Further thoughts on stern

“Nicholas Stern this week told us that climate change
represents a ‘massive market failure’. Yes it does, but it also represents a
massive political failure too.

“Stern tells us that tackling climate change is the only way to preserve our
ability to pursue economic growth, when the reality is just the opposite:
our single-minded pursuit of economic growth will render us incapable of
tackling climate change. We don’t need any more reports, we need action.”

Caroline Lucas MEP, at yesterday's climate protest.

The Stern Review is nearly 600 pages long. Much of it is inaccessible economise, the language of Gordon Brown’s neo-classical endogenous growth theory. It can be summarized in a line or two, though. In short, it argues that climate change is occurring, that it will if it continues cause chaos and the antidote to such chaos is market based economics.

In its initial chapter on the scientific evidence for climate change it moves through the technical complexities with a surprising burst of clarity. The message buttressed with numerous scientific reports is sobering.

Stern argues
‘An overwhelming body of scientific evidence now clearly indicates that climate change is a serious and urgent issue. The Earth’s climate is rapidly changing, mainly as a result of increases in greenhouse gases caused by human activities. Most climate models show that a doubling of pre-industrial levels of greenhouse gases is very likely to commit the Earth to a rise of between 2 – 5°C in global mean temperatures. This level of greenhouse gases will probably be reached between 2030 and 2060. A warming of 5°C on a global scale would be far outside the experience of human civilisation and comparable to the difference between temperatures during the last ice age and today. Several new studies suggest up to a 20% chance that warming could be greater than 5°C. If annual greenhouse gas emissions remained at the current level, concentrations would be more than treble pre-industrial levels by 2100, committing the world to 3 – 10°C warming, based on the latest climate projections’

It discusses the consequences which are startling.


Its solution will make the average economists swoon. Sir Nicholas and his team have reached for their micro economic textbooks in the way that a Mid West preacher would reach for the Bible. Economists are not centrally concerned with the ‘end of civilisation’ as we know, social justice or ecological sustainability. They are out to maximse welfare. Economics is based on utilitarianism, the greatest good for the greatest number. Costs must be minismised and benefits maximized. Costs and benefits are measured in cash terms. Where supply and demand curves meet, overall benefits are maximized.
Environmental problems come down to unpaid costs. The motorist pays the private cost of the car, petrol and other expenses of keeping on the road but she or he does not pay for the ecological and social costs of car use. Economists argue that by calculating the money costs of pollution, congestion and other ills to society of car use and then making the motorist pay, efficiency can be restored. Stern takes this approach. Climate change costs money, the cost can be measure and added to the price of all the things we do that lead to climate change. If consumers choose to pay and continue wrecking the planet so be it. This shows that they are prepared to pay because they value driving 4 X 4, fly commuting to Hong Kong and generally indulging in a wasteful lifestyle. Whether green taxes lead to less climate chaos is not the issue for economists, it is all about utilitarian cost counting.

Stern is genuinely concerned with the devastating effects of climate change. However, even a robust and sophisticated set of policy prescriptions based on the logic of ‘internalising externalities’ has its limits. Environmental taxes have a surprisingly Thatcherite logic. Making the polluter pay sounds radical but the polluters who pay the most tend to be the poorest. £2,000 a year in congestion charges is nothing to a city lawyer but an awful lot to a single parent. The congestion charge in London is likely as a result of Stern to be replaced by a system of road pricing, the wealthy will be able to flaunt their 4X4s, while the poor will be priced off of the roads. There has been a huge shift in recent decades both in Britain and globally from direct taxes on income and profits to indirect taxes on consumer items. Lower income and corporation tax has been replaced by higher value added tax and excise duty. The tax burden shifts from city workers, who in the last financial year enjoyed bonuses of £7.5 billion, to those on the lowest incomes. The much vaunted green taxes will push the bills for the poorest up and cut them for the wealthy.
Tax is a blunt instrument for achieving environmental sustainability, even is social justice is ignored. Economists find it difficult to think deeply about social change. Green taxes will lead to big sacrifices for little environmental gain unless appropriate structures are put into place. Consumers will only shift out of their cars if alternatives exist. Stern has nothing to say about the deregulation of bus services, which mean that in rural areas, abandoning the car is not an option for many. Rail and tubes services into London are already bursting at the seams, indeed economists recommend a congestion charge for rail to shift commuters back on to the roads for the worst lines into Waterloo. The party political consensus from Cameron to Brown via Campbell of green taxes will not on its own deliver environmental sustainability
Market bases policies enthusiastically endorsed by the three main parties will continue to drive climate chaos. Markets work when we consume more. An excellent example is the Post Office, as part of an EU wide process strongly supported by Britain, it is subject to ‘deregulation’. The Post Office looks likely to be privatized, with deregulation it now has to compete against new firms who enter the market. So the Post office has to make a profit by cutting costs and increasing revenue. To cut costs local Post Offices are closing, so as with the closure of other local services on the basis of market efficiency, individuals will have to travel further to send a parcel or take their children to school. To make more revenue the Post Office has removed restrictions on junk mail and can now deliver as much of it as it can. Junk mail adds to global warming in the production and transport of glossy pieces of paper.

Marketisation means that environmental consideration will always be secondary to profit. The marketisation of society will fuel more and more climate chaos. One of the negative features of the Stern review is the way that it focuses upon economic dangers. Thus global warming will lead to a possible 20% fall in global GDP and spark recessions. Its effect on the Great Apes is rather less important.

In a marketised world a report by a close associate of Gordon Brown will inevitable reflect this maket logic. The point is not merely to criticize Stern but to look at the politics of the path beyond Stern. Stern is a weapon in the fight against global warming because it shows even the most hardened neo-liberal that it is vital to deal with the problem. For example, the Economist notes (4.11.2006) graphically ‘the world should invest a small proportion of its resources in trying to avert the risk of boiling the planet’. Stern is clearly aimed at the climate sceptic in the White House and will be part of making Democrats sign up to Kyoto.

The logic of market based instruments such as green taxes and a global market in carbon has to make way for more radical policies. The Green Party has long called for a return to more redistribution and greener taxes by simply replacing VAT with green taxes. George Monbiot’s call for an end to road building and new airports is also essential. Contraction and Convergence has its limits, because the rich can buy the right to run their 4 X 4 from the poor, but provides a basis to move to more radical and sensitive policy instruments.

Hair shirtism is no option, we must make the move to an ecologically sustainable society as enjoyable as possible. Local production for local need, a huge expansion of public transport and renewables, zero waste and the rest are possible. The most important part of change will be the demand that policy is governed not by the needs of more economic growth but on the basis of what is good for humanity and the rest of nature. The real lesson of Stern is that to create a liveable future we will need to develop more sophisticated and detailed ecosocialist solutions.