Stern, Nicholas: Why Are We Waiting? The Logic, Urgency, and Promise of Tackling Climate Change

Nicholas Stern argues convincingly for more action against climate change and asks the reader “Why are we waiting?”. He calls for a new energy industrial revolution in a Schumpeterian sense away from a carbon based society doomed to low growth pathways due to negative consequences of climate change. Stern summarizes the facts of climate change and ways to address it that are beneficial both locally and globally. He describes a global regime switch away from a rigid top down international climate agreement towards a bottom up regime based on unilateral actions and pledges by countries. Increasing trust and confidence among countries raises ambition and builds up credibility that in connection with a more flexible top down agreement mutually reinforces efforts. For this, it is essential to increase awareness about the challenges and consequences of climate change and inform the global community about existing efforts and pledges. Instead of focusing on misleading accurate net benefit calculations, we should rephrase the problem and follow less risky development paths or work on an “equitable access to sustainable development”. Given the action we see already, Stern is hopeful that the global community can address climate change, but we should not delay action for too long as immediate action is necessary in order to prevent drastic consequences of a temperature change exceeding 2°C.

The author structures the book in three parts. The first part lays the groundwork for the following chapters by defining the problem and presenting possible steps against climate change. It is vital that all countries and sectors pursue, what the author calls, a new energy industrial revolution. This part is a stepping stone to the following chapters to show that there are indeed already feasible steps, which are also unilaterally desirable for countries. For a reader already familiar with the topic this part might be of lesser interest.

The second part discusses broader failures and problems in the analysis of climate change policies. While looking at possible policies it is important to focus on a more long term view to correct for the global market failure climate change. With Nicholas Stern´s reputation for Integrated Assessment Models (IAM) and the controversy about discount rates between him and William D. Nordhaus, Chapters 4 and 5 are very interesting and present the general failures of economics to combine economic theory and climate science at the same time. Quoting Keynes, most models are “precisely wrong and not roughly right”. Nicholas Stern challenges the well-established and unquestioned practice of discounting as misleading. There are few reasons to morally justify discounting and exogenous discount rates are unsuitable when climate change would alter them immensely. Basing discount rates on markets rates ignores imperfections on capital markets and the lack of long term interest rates. Either way, discount factors should be at most very low. A discussion of the most prevalent ethical arguments around climate change further strengthens the call for action.

The third part addresses the actual process of international climate negotiations. An assessment of the past development is accompanied by an overview of what countries already do. This progress would benefit greatly if countries were more aware about each other’s efforts and if international institutions like the IMF, the World Bank, or others would provide more help. Chapter 8 stresses the idea of a reinforcing framework of bottom down and top down mechanisms. While the author acknowledges that a lot of the national actions are driven by domestic factors, ways to encourage more action through an international agreement are shown. Returning to the issue of equity in climate change, a focus on “equitable access to sustainable development” is going to work better than the implied zero-sum game of burden sharing via emission quotas. A concluding chapter finally addresses the point why we are moving too slowly. While the lack of understanding or other psychological factors play a role, vested interests and other strategic problems are the main barrier for climate change policies. Hopefully, social pressure and leadership by some key players will promote more action that puts the world on a new carbon free growth path.

In my opinion the critique on badly framed economic cost benefit analysis and discounting are the most insightful, also to a reader familiar with the topic. For a reader unfamiliar with the topic, Stern explains in detail why climate change is a problem and how it could be prevented. An extensive list of examples and anecdotes should convince most sceptics that a carbon based growth path is doomed to fail. Although the third part of the book is meant to be more applied, it does remain vague how the global community is meant to move forward. The general feeling of the book seems a bit too optimistic. In spite of the many examples given by Stern, the world is moving too slowly to prevent drastic consequences of climate change. Looking at the title “Why are we waiting?”, I had expected a larger part of the book to be devoted to this and the strategic issues that play a role. Instead, we are told that policies against climate change are indeed locally and globally beneficial, if governments and businesses finally opened their eyes and understood the problem. In this regard, Nicholas Stern hopefully opens the eyes of stakeholders and climate skeptics alike.