4 million deaths
annually, almost half in Africa. According to one study,
temperature rises of 2 to 3 C will increase the people at risk of
hunger, potentially by 30 - 200 million (if the carbon
fertilisation effect is small) (Figure 3.6).43 Once temperatures
increase by 3 C, 250 - 550 million additional people may be at risk
over half in Africa and Western Asia, where (1) the declines in
yield are greatest, (2) dependence on agriculture highest, and (3)
purchasing power most limited. If crop responses to carbon dioxide
are stronger, the effects of warming on risk of hunger will be
considerably smaller. But at even higher temperatures, the impacts
are likely to be damaging regardless of the carbon fertilisation
effect, as large parts of the world become too hot or too dry for
agricultural production, such as parts of Africa and even Western
The distribution and abundance of disease vectors are closely
linked to temperature and rainfall patterns, and will therefore be
very sensitive to changes in regional climate in a warmer world.
Changes to mosquito distributions and abundance will have profound
impacts on malaria prevalence in affected areas. This will be
particularly significant in Africa, where 450 million people are
exposed to malaria today, of whom around 1 million die each year.
According to one study, a 2 C rise in temperature may lead to 40 -
60 million more people exposed to malaria in Africa (9- 14%
increase on present-day), increasing to 70- 80 million (16-19%) at
higher temperatures, assuming no change to malaria control efforts.
Much of the increase will occur in Sub-Saharan Africa, including
East Africa. Some studies suggest that malaria will decrease in
parts of West Africa, e.g. taking 25 50 million people out of an
exposed region, because of reductions in rainfall. Changes in
future exposure depend on the success of national and international
malaria programmes. Such adaptations are not taken into account in
the estimates presented, but the effectiveness of such programmes
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