Costing climate change - Climate Change: The Facts - page 91

Just as the government-funded Stern and Garnaut reports produced estimated costs of
global warming far in excess of those of the IPCC, these sources also estimated the costs
ofrestrainingemissionstobeevenlowerthanIPCCexpectations. TheSternReportsought
reductions in global emissions of CO 2 by 80 per cent of current levels by 2050. 16 Stern
argued that the economic cost will be 1 per cent of world GDP, 'which poses little threat to
standards of living given that the economic output in the OECD countries is likely to rise
by over 200 per cent and in developing countries by more than 400 per cent' during this
period. 17
Neither Stern nor Garnaut has plausibility. Both reports used a near-zero-interest-rates
approachtoevaluatingfuturecosts.Sternused0.1-1.4percentandGarnautused1.35-2.65
per cent. A low discount rate means future benefits appear higher than they should be. As
the Nongovernmental International Panel on Climate Change argues,
Discounting is a standard tool of policy analysis on issues ranging from financing public facilities to education and
fighting crime. How can climate change be exempted from the use of an analytical tool that is required in all other
debates?Andifthepurposeofreducinggreenhousegasemissionsistobenefitfuturegenerations,itmustbecomparedto
otherinvestmentsthatwoulddothesamething.Nearlyanyinvestmentincapitalandservicesthatraisesproductivityand
produces wealth benefits future generations. Making investments in emission reductions that yield less than the return on
alternative investments in fact impoverishes future generations … 18