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Oliver Morton

Date
14 January 2011
Oliver Morton

  • Oliver Morton: So 2005, when you first got into this game to 2010 – a five year period. Obviously a five years in which climate has become a dominant theme in your life professionally and maybe perhaps emotionally, too. Can you put it away when you get home in the evening?

Lord Stern: Well you never put anything entirely away, but I’m not a workaholic in the sense that I can, and do, enjoy myself when I’m not working. It [the climate problem] is more worrying that anything you can think of.

  • Oliver Morton: So 2005-2010, how would you describe that journey that the rest of the world, talking about the people in this audience for example, you have been through?

Lord Stern: Well let me describe the G8 summit [in 2005] and I think that is quite a good benchmark: you had 8 leaders of the world, six of them bored, two of them concentrating – it was at the moment when we had just had the “no” vote in Europe and Jacques Chirac publically blaming Blair and the Brits for sabotaging Europe yet again. The relationship was the absolute pits – but they did collaborate on this issue – the two of them driving the discussion that took place. The point though, isn’t those two but the other six – they really didn’t take it seriously.

The G8 sherpas, when this idea of focusing on climate change was mooted, asked why Presidents and Prime Ministers from the biggest countries, the biggest economies in the world should focus on this third world subject.

You could not see that now. Politicians around the world have to focus on this. Even more positive is what the business community is doing. Five years ago the focus on technological change, on the green economy, on low-carbon growth, on the huge opportunities, simply wasn’t there. Now business leaders around the world who are looking ahead ten or twenty years are all asking themselves the question: is a path following high-carbon growth acceptable? And they are answering that question saying no – that path is in all likelihood extremely risky.

That change, and the pace of technological progress that has come with it, has been very cheerful. It is extraordinary how fast ideas have come through. It is extraordinary how rapidly the cost of solar has come down, for example. We didn’t know, for instance, about the potential of algae, which may or may not work but it looks as if it might. So we’ve got tremendous advances in those technologies and the discovery of quite a lot of new ones. We weren’t really confident about that happening five years ago, so that change in business atmospherics and business exploration of new ideas is enormously encouraging. The science on the other hand is more worrying.

  • Oliver Morton: And yet, if you want a high-density source of energy that is available, tradable, and not controlled by any big economic power in the world, you still look like you’re picking up a lump of coal. Coal is still a part of the future energy mix.

Lord Stern: We’re going to have to manage over these next two or three decades, a movement to ‘low carbon’: it’s not just electricity, it’s agriculture, it’s transport, it’s buildings, it’s forests, it’s about all of it - but electricity is important.

  • Oliver Morton: But surely decarbonization is about electrification in many respects.

Lord Stern: Yes, if you can have zero-carbon energy, you can have zero-carbon surface transport and so on. If we use hydrocarbons, we’ve got to use carbon capture and storage (CCS). There is really no alternative and we’ve got to work it out. We need technological progress and new exploration but much of this low-carbon technology is already known. We need to move it to scale and as we do that the costs will come down, although CCS does mean paying a little more for using coal.

At the same time there is also the renewables side where costs are decreasing really rapidly.

  • Oliver Morton: How big is the long-term gain you see from energy efficiency?

Lord Stern: If you look at the International Energy Agency analysis and just look at the energy part of the story which is about two thirds of the total emissions, half of the difference between business as usual in 2050 and where we need to be in 2050 is energy efficiency.

  • Oliver Morton: But isn’t there an idea that has been around since the 19th century, that efficiency is a slightly two edged sword in this? Because if you make people more efficient in using something then they use more of it or they consume something else which also uses more raw materials. So as long as you’re in a moderately high carbon society, you can economize and cut down on one thing but you just end up consuming another carbon in a similar fashion?

Lord Stern: It’s partly empirical – how big is this effect? And partly timing – how long does it take to come through? But I haven’t seen studies which say it is a huge thing. Conceptually, this issue is there: essentially if you reduce the price, then you increase the demand. The question is how big the effect is, how fast it comes through, but it also tells you that to solve some of this we’re going to have to regulate. And in China’s 12th Five-Year Plan, for example, which is the biggest event in my view on climate change in the last couple of years, they are talking about overall caps on energy use in 2015.

  • Oliver Morton: Regulation is obviously one approach but another long-term approach is to have renewable forms of energy that are just cheaper than fossil fuels. One way to do that is to increase the price of fossil fuels and so far, the mechanisms that have been put in place to do that have not increased the price by much. What about the other mechanisms of finding ways that governments can intervene and ways that businesses can develop lower-cost renewables?

Lord Stern: We must do that, but before I go into that it is worth saying, that if you emit greenhouse gas then you are damaging people. A price for greenhouse gas; a tax; or a cap and trade system; or some kind of a regulation on that damaging activity is basic economics. If we don’t do that there’ll be much too much damage. As we talk about the importance of cutting down the price of renewables, we shouldn’t forget that it is not a substitute for taxing carbon.

  • Oliver Morton: In the last five years that has often been said by governments and your report also says that very clearly. However, in the last five years, we haven’t actually seen much progress on adding costs to carbon.

