Lord Stern - Economist HARDtalk

Welcome to HARDtalk. I Zeinab Badawi. World leaders gathered at a

UN climate summit in New York and pledged again to tackle global

warming. There were marches on the streets in New York and elsewhere,

as activists demanded tougher action on climate change. Yet again this

year, global greenhouse gas emissions have risen, partly because

many politicians and citizens don't want more expensive renewable energy

if it affects economic growth and prosperity. My guest today is the

British climate economist, Lord Nicholas Stern, who has just

co`chaired a new report on the climate and economy. He says it is

not an either/or situation. But what evidence is there that we can have

it both ways, and are governments listening?

Lord Stern, welcome to HARDtalk. Thank you for having me. How do you

convince people that tackling climate change is compatible with

prosperity? Evidence of things that work, showing that the costs of

renewables will come crashing down, both wind and solar. And linking it,

and this was a key aspect of our reports, linking it to the big

processes of change going on around the world, particularly the movement

into cities, particularly increasing demand for energy, particularly the

pressures on forest, and of course, the overall shift in the balance of

economic activity in the world away from the rich countries towards

emerging markets and developing countries. Even the UN Special Envoy

on climate change Mary Robinson the former president of Ireland says

that your report is very welcome, the report that he co`chaired with

the former Mexican resident, the new climate economy report. She says it

is great to tell nations that climate action is possible but your

message is overhyped and two positive, she says. Well, I hadn't

seen that, and I hadn't seen that report. That is what she actually

told me. And I think that is a misinterpretation. And I look

forward to my next discussion with Mary. We have looked at what is

possible. And we have been quite cautious about the numbers. So we

haven't assumed, made wild assumptions about technical change.

But what we have done is to state if these policies are good, if we

invest in much more compact cities, if we put the real technical

progress to work in renewables and energy efficiency, then we can do

very well. So we are achieving good policies, good programmes, good

investments, and showing what they can do. So the assumption is that

those will happen, that is not an assumption that we make. But we sure

what we can do, and I think the numbers that we put to what we can

do actually quite cautious. So your report, one of its key outcomes was

as global populations become increasingly urbanised you are going

to be the right kind of infrastructure to shape development

land use and energy systems. But the fact of the matter is, how can you

use renewable energy to achieve those goals of better cities for

people to live in, when as Professor Richard Cole, Professor of economics

at Sussex University, has been involved in several reports on

climate change for the UN, says it is implausible that growth and

climate objectives are mutually reinforcing. Renewable energy is

more expensive than fossil fuels. So which country is going to say we are

going to go for more expensive renewable energy. Well, Professor

Tolle is entitled to his opinion, but the kinds of models he builds

are pretty mechanical in assuming essentially the results which he is

arguing for. What we have seen in the last five or six years is a

dramatic fall, indeed, over a longer period, dramatic falls in the costs

of renewables. They are now competitive with fossil fuels in

many countries of the world. Al Gore recently has done of 79 `` a count

of 79. What a lot of economists have missed, or haven't built into their

models to put it more fairly, is that dramatic cost reduction in

renewables, and that is going to continue, but there is another

factor here as well. Remember our report is called better growth,

better climate. And that is very important. It is not just the rate

of growth, which could be faster all could be slower. It is better. And

the fundamental sense of better is a pollution. Because another thing

that has become much more clear in the past few years with work from

the WHO, OECD, IMF and so on Tom is the immense costs of air pollution.

Much bigger now than had been previously thought. So if you put

those two things together, reduce cost of renewables and the cost of

fossil fuels in terms of human health, then you can certainly have

better growth and better climate. But are you seeing now the

investment going into those renewable energy project? Because

there are those in climate debate that say yes, there is the money

there after all. 800 is as leaders and financiers turned up at the

recent climate Summit in New York and there is the money there. But

they need relatively risk`free investment. So if you take one

example for instance, the Inga hydroelectric dam in that Democratic

Republic of Congo cost an estimated $70 billion to build and would

provide nice clean energy for South Africa but they only have $35

billion of that money because people are thinking who is going to invest

in the DIC? First we have to recognise just how much investment

is going into renewables. And more than half of the electricity

investment in the last few years, power sector investment, has been in

renewables. `` DRC. So they are going back from a low base at the

moment, very fast indeed. And if you add Hydro, which is perfectly

reasonable, into renewables, then the numbers are still stronger. Now

how do we bring the cost of capital down, how do we mobilise capital?

One thing you need is clear, strong policies. And in many countries

around the world you have seen vacillation backwards and forwards.

