Overrated: Nicholas Stern
The new president of the British Academy and climate policy guru deserves a global roasting for his work on global warming
Nicholas Stern, created a life peer in 2007 as Baron Stern of Brentford, of Elsted in the County of West Sussex and of Wimbledon in the London Borough of Merton, wasn’t always a global warming superstar. When he was knighted in 2004, he had just become second permanent secretary at HM Treasury after four years as chief economist at the World Bank. Before becoming a top civil servant, Stern taught at Oxford, Warwick, and the LSE, where it is unlikely that he did any more damage to the economy than other developmental economists of conventional outlook.
Stern’s ascent began in 2005 when the then-Chancellor Gordon Brown chose him to head a large Treasury team charged with writing a report comparing the costs of global warming impacts with the costs of stopping warming by reducing drastically greenhouse gas emissions. It was understood by everyone involved that the report was to be a put-up job. Stern’s team were well-equipped to deliver: they had little expertise in energy or environmental economics and, like many bureaucrats, appear to have had few scruples about letting facts get in the way of pleasing their masters.
The publication in 2006 of the Stern Review on the Economics of Climate Change was an immediate international sensation; and it made Stern into a media star, a hero of the environmental movement, and a pillar of the global warming establishment. He set up a company to handle the cash rolling in from speaking engagements around the world. The LSE appointed him I.G. Patel Professor and founding “chair” of the Grantham Research Institute on Climate Change. To cap it all, the British Academy recently elected Stern as its president, thereby making him one of Britain’s most powerful and prestigious academics.
The Stern Review concluded that global warming’s impacts were going to cost 5 per cent of global economic output “now and forever”. However, preventing global warming (primarily by reducing carbon dioxide emissions produced by burning coal, oil, and gas) would cost only 1 per cent of global output. What a deal!
But despite an impressive scholarly apparatus that goes on for 700 pages, Stern’s report is hack work. A number of the world’s leading resource economists quickly found insurmountable problems with its assumptions and analysis. About the best that was said for it was that some of its conclusions might still be defended on other grounds. Stern, however, dismissed his critics without answering their criticisms by calling them morally obtuse.
Brown’s government ignored these devastating criticisms and relied on the Review as the intellectual justification for its policies to restrict fossil fuel use and to subsidise more expensive alternatives, such as wind turbines. Other countries accepted it as well; Australia even produced a copy, the Garnaut Report; and the Cameron government fell into line (although the recent elavation of Owen Paterson suggests that reality is dawning).
To counter the persistence of the Review’s influence, Peter Lilley MP has now debunked it in What is Wrong with Stern? published in September by Lord Lawson’s Global Warming Policy Foundation. Lilley gives an especially clear explanation of the multiple faulty assumptions and false reasoning that support the central claim that the benefits of stopping warming will outweigh the costs of doing so by a factor of five.
To summarise, Stern requires people in the next half century or so to pay the colossal costs of reducing emissions, while most of the alleged benefits of doing so won’t be enjoyed for a century or two. Since Stern accepts the standard economic growth assumption that people in the future will have a much higher living standard (even though temperatures will be higher) than people today, this means that wealth will be redistributed from us to much wealthier people a century from now. And we’re supposed to like it.
In a foreword to Lilley’s splendid study, the esteemed resource economist Richard Tol concludes that the Stern Review’s “academic value is zero”. On the other hand, its political value is high. It is therefore understandable that Stern was rewarded for doing the government’s dirty work.
It is not surprising that global warming alarmists and those who hope to profit from providing government-mandated, higher-priced energy continue to lionise Stern. An astonishing number of academic institutions have behaved shamefully in conferring honours and positions on Stern. Might they have done so because they are beholden to government for nearly all their funding and therefore toady to it in hope of getting more?
As rising energy costs make poor people poorer and as the British economy continues to decline as a result of disastrous policies pursued in order to slash Britain’s greenhouse gas emissions (which comprise 2 per cent of the global total), Lord Stern will have a lot to answer for. But so too will those academics who have gone along to get along.