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Report n° 7: The Stern review

A precise and disquieting diagnosis of actual risks

Possibly because the debate has focused on the current value of damage, the fact that N. Stern provides an impressive overview of the links between climate change and economic vulnerability may have been overlooked. Quantitative assessments are necessarily fragile but there is a good description of the mechanisms explaining that there is little chance of our societies adapting smoothly to rapid developments which are increasingly likely following on recent upward revisions of climate sensitivity (possibility of a 10°C warming).
In addition to major disasters such as the slowing down of North Atlantic thermohalyne circulation, the main risk vectors can be summarized briefly as follows.

Water, a major vector of fragility

differences in water availability are sharpening alarmingly: 30% loss in sub-Saharan Africa and South America for 2°C of warming (40% to 50% for 4°C) and a 10 to 20% increase for Russia, South Asia and Northern Europe. Some 1.4 billion people will suffer from water shortage (Africa, Middle East, Southern Europe, some Latin American areas)1.

Based on this overall picture, unsurprisingly, one may note:

  • The consequences of melting glaciers for water availability (500 million people affected in the Ganges valley, 250 million in China, 10 million in the Andes) and infrastructure (sudden overflowing of glacial lakes which destroyed 14 bridges of the Namche hydraulic project in 1985),
  • Extreme events (long droughts and floods); in addition to infrastructure costs, Stern stresses less tangible parameters such as social structures adapted to a given rainfall pattern (in India for instance for monsoon cycles which up to now were fairly regular),
  • The combined impact on agricultural productivity of water shortage, traditional pollinator decline, pest proliferation, and more frequent heat waves.

1 Stern adopts a threshold of 1000 m3/per capita/annum for severe shortage, and 500 for absolute shortage with 20% to 50% available for human use, 30% "lost" and 20% to 50% used by ecosystems.

Food, rising tensions

In the 21st century, agriculture will continue to feed the high proportion of world population living with less than 2$ a day, and the social weight of the sector exceeds by far the 3 to 5% of economic GDP it represents in developed economies, if only because of the impact of a huge food price increase on household purchasing power.
The lengthening of the growing season, the extension of available land and the carbon fertilising effect resulting from 1°C of warming are more than offset by the disturbances caused by water cycle alterations. Global cereal production may drop by 5% for +2°C and 10% for +4°C (disregarding extreme events and higher O3 troposphere concentrations resulting from acid rain in Asia where coal will predominate). The most vulnerable country is Australia (which is experiencing its longest ever drought, i.e. six years from 2001 to 2007, in the south and south-east where 85% of irrigated farming is concentrated). Africa and West Asia may see their production drop by 25% to 35% for a 3° to 4°C rise in average temperature, and famine may affect 500 million more people. To this should be added ocean acidification which threatens shell and skeletal formation; a drop of 0.15 pH units (for 560ppm) would severely affect the marine trophic chain, particularly by halting coral formation. And yet one sixth of the world population depends on sea products.

Human health

Just as with food, there will be gains in some regions (lower cold-related mortality in Nordic areas) and deterioration in warm areas (according to WHO estimates, there have been 150,000 extra deaths on average per annum since 1970 because of climate change).
Global warming alters the geographical extent of pandemics and water is a major vector, particularly for the increase in tropical diseases (after Hurricane Mitch in 1998, Honduras experienced an extra 30,000 cases of malaria and 1,000 cases of dengue fever) and accidental deaths (dehydration and drowning).
An additional risk factor is the extension of areas close to the critical threshold for humans, such as the Ganges plain (45°C daily average). Whereas it may be argued that it is possible to control the cost of tropical diseases by providing free medication (which implies settling the controversy with the pharmaceutical industry), this damage can only be remedied by relocating people (150 to 200 million in 2050).

Infrastructure costs and systemic shocks

This is one of the review's central messages showing similarities and differences between developing and developed countries, and leading to the concept of "systemic shock" caused by migration and the weakening of the insurance and financial industries:

  • Rising sea levels : 200 million people live in coastal plains and the value of assets located less than one meter above sea level is estimated at 1,000 billion euros. This includes 22 out of the 50 largest cities in the world (including London and New York) and one quarter of the population of Bangladesh. The report estimates that 7 to 70 million people will experience floods every year with 3°C of warming and 20 to 300 million with 4°C, which of course calls for expensive protection measures. The most vulnerable areas are Bangladesh, the Nile delta, and the Caribbean and Pacific islands.
  • Extreme events : their direct impact is the need to rebuild infrastructure (hurricanes, floods) or to urgently adapt them (droughts, heat waves). However, over one fourth of developed countries' investment is devoted to construction, to which must be added transport and production infrastructure, energy transmission and distribution (mostly electricity). Insurance business statistics, as well as events such as Katrina, floods in Germany and Central Europe or the 2003 European heat wave, indicate that even a slight increase in the intensity of hurricanes or tidal surges would generate sizeable costs.
  • Systemic shocks for the financial and economic system : the increased need for repairs and damage compensation (including loss of agricultural and tourism income) raises such a serious problem for insurance and reinsurance companies that they are searching for new products (weather derivatives, catastrophe bonds). To avoid systemic risks for the financial and banking system, one could contemplate either lowering significantly the basis or rate of coverage, or transferring the disaster burden to "ordinary risks", hence a transfer of the shock to the industry (which could then greatly cut risk-taking).

Acceleration of migratory flows and risks of conflicts

Migratory flows are described by N. Stern as one of the major and least controllable consequences of climate change. In developed countries, he notes a "northward shift" without dwelling on the political risks generated (possibly challenging national solidarity in Spain and Italy for instance). He does however insist, quoting numerous past examples, on potential conflicts linked to water, sudden drops in subsistence farming productivity, rising sea levels or infrastructure loss resulting from extreme events.
That is probably the core of N. Stern's message, thus concurring with a longstanding British Government analysis.