Tuesday, October 31, 2006

Reactions to the review of the economic implications of climate change include optimism about the commercial opportunities and apprehension about possible fiscal repercussions.

The Stern Review of the Economics of Climate Change, commissioned by the British Chancellor of the Exchequer, Gordon Brown, points to the need for urgent action to reduce carbon emissions if a world-wide economic catastrophe is to be avoided. The institution of global carbon trading, control of deforestation, increased investment in energy R & D and support to poorer countries in adapting to climate change are all key proposals in the Review.

A leaked letter from David Miliband, Environment Secretary, to Chancellor Brown contains a package of tax proposals to promote the use of public transport and to encourage people to buy smaller cars and fly less. The proposals also include charges on petrol-guzzling cars, road pricing, levies on air travel and increased charges for landfill waste disposal.

The findings of the Review and the promise of a Government Climate Bill, containing measures in response to the Review, received a mixed reception from employers and unions.

Miles Templeman, Director-General of the Institute of Directors, said: “Without countries like the US, China or India making decisive commitments, UK competitiveness will undoubtedly suffer if we act alone. This would be bad for business, bad for the economy and ultimately bad for our climate.”

The Confederation of British Industries, the British Chambers of Commerce and asset managers F&C all pointed out the dangers to business of additional taxation.

Brendan Barber, General Secretary of the Trades Union Congress, was optimistic about the opportunities for industry to meet demands created by investment in technology to combat climate change. The Prince of Wales’ Corporate Leaders Group on Climate Change, formed by 14 of UK’s leading companies shared this hope. Chairman of Shell UK, James Smith, expressed the hope of the group that business and Government would discuss how Britain could obtain “first mover advantage” in what he described as “massive new global markets.”

The markets for low-carbon energy products are expected to be worth £300 billion by 2050.

Nigel Farage, leader of the UK Independence Party, questions the assertions that there is scientific consensus on global warming. At best, he said, there is uncertainty. Politicians world-wide are jumping on the ‘green’ bandwagon, but, if they want popular support, they’d better be sure that this is not simply the ‘new witchcraft’.

Ruth Lea, Director of the Centre for Policy Studies, also questions the notion that there is a ‘scientific consensus’ over global warming. She alleges that “authorities on climate science say that the climate system is far too complex for modest reductions in one of the thousands of factors involved in climate change (i.e. carbon emissions) to have a predictable effect in magnitude, or even direction.” About economic models, upon which Stern relied for his projections, her experience was that forecasting just two or three years ahead was usually wrong. She described the problem of drawing conclusions from combining scientific and economic models as ‘monumentally complex’. She doubted whether international cooperation was really possible. She concluded that she thought that this Review was designed to cloak the motives of a government that wanted some moral justification for increasing taxation on fuels.

An unconfirmed report on BBC 24 early Tuesday morning, October 31, stated that the White House had not yet seen a copy of the Stern Review.

In response to the Stern Report Australia‘s Prime Minister John Howard promised a AU$60 million to fight climate change. The projects are part of the Asia-Pacific Partnership on Clean Development and Climate. “The Asia-Pacific Partnership includes countries that represent about half of the world’s emissions, energy use, GDP (gross domestic product) and population, and is an important initiative that engages, for the first time, the key greenhouse-gas emitting countries in the Asia-Pacific region,” Mr Howard said in a statement.

A statement by Australian Greens senators Rachel Siewert and Christine Milne criticised the Australian Bureau of Agriculture and Resource Economics saying “ABARE indicated that the type of research undertaken for the Stern Report is beyond them. They can put a price on what ratifying the Kyoto protocol would cost but have no idea or capacity to put a price on the cost of not acting. They are tinkering around the edges of the problem and don’t seem to know whether climate change is real or whether there is any urgency.”