Vancouver, Canada - "The world faces an unprecedented challenge which requires urgent global action to sustain growth and guard against the risks of catastrophic climate change." Those are the opening words to a new report entitled Key Elements of a Global Deal on Climate Change by Sir Nicholas Stern, author of the landmark 2006 UK report on the economic costs of climate change action.

Stern notes that the balance of scientific evidence points clearly to the need for all countries - both developed and developing - to plan credible emissions reduction policies now, if mankind is to avoid substantial risks to future generations. The impact of global warming is already being felt and future generations face grave risks if activities continue unaltered. Delaying action increases the cost of meeting any temperature or concentration goal, and raises the risks of irreversible impacts as temperature thresholds are exceeded.

The challenge is far-reaching, comprehensive, and global, notes Stern, but it is manageable. The activities and technologies necessary to eliminate the bulk of the risks associated with climate change are already available, or can be developed through appropriate policies to support innovation.

All countries will be affected by climate change. The devastating impacts of extreme weather, including floods, droughts and storms, are already being felt by developed and developing nations alike notes the report. But it is the most vulnerable - the poorest countries - that will suffer the earliest and the most, even though they have contributed least to the factors exacerbating climate change.

Developing countries, which will make up nearly 90% of the world’s population in 2050, must plan for emission reductions and be ready to accept binding targets by 2020, says Stern. Those with strong emissions growth, such as China and India, should be willing to accept sectoral, or even national, targets well before that.

The report stresses that developing countries should not be required to bear the full costs of this action alone but actions taken by developed countries are already reducing some of the burden on developing nations.  For instance, carbon markets are beginning to deliver flows of finance to support low-carbon development, including those funds generated through the Clean Development Mechanism.

Stern’s purpose in the report was to put forward a coherent set of proposals on global policy that satisfy three basic principles:

• Effectiveness - it must lead to cuts in greenhouse gas (GHG) emissions on the scale required to keep the risks from climate change at acceptable levels;
  
  
• Efficiency - it must be implemented in the most cost-effective way, with mitigation being undertaken where it is cheapest; and
  
  
• Equity - it must take account of the fact that it is poor countries that are often hit earliest and hardest, while rich countries have a particular responsibility for past emissions.

His proposals are designed to advance the climate change debate at the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change scheduled for Copenhagen in December 2009.

According to Stern, a future international climate change framework should include:

Emissions trading: Expanding and linking the growing number of emissions trading schemes around the world is a powerful way to promote cost-effective reductions in emissions and to bring forward action in developing countries: strong targets in rich countries could drive flows amounting to tens of billions of dollars each year to support the transition to low-carbon development paths.

Technology cooperation: Informal co-ordination as well as formal agreements can boost the effectiveness of investments in innovation around the world. Globally, support for energy R&D should at least double, and support for the deployment of new low-carbon technologies should increase up to five-fold. International cooperation on product standards is a powerful way to boost energy efficiency.

Action to reduce deforestation: The loss of natural forests around the world contributes more to global emissions each year than the transport sector. Curbing deforestation is a highly cost-effective way to reduce emissions; large scale international pilot programs to explore the best ways to do this could get underway very quickly.

With respect to emissions targets Stern notes that on the basis of the risks and costs of action and inaction, an appropriate stabilization target for greenhouse gas (GHG) concentrations would be 450-500 ppmv CO2e. Meeting a 500 ppmv CO2e target requires a cut in all GHG emissions of around 50% by 2050, relative to 1990 emission levels, and further cuts after that.

This would imply - as a matter of simple arithmetic - a commitment to per capita emissions by 2050 of around 2T CO2e as a world average, with little scope for significant deviation. All current plans need to be credible, and framed with this world average in mind. All countries will eventually need to take on binding national targets close to this per capita level to achieve these reductions.

At the COP15 meetings in 2009, developed countries should commit to cutting emissions by 80-90% from 1990 levels by 2050 together with credible interim targets. Developing countries will also need to make substantial cuts, but should not be asked to take on binding national targets until developed countries provide the example of lower carbon growth and can demonstrate that institutions and frameworks can provide financial and technological support.

Developing countries will be expected to play their part in adopting domestic policies that enhance energy efficiency policies, implement sustainable technologies and reduced deforestation They should facilitate the involvement of domestic firms in international emissions reductions markets and access to technology. They should also be at the forefront of work to shape a global deal.

By 2020 developing countries, subject to developed country performance, will need to take on appropriate and binding national targets and current policies will need to be clearly framed with this goal in mind. If binding targets were deemed as necessary now, the risk is that they would be much too high in relation to long-term targets.

Some fast growing middle-income developing countries may need to take on early sectoral targets, and possibly binding national targets, before 2020. The next steps would include: examining the details of the interim period between now and 2020, in particular with respect to the evolutionary pathway to full trading; and detailing how to allocate responsibilities on emissions between producers and consumers, as this is an important element of the equity story.

Stern recommends that the world should aim for an international cap-and-trade system for three reasons:

• Managing the risks of dangerous climate change by imposing an absolute limit on emissions (effectiveness);
  
  
• Reduces the costs of action (efficiency); and
  
  
• Generating private sector financial flows to developing countries which can be used for low carbon development (equity).

Other policies (e.g. regulation, standards, and taxation) should also be pursued, and can complement a cap-and-trade system. Different countries will differ in their domestic combination of policies but should work towards common effective carbon prices and product standards.

The power of a global cap-and-trade scheme should be used to generate significant financial flows to developing countries: around $20-$75 billion per year in 2020 and $50 - $100 billion per year by 2030.

The emerging global carbon market should build on current institutions and mechanisms (e.g. linking up existing and developing regional carbon markets).  Further work is needed to better understand how to link existing trading schemes, the role of enabling environments in attracting investment and the data and institutional requirements to allow developing countries to fully benefit from a carbon market.

The report urges action must be taken soon that leads to a simple conclusion: the benefits of strong and early action far outweigh the economic costs of not acting.

Using the results from formal economic models, the Review estimates that if none of these actions are taken to reduce emissions, the concentration of greenhouse gases in the atmosphere could reach double its pre-industrial level as early as 2035.  This would result in a global average temperature rise of over 2°C. In the longer term, there would be more than a 50% chance that the temperature rise would exceed 5°C.

The overall costs of inaction will be the equivalent to losing 5% to 20% of global GDP each year, now and forever.  In contrast, taking action - reducing greenhouse gas emissions to avoid the worst impacts of climate change - can be limited to around 1% of global GDP each year.

Along with mitigating greenhouse gas emissions, the report urges governments to adopt an adaptation strategy for some of the inevitable impacts of climate change.  The report stresses that it is essential that climate change be fully integrated into development policy.

"It is no longer possible to prevent the climate change that will take place over the next two to three decades, but it is still possible to protect our societies and economies from its impacts to some extent," says the report.

The full Stern Review can be downloaded here.

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For More Information: London School of Economics and Political Science