ECONOMIC DEVELOPMENT AND CLIMATE CHANGE Author: Victoria Bradford, Policy and Information Researcher, CLES (0161) 233 1927 [email protected] INTRODUCTION AND PURPOSE As such, the purpose of this research is to identify to what extent the Stern Review and The recently published Stern Review1 has set mitigation of the effects of climate change are out a key challenge for central and local influencing or should influence economic government in terms of the economic impact development activity in the UK, at the that climate change will have on the local, national, local and regional level. This national and global economy. research assesses the strategic lead played by economic development departments on The review demonstrates that ignoring climate climate change strategies, and wider change will damage economic growth. At its corporate environmental sustainability policies. heart is the concept that tackling climate It is also designed to assess the extent to change is the pro-growth strategy for the which economic development departments are longer term, with Stern and his fellow author’s involved in taking action to reduce the impact arguing that it can be done in a way that does of climate change on business activity as well not cap the aspirations for growth of rich, or as highlighting and promoting the economic poor, countries. The earlier effective action is benefits that can be gained from taking taken, the less costly it will be. Without action action, e.g. resource consumption and to address climate change, over the coming developing new energy technologies. It will few decades we risk major disruption to also look at the role that economic economic and social activity, on a scale similar development, together with spatial planning is to those associated with the great wars and playing in reducing the impact of climate the economic depression of the first half of the change on the economy of the UK. 20th century, and it will be difficult or impossible to reverse these changes. In order to do this, this rapid research will: explore the issues surrounding climate 1Stern, Nicholas (2006), The Economics of Climate Change, change from a global perspective, HM Treasury, London: http://www.hm‐ including looking at international targets treasury.gov.uk/independent_reviews/stern_review_econ that the UK has agreed to; omics_climate_change/stern_review_report.cfm 1 consider the findings of the Stern Review, economic growth as well as the economic, including the relevance and consequences social and environmental consequences of of the report for local government, and climate change. It also sought to explore the look at how the RDAs are responding to potential of different approaches to adaptation the review’s findings; to the changes in the climate; and sought to examine the wider governance and policy consider any specific lessons for the UK, in the responses surrounding the mitigation and context of its existing climate change goals. prevention of the effects of climate change, including the Nottingham The Review noted that average global Declaration, the 2003 Energy White Paper, temperature would rise by 2 - 3°C within the the Local Governnment Bill, the next fifty years or so. This warming will have forthcoming Climate Change Bill; changes many severe impacts, often associated with to the planning system; and other more water, including; flooding and reduced water localisesd policy and governance supplies and increasingly vulnerable responses; and ecosystems. It will also result in increased explore local responses to the agenda. deaths from starvation, malnutrition and heat stress, and more widespread vector-borne METHODOLOGY diseases, such as malaria. To determine the costs and benefits of action to reduce the This research has involved the following three emissions that cause climate change, the methods: Review considered the physical impacts of climate change on the economy, on human A policy and literature review to examine life and on the environment and used current and forthcoming governance and economic models to estimate the economic policy responses to climate change, at the impacts of these, comparing the cost of action international, national and local levels; against the cost of doing nothing. Interviews with five local authority officers to determine the level and depth of From all perspectives, the evidence gathered activity with their authority and the by the Review led to one simple conclusion: strategic input of their economic the benefits of strong, early action development team to wider climate considerably outweigh the costs of not doing change mitigation activity; anything. The Review found that mitigation - A case study of a local authority that has taking strong action to reduce emissions - made adjustments to its economic must be viewed as an investment, a cost development policies in the light of the incurred now and in the coming few decades threat posed by climate change to to avoid very severe consequences in the economic development, and more widely. future. It found that if investments are made wisely, the costs will be manageable, and THE STERN REVIEW2 there will be a wide range of opportunities for growth and development. The Stern Review was set in motion in 2005, with the intention of assessing the economics Central to this Review, is the idea that the of moving to a low-carbon global economy as challenge of climate change also presents a well as exploring timescales for action, and unique challenge for economics: it is the the choice of policies, mechanisms and greatest and widest-ranging market failure institutions for reducing net emissions. To do ever seen. The economic analysis must this the Review consulted stakeholders to therefore be global, deal with long time examine the evidence on energy demand and horizons and have the economics of risk and uncertainty at its heart. This is a key feature of the Stern Review. To meet these 2 Stern, Nicholas (2006), The Economics of Climate Change, challenges, the Review draws on ideas and HM Treasury, London: http://www.hm‐ techniques from most of the important areas treasury.gov.uk/independent_reviews/stern_review_econ of economics, including many recent omics_climate_change/stern_review_report.cfm advances. Later in this report we will unpack 2 how these findings are influencing the activity of progress in achieving the UK’s four long of a range of local and regional partners. term goals for energy policy: First, however, it is necessary to look at the international and national policy context within To put the UK on a path to cut our carbon which the Stern Review sits. dioxide emissions by some 60% by about 2050, with real progress by 2020; NATIONAL POLICY, TARGETS AND To maintain reliable energy supplies; AGREEMENTS To promote competitive markets in the UK and beyond, helping to raise the rate of The UK is curently required via the sustainable economic growth and to Kyoto/Burden Sharing Agreement to cut improve our productivity; and greenhouse gas emissions by 12.5% by 2008- To ensure that every home is adequately 12, against the 1990 base year. Additionlly, and affordably heated. the Government has set the national target of a 20% CO2 emission reduction by 2010, again Additionally, in March 2007, the Government against the 1990 rate. In 2003, the UK published its draft Climate Change Bill.8 The Government's Energy White Paper3 set an Bill will establish an independent body, the aspiration for the UK to reduce carbon Carbon Committee, to work with Government emissions by 60% and create a low carbon to reduce emissions over time and across the economy by 2050, accepting the whole of the economy. It will put in place new recommendations of the Royal Commission on emission reduction measures and improve Environmental Pollution (RCEP)4 of a need to monitoring and reporting arrangements, stabilise greenhouse gas emissions, with real including implementing the publishing of a progress on the path to 60%, evidenced by carbon budget every 5 years. At the same 2020. time it will be mindful of sectoral and competitiveness impacts, including the need to The existing UK Climate Change Programme5 secure energy supplies at competitive prices. combines both regulatory and obligation The key points of the draft bill are: based measures with fiscal and support measures to place the UK on a path to reduce A series of clear targets for reducing carbon emissions by 60% by 2050 through a carbon dioxide emissions - including combination of energy efficiency in the short making the UK’s targets for a 60% term and renewables in the long term. In reduction by 2050 and a 26% to 32% 2006, the Government published a review of reduction by 2020 legally binding. the UK Climate Change Programme.6 This was A new system of legally binding five year followed in July 2006 by the publication of the “carbon budgets”, set at least 15 years Government’s Energy Review,7 a major review ahead, to provide clarity on the UK’s pathway towards its key targets and increase the certainty that businesses and individuals need to invest in low-carbon 3 DTI (2006) Our energy future ‐ creating a low technologies. carbon Economy, Stationery Office limited, London A new statutory body, the Committee on http://www.dti.gov.uk/files/file10719.pdf Climate Change, to provide independent 4 Royal Commission on Environmental Pollution (2000), expert advice and guidance to Energy ‐ The Changing Climate, Stationery Office limited, Government on achieving its targets and