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Report n° 7: The Stern review

Robustness of Stern's conclusions as to the need for immediate action

The Stern review is mostly criticized for its economic methodology. It may indeed be regretted that its overall evaluation depends on such sensitive and abstract parameters as pure preference for the present or the curvature of the utility function. We saw that one way of overcoming the limitations of the model used was to choose a low ppp, to which should be added a large amount of non-market damage.
However this in no way invalidates overall conclusions that can be supported by methods less sensitive to a few inescapable (because they include some of the real dimensions of the problem) but very fragile parameters.

  • In a context of extreme uncertainty the problem does not lie in guessing the value of damage in order to decide today which is the right emission path to choose for the current century. In fact such an exercise would not stand the slightest chance of leading to a consensus in the foreseeable future in view of the highly controversial nature of the physical, economic and ethical parameters of the calculation. The aim is to reach a compromise over the next twenty or thirty years between contrasting positions (from Greenpeace to Claude Allègre) until more is known. Therefore, even with the usual ppps, introducing a meaningful probability of thresholds beyond which damage increases significantly (even if it means stabilising later at a non-catastrophic level) is sufficient to conclude that immediate action is required.
    Such thresholds move forward in time in case of strong climate sensitivity, and we find ourselves in the situation of a motorist who does not know if the next bend is icy; the driver taps the brake pedal to be able to slow down if needed without wasting too much time in case the ice has melted. The car's momentum must not take over and a margin of adaptation must be preserved.

  • The existence of such thresholds does not depend solely on physical mechanisms.
    It depends mainly on the cost of adapting societies to climate change, and on the three following crucial parameters: (1) infrastructure sector inertia; (2) the spreading of sporadic economic imbalances to the economy as a whole; (3) the effect of international destabilisation. These are multiple factors that explain the possibility of "thick-tailed distributions" (Weitzmann 2007), i.e. risks whose probability tends towards zero but not fast enough for their mathematical expectation to tend towards zero.

  • The problems of internal and international security in that context are a central element, already mentioned by Homer-Dixon (1991). The issue is not that there are international crises caused only by an environmental problem (e.g. Gleditsch, 2006), but that climate change will exacerbate pre-existing tensions, if only through waves of "climate refugees". The causes of migration are water scarcity, rising sea levels (Bangladesh, Egypt), or both (small islands becoming more vulnerable to storm surges and whose fresh water resources are jeopardized by increased salt content). The psychological and social costs of such forced migration can be very high, as suggested by the U.S. Dust Bowl in the thirties, Hurricane Katrina or Hurricane Mitch in Honduras. Managing such movements will be a challenge for the international community, and recent experience on a smaller scale is not conducive to optimism.