The Economics of Enough_ How to Run the Economy as if the Future Matters - Diane Coyle [29]
The same conclusion was reached in a large-scale study commissioned by the UK Government and carried out by economist Nicholas Stern. Lord Stern said, just like Vice President Gore in his film An Inconvenient Truth, that consumers everywhere, but especially in Western countries, need to make big changes in their lifestyles, and thereby big reductions in the carbon emitted in the course of their economic activity. The Stern Review concluded that the fall in output required is about 1 percent of world GDP immediately and permanently—that is equivalent to a reduction of $104 a year in consumption spending by every person on earth, if it were shared equally. If all of the burden is borne by the rich countries, the required reduction is 1.8 percent of OECD GDP, or $667 per OECD citizen. These figures might sound low, but the power of compounding over the years mean they are in fact enormous consumption sacrifices. One estimate is that a 1 percent a year reduction in consumption is equivalent to about twice what U.S. households would lose in purchasing power from a 10 percentage point increase in inflation, and about twenty times the welfare cost of business cycle fluctuations since 1945. For every American it amounts to a cut in consumption now of about $277 a year, or more than one month’s average spending on food.4 This might seem a small price to pay to save the planet and secure humanity’s future, but to demand it is like calling for a Great Depression.
Received wisdom among many “opinion formers,” and also the political momentum, lie at present with the Stern and Gore view that we should be making these big sacrifices right now in order to limit the rise in the Earth’s temperature and ensure changes in weather patterns are no more catastrophic than we can help at this stage. However, nobody in the rich Western democracies has yet been asked to make any sacrifices they might notice. Indeed, being green is regarded as a consumption choice—energy efficient light bulbs or normal ones? A hybrid car or a diesel? Plastic carrier or canvas bag?—rather than a matter of cutting consumption. The leading environmental economist Partha Dasgupta has pointed out that if poor countries will not adjust so the burden demanded by the Stern Review and its supporters falls on the rich West, the amount involved is equivalent to asking voters to pay two or three times as much to reduce carbon emissions as they currently pay to donate aid to developing countries. So the first serious electoral tests of this demand will be interesting. Consumers might have other good reasons for cutting spending, as we’ll see in the next chapter, but it isn’t at all clear that a majority yet see reducing their environmental impact as a compelling reason for doing so. Especially as any policy to bring it about will bear more heavily on some people than others.
A vast amount has been written about climate change and what needs to be done, and I am not going to try and sum it up here.5 My focus is not on the science or even on what specific policies would be needed to curb GHG emissions by enough to stabilize the climate, but rather on the implications of the environmental challenge for how to go about setting policies to improve social welfare. How do we know whether big economic changes are needed to achieve environmentally sustainable growth? How can consumers be persuaded to change their way of living by enough to avert the worst potential impacts of climate change? And how can we start to address these questions when there’s a diminishing degree of political consensus about, on the one hand, the sharing of the burden of adjustment between rich and poor countries, and on the other hand, about the extent to which there is a climate problem at all?
GLOBAL CLIMATE POLITICS
The consensus—or at least the convention—in international