Lord Stern: Well, we have a cap and trade scheme in Europe which covers around 40 per cent of its emissions; part of the Chinese 12th Five-Year Plan will be a cap-and-trade scheme and that will be ‘game changing’; in India, as part of the recent February budget, you’ve just seen the introduction of a tax on coal; and in China they are also about to start a tax on coal – although at a level that is not commensurate with a decent price on carbon. All of this is the beginning and I think that is extremely important.

  • Oliver Morton: So how does that fit in with what’s going on just down the beach here in the Moon Palace – what is your take on that and how the UN negotiations are going?

Lord Stern: Comparing the atmospherics here with the atmospherics in Copenhagen, talking to the people in the different delegations – and I’m just talking about behaviour now rather than the nitty gritty: nobody wants to be seen as the destroyer here. When I talk to ‘the two elephants’ in all this, they spend much less time slagging each other off privately than they did last time. I think the atmospherics are different.

People want to stop the regress, to stabilize and to move forward. They are moving on to substance. We may be able to consolidate the emissions intentions for 2020 that are already on the table – these cover more than 85 per cent of emissions. If implemented, these cuts would lead to global emissions levels in 2020 not far away from where we are now and would essentially mean emissions have peaked. Now we can’t use the language of the Copenhagen Accord but if we talk about the emissions cuts on the table and if we consolidate those into the system then that would be valuable. We‘re also close on REDD+; we’re close on adaptation; we’re close on technology; and, I think we can find a way through MRV (measurement, reporting and verification). The biggest threat at the moment is to find a way through the story of a second commitment period for Kyoto, which will have to be a fudge.

If that doesn’t happen here but it doesn’t not happen here – then it’s kept going. If there is some discretion in the way that the LCA statements on mitigation intentions can fit together then there is a way through.

And what’s encouraging is people are looking for that. That is very acceptable given where we started. It is there for the taking but will we be collectively smart enough to do it? I really don’t know, but there is something in these last three days or so to play for.

  • Oliver Morton: But the 2020 peaking date still leaves us quite a long way over a target of 2 degrees Celsius. Do you think it would be helpful to just face up to that and to say that two degrees is now well behind us?

Lord Stern: It’s not really behind us. If everyone did what they said they will in their submissions, it would take us back to 48 Giga tonnes CO2e by 2020 and we’d need to be about 10 per cent below that. We need to be around 44 GT CO2e to be on a path which will give us a 50/50 chance at two degrees. If we have a collegial atmosphere over the next few years and if people see what can be done – in China’s 12th Five-Year Plan for example, which is extremely ambitious if you look at the detail...

  • Oliver Morton: Let’s focus on China’s 12th Five-Year Plan

Lord Stern: The 12th Five-Year Plan is good – it cheers you up. It is the most ‘feel good’ five-year plan I’ve come across!

If the atmospherics do not deteriorate, if we make modest progress on REDD+ and on green farming, if we start to think about financing, then significant things are possible. This won’t be the whole all-singing all-dancing legally binding agreement enforced by people from Mars. If we get modest progress on key dimensions and you see people starting to bring emissions down; if you see people launch on this new industrial revolution; if you see people implementing the type of thing that these subnational governments we’ve heard from today are, then you’re going to start to change the atmospherics. You’re going see that this stuff about great burdens, trade-offs between growth and development are just misguided forms of the question. You will see that change on the ground in terms of examples and the power of the example, coupled with modest movements forward on collaboration over 5 years. And coupled with an IPCC report in 3 or 4 years that will show, we think, that things are even more worrying; that will start to get you to a place where you could not only contemplate 48 in 2020: if everyone implemented what they are doing – perhaps you could start to talk about moving things even lower.

Now that’s an optimistic picture but to describe an optimistic picture doesn’t necessarily mean you’re optimistic. But what it does do is show that there is something worth having to work towards. You may not get it but it will be our fault if we don’t – this is something that is possible. Not simply technologically but also politically, but it does require that sort of positive collaboration and commitment – the different kind of atmospherics that we are trying to restore and that people want to restore. However, we are not there yet here in Cancun.

  • Oliver Morton: What will be the biggest difference in 2015?

Lord Stern: I think it will be the experience of a new way of doing things. It will be showing what’s possible – much as we heard this morning. It will be all around the world because the examples we heard this morning are from all round the world. For example, there may not be much movement at the federal level in the United States in these next two to three years but we heard this morning some very clear examples of action from cities and from states such as California. What these examples will continue to show is that the argument that it is all too difficult, too expensive and it loses jobs, an argument which is intellectually flawed, will also be shown to be practically flawed. And that will change the debate.

People will see, not simply the story of opportunity, they will see also that it is actually a much more pleasant way to live and work. Its cleaner; it’s quieter; it’s safer; it’s more energy secure; it’s more bio-diverse; people have to see that and see some examples.

  • Oliver Morton: Well let’s drag you away from the cricket again in Cop 21 and see how we’re doing.

Biography

British economist Lord Stern sat down with The Economist’s Oliver Morton in Cancun on 7 December 2010 to reflect on international progress made since The Stern Review. He shares personal insights into ongoing UN climate negotiations (COP16) and discusses how the world is faring on the path to a clean industrial revolution. The conversation was hosted by The Climate Group at its annual Climate Leaders Summit and was attended by its international coalition of business leaders and sub-national governments.

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