That is bad for any sort of investment, whether it be green or

brown. So clear, strong policies are very important. Secondly you need

better sources of finance. We need to increase the availability of

funds from the infrastructure development banks. That is why the

bricks led development bank was set up. As for South Africa. That is the

kind of investment that this new investment bank could put their

money in. All right. So good, create strong policies and new sources of

finance. The savings are there. So the cost of renewables are coming

down is your answer to critics like Richard Tolle who say that at the

moment it is not extensive than fossil fuels. In addition, the

reduce pollution. That is a big saving. In China for example, recent

WHO OECD figures suggest that something like ten or 11% of GDP is

the cost of air pollution associated with fossil fuels. That is an

immense cost. 4% in the United States. It is those two things

together, not just the cost of renewables coming down, which is

extremely important, but also take into account these immense social

costs, particularly the health costs of fossil fuels. And that a serious

economics. Let's take what you say then and go forward and say, suppose

a country or countries do make their policies, their energy sources more

green. Take the European Union, they have targets to have 20% of their

energy from renewable sources by 2020. But again, Richard Tolle has

said that his costs EU members 250 billion euros in lost economic

growth every year. And he says yet the net effect will be almost an

immeasurable reduction in global temperatures of just 0.1% by 2100,

nearly 100 years from now. So a lot of money but it may have a

negligible impact upon greenhouse gas emissions. Frankly I would be

deeply sceptical about those numbers. What we have looked at is

the current cost of renewables, and how they are coming down. We have

looked at the effects on the quality of growth as well as the rate of

growth. And those are the key in his two weeks and in. At their purpose

is to combat global warming. And if he is saying he spent 250, it could

cost you 250 billion euros a year in lost growth and the impact is just

negligible, on global warming, lost growth and the impact is just

don't believe either of those things. I don't believe the impact

on growth is anything like what is suggested there. Those come out a

very mechanical and rather dubious models. I have to just pick you up

on models, because you have your own models as well that support your

findings, and an academic from Massachusetts Institute of

Technology, MIT, says the models that you use, can be used to obtain

any kind of result. They are useless policy analysis, they suggest the

level of knowledge and precision which is simply illusory. The same

could be said about your models. No, because essentially the way we

do it is much more was up and the kind of overall aggregate

macroeconomic models that he was talking about. And he actually made

that statement in a forum in the Journal of economic literature. I

also had a paper in that forum criticising the way in which a lot

of these overall aggregate models were built. They feed in very strong

growth. They need in very low risk. They feed in very low damages from

climate change. We were doing something different. We were looking

at the whole process of urbanisation. Of investing in

energy. And we did it from the bottom up. And we asked what other

new kind of technologies available? What do they cost? How could they be

put together. So it was a very different kind of analysis, not

subject to his criticism. I am sure he would agree with that. Is your

message getting through though, when you have people like Tony Abbott the

Australian Prime Minister saying, it sounds like common sense, is said

this in June, before you report, it sounds like common sense to minimise

human impact on the Environ. It doesn't make much sense however to

impose certain substantial cost on the economy now in order to avoid

unknown and perhaps changes in the future. So you could say, which you

will say, Tony Abbott is wrong. You have to convince political leaves it

dumber leaders. You have to convince the political leaders. They are

elected. Who are the big ones? The big emitters in order are China,

United States, and the European Union. And those leaders to

recognise, quite rightly, the immense risks of climate change. It

is very important that your listeners and viewers understand

just how big those risks are. On current projections, we risk over

the next 100 or 150 years, temperatures of three, four, or five

China is the biggest emitter and they are seeing this as an immense

problem, they are rapidly changing what they are doing. That is because

people are going around Chinese city with masks because of the smog. That

isn't what is going to happen in a few decades. That is here and now.

They are responding to both. How do you try to make people, you say

President Obama is a concern, but you said a research centre asked

America what the top 20 priorities were and climate change was number

19. Is it because you are saying things that are too apocalyptic? A

study by University College in London found that the kind of

appeals you have made to fear or ineffective and lead to suspicion

that they are being manipulated. You asked me whether the risks were big

or small in response to a statement with Tony Abbott that he thought

they were small. I responded that the risks were big. The reason we

wrote the report as we did, the reason we wanted to understand the

relationship between better growth and better climate was because we do

know and recognise the importance attached to growth and development.

That is why we told the story correctly as we did. This is about

better growth and better climate. We put better growth first. You accept

that there is a failure by people like you to get their message across

to people? There is more to do. Failure is much too strong. If you

have got the big emitters in the world, those three, China, the US

and the EU, half the world emissions, they understand the

seriousness of the problem. They also recognise that there is growth

here and now and that growth can be strong and clean. I am not saying it

is stronger in terms of the GDP story, but it could be stronger or

weaker. The cleaner, better growth, less congestion in our cities, less

waste in our food, less pollution in the air that is killing so many

people with the huge cost of GDP, 10% in China, this is a story of

much better growth over these next 10` 20 years, a real attack on world

poverty while at the same time, (CROSSTALK) the message isn't

getting through. Narendra Modi has said clearly that he doesn't want to

pollute his country to prosperity. He says he wants to make India a

global manufacturing hub and that he was like to use renewable sources.

