At a February 12 seminar organized by the World Bank and the IMF, Sir Nicholas Stern urged the two institutions to take on a greater role in mitigating climate change caused by human induced global warming. Stern, a former Chief Economist at the World Bank who led a review into climate change for the U.K. government, said it is still possible to avoid the worst effects of global warming. But the window for capping the level of greenhouse gases in the atmosphere at 450–550 parts per million (ppm) CO2 is closing fast. The current level stands at 430 ppm—concentrations that have already caused a rise in the earth’s temperature by more than half a degree Celsius, according to the Stern review on the economics of climate change, published in 2006.
Based on current trends, average global temperatures will rise by 2–3 degrees Celsius within the next 50 years or so, Stern said, adding that the most severe impact of global warming will be felt through its effects on water:
- Melting glaciers will initially increase flood risk and will then strongly reduce water supplies.
- Declining crop yields could leave hundreds of millions of people without the ability to produce or purchase sufficient food.
- There will be a worldwide increase in deaths from malnutrition and heat stress in lower altitudes—although in higher altitudes, cold-related deaths will decrease.
- Rising sea levels will put hundreds of millions of people at risk for being flooded each year.
- About 15–40 percent of all species could face extinction as a result of global warming.
Cost of action
Stern estimated that fighting global warming will cost about 1 percent of annual global GDP by 2050, adding that developed countries should be prepared to shoulder most of the burden, at least initially. He also urged international financial institutions—including the World Bank and the IMF—to take a lead role. The two institutions could disseminate information about what countries are doing worldwide to combat global warming, help spearhead new initiatives such as a global carbon cap and emissions trading system, support efforts to stop deforestation (a very cost-effective way of reducing greenhouse gas emissions), and help countries adopt policy frameworks that mitigate the effects of climate change.
In commenting on Stern’s presentation, Teresa Ter-Minassian, head of the IMF’s Fiscal Affairs Department, noted that the Stern review had prompted the IMF to reflect more deeply on its role in the fight against global warming. “We are keenly aware of the fact that climate change will have major macroeconomic and fiscal effects for the Fund’s member countries.” She said that the IMF would focus on macroeconomic, financial, and especially fiscal instruments to deal with global warming, in line with its mandate and what it does best.
Not everyone agrees with Stern, of course. Some of his judgments have been controversial, and the models used to back the conclusions of his report have attracted criticism from many economists, including Professor William Nordhaus of Yale University and Professor Partha Dasgupta of Cambridge University. But most scholars now agree that the science behind global warming is sound and that the issue needs to be addressed, almost certainly by raising the market price of carbon, as proposed in the Stern report. In February 2007, the United Nations Intergovernmental Panel on Climate Change presented further scientific evidence to support the claim that global warming is caused by carbon pollution.
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