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‘No one has the last word’

Fraser Nelson meets Sir Nicholas Stern, author of the government’s report on climate change, and is struck by how much more equivocal he is than his political masters

17 January 2007

2:56 PM

17 January 2007

2:56 PM

Fraser Nelson meets Sir Nicholas Stern, author of the government’s report on climate change, and is struck by how much more equivocal he is than his political masters

In a lecture a year ago, Sir Nicholas Stern confessed that until recently he ‘had an idea of what the greenhouse effect was, but wasn’t really sure’. What a difference a year makes. The man I meet in the Treasury office has been transformed into a towering figure in the global warming debate. His report, The Economics of Climate Change, has had a huge impact in Britain and around the world. It is billed as hard proof of the compelling economic case to tackle global warming.

It is hard to imagine a less likely evangelist than the quiet, bespectacled man who apologises for being late. He is, he explains, ‘a civil servant working for the Chancellor’. Not for much longer, I say — he has quit the Treasury to resume his academic career. ‘Yessss,’ he says as a smile spreads across his entire face. The thought of leaving the government does not seem depress him.

Odd, for a man who has made such an extraordinary impact. But Sir Nicholas signed up to run the Treasury’s public finance division, not to be its green warrior. ‘I met Gordon when I was chief economist at the World Bank. We got on right from the very start, and still do,’ he says. He was asked to write the Commission for Africa. ‘The other Gleneagles agenda was global climate change, and the Chancellor felt we could approach that on the same basis.’ So he led a team of 23 economists to produce his 550-page report.

But it was hard to find much echo of that document’s urgency in Mr Brown’s pre-Budget report. The Chancellor proposed a mild green tax — an extra £5 on air fares and more petrol duty. Hardly enough to alter behaviour. Was Sir Nicholas disappointed? No, he says, it was just the first step in the greening of the Chancellor. ‘As you build up the price of carbon over time, you’re giving people the incentives to cut back on carbon in a way that suits them best,’ he says. ‘By ourselves we are small. But we can show what’s possible, and do things in a way that builds international co-operation.’

By itself, Britain contributes 1.6 per cent of world greenhouse gas. But Tony Blair believes that it can make a greater intellectual contribution by having Sir Nicholas convince the world of his figures. He has been to India and South Africa and will soon head to the United States to advise the Democrats. The world, he believes, can limit carbon dioxide atmospheric levels to 550 parts per million (ppm). This would cost just 1 per cent of economic output. The costs of not acting are between 5 and 20 per cent — bigger than the Great Depression. It is a no-brainer.

But there is a problem. While conducting the report, Sir Nicholas and his team knew something they even now cannot admit. The United Nations Intergovernmental Panel on Climate Change (IPCC), the recognised world authority on whose work the Stern review was itself based, is preparing its own review on climate change economics. It calculates that the 550 ppm target would cost up to 5 per cent of economic output, five times the loss Stern suggests. I ask Sir Nicholas how he intends to persuade the world that he is right and the IPCC is wrong.

‘The IPCC has not reported yet,’ he says. This is technically true: it will not publish until later this year. But its draft report has been sent to all policymakers, I say. He must have seen it. ‘I think if you wait and see what the report does actually say…’. I produce a leaked copy of the UN draft, and show him the page where it disagrees with him. What’s more, the IPCC declares it has found a ‘high level of agreement and much evidence’.

So when this is published, won’t it blow the Stern review out of the water? He pauses, and stares at the document. ‘This is the July version,’ he says. So does he expect it to change? ‘We will see. My guess is that our numbers and their numbers will look pretty similar.’ And anyway, he believes his review is strong enough to stand on its own. ‘We’re all making contributions and the IPCC makes a very important contribution. But we will all work away on this. No one has the last word.’

Politically, Sir Nicholas certainly has had the last word. All major parties are keen to embrace the climate change agenda, and his report was received uncritically in Westminster. But not so by economists. The journal World Economics has had academics lining up to say that Sir Nicholas has downplayed the costs of tackling carbon emissions and has exaggerated the potential damage. Nor are these climate-change deniers.

So did Sir Nicholas produce a ‘sexed-up’ dossier? ‘I would completely reject the idea that we have been low on the costs of tackling climate change, and high on the damages,’ he says. ‘We have been quite cautious, and estimates of cost will turn out to be middle of the road.’

The Treasury remains rather protective of Sir Nicholas. Although our interview is arranged by Cambridge University Press, the publisher, I had been told I can meet him for just 20 minutes in HM Treasury and that I should submit questions in advance (which I didn’t). A Treasury civil servant stands in the corner of the room and acts like a human egg-timer, edging closer to the table as my time runs out. The publisher kindly offers to submit some follow-up questions to Sir Nicholas after the interview, but they are not answered.

But he himself is not running away from the controversy and he has defended himself both in the pages of World Economics and in a postscript to the new paperback version of the Stern review. ‘We want it to be a discussion,’ he says. ‘This is an evolving science, albeit one with very strong foundations’. Nor does he seek to cover up the gaps in the Stern review. Take, for example, his headline claim — that the cost of not acting on climate change may be up to 20 per cent of economic output. How far would this be mitigated by doing as he suggests and spending that 1 per cent of economic wealth on tackling climate change? He has no idea. ‘We don’t have sufficiently detailed knowledge to simply add this up,’ he admits.

Not that anyone noticed on its publication. The political debate has taken on a life of its own. A note on page 292 of the Stern review suggests that the computer model used to produce his financial projections ‘should be taken as only indicative’ of the cost of climate change. This caveat is mentioned nowhere in the political reaction to the report. But that is what happens when an economic study is fired off into the political arena.

As I switch the tape recorder off and we head to the door, Sir Nicholas goes a little further. ‘Anyone who places too much faith in one computer model,’ he says, ‘is deluding themselves.’ In other words, as an academic, he perhaps grasps better than he dares admit publicly that the certainty which both sides crave in the global warming debate does not, as yet, exist.

The Economics of Climate Change is published by Cambridge University Press, £29.99.

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