However, his environment minister has also said this, 20% of our

population doesn't have access to electricity and that is our top

priority. We will grow faster and our emissions will rise. Developing

nations, Africa, we want to use coal. People need to provide energy

in developing nations now and they are reaching for fossil fuels. More

than half of the electricity investment over the last few years

around the world has been in renewables. There is continuing

investment in coal but it is fraction if you take the medium term

is going down. The Chinese are looking to peak their coal in ten

years. The understanding and opportunities in renewables has gone

up. As they stand, worldwide, we have build more coal burning power

plants in the past decade than in any previous decade. The closures of

old plants and keeping pace with this expansion. If you take the last

three or four years, you have seen at least half of the investment in

power in renewables. That is changing. That's why the report is

timely. We are picking up on the changes in investment and cost.

Let's stay with India and Prime Minister Narendra Modi. He said

shortly after his election in May, I have worked in India for 40 years,

he said that we want to bring to the 400 million people in India without

electricity, we want to bring solar lighting to their homes. He said, we

want to do it by 2019, not 2020, 2019, the end of his five`year term.

That is a serious commitment to bringing electricity, meeting the

problem the environment minister described through renewables. It is

true that India's emissions will go up for a while. They are only two

tons per capita. You say it is a race against time. India is one of

many developing nations. Africa accounts for 3% of global emissions.

You see the biggest industrial power in Africa, South Africa, the finance

minister until recently said that we need to create jobs. We haven't got

a choice except to build generating capacity, relying on what remains

our most abundant and affordable energy source, Cole. 85% of South

Africa's energy comes from coal `` coal. I have worked closely with him

in the bricks make development bank, he was looking at finding new

sources of finance focusing on infrastructure and renewables ``

BRICS. Trevor manual, Finance Minister of South Africa for 13

years was a member of our commission. What you are seeing with

the understanding of the lower cost of renewables, with the

understanding of the enormous social cost of fossil fuels in terms of

pollution in the air and killing people, you are seeing a movement

away, you see an understanding that we can do much better. That is

something recent of the last few years, which is why the report is

timely. When you speak with South Africans, for instance the founding

secretary of the biggest trade union, he says, we would like to go

for renewables but if you take countries like Germany, their

baseload is guaranteed. We can't guarantee. We don't want to have

intermittent power because we can't go elsewhere for it. We need to have

it guaranteed. The president of the World Bank said no country is

power. It is a different picture for the developing nations as they want

to convert to renewable energy, they can't afford the power cuts. In

China, has seen more than half the investment in renewable

quotes you are bringing our a little out of date. I don't think that

broadband, who I have worked would talk down the opportunities in

renewables. They are not bad I am giving you the reality is that they

want jobs now. That is a reality looking backwards. If you look

forwards, the perceptions of people like Trevor manual, the member of

the commission, and Finance Minister of that country, those are changing.

That is what we are pointing to. Is it changing fast enough? 55,000

coalminers in South Africa. You can't close those coal mines

overnight and convert to renewable energy. It's going to take a while.

Can I put this to you, the point at... The United States has more

people working in renewables than coal mines. Those things are

changing. You have to manage change. One way of managing change is that

not all fossil fuels all the same. Gas is much cleaner than coal. Why

not have a single, unified goal, as a climate lobbyist, and said...

Climate economist, I beg your pardon. As the chief executive of

Norway's Statoil said at the UN summit, replacing coal with gas and

power generation is a simple way of halving emissions. People understand

that. That could be part of the story, part of a bridge. We have got

to have close to zero carbon emissions from the energy sector by

the second half of this century, that is the way in which one of our

commissioners put it. He is right. You can't have zero emissions from

gas, you can have much lower emissions from gas than you do from

coal. That is a very important point and that is why it could be valuable

as a bridge. It won't do the job, because we will need close to zero

or zero carbon emissions from energy in the second half of this century.

Finally, we saw some of those marchers at the head of the UN

climate summit in New York demanding a fossil free future. Is that

possible and, if so, when? It is possible. We can have fossil

free... If you have carbon capture and storage, if you catch the CO2

and the greenhouse gases, you can have fossil fuel. What they called

carbon capture and storage would allow fossil fuels to stay in the

mix. I would look forward to 2050, to an electricity system with a mix

of renewables, hydro, as another sort of renewable, nuclear, carbon

capture and storage for some fossil fuels, a mixture like that could do

the trick. And of course, we need most of all, much better energy

efficiency. Lord Stern, thank you very much indeed for coming on

HARDtalk. It is a pleasure. Once again, Tuesday will turn out to

be a decent stay in central and eastern parts of the British Isles.

Different story in the west. Warm and bright on Tuesday in central and

eastern parts once we get rid of the fog. Towards the west, change is at

hand. Thanks to this area of low pressure, throwing its weather front

well ahead of it and into the western side of the British Isles.

That's the reason for the