Mark John

GLASGOW (Reuters). – The recent computer revolution has taught Nicholas Stern valuable lessons about the impact of falling green technology costs on the economy and the reasons why economics continue to struggle with its modeling and measurement.

The author of “Stern Review”, a landmark report on the economy, draws an analogy closer to home. He cites the diminishing cost of video calling family members over the past two decades as one way of explaining the financial stakes in reducing carbon emissions.

“If you look back 20 years and offered me the opportunity of telephoning my grandchildren on-screen, once a week, I would have said that is extremely valuable,” he told Reuters in an interview at the COP26 climate talks in Glasgow https://www.reuters.com/business/cop.

But now, you have the option to do it free of charge – basically whenever you wish. It is quite difficult to value this kind of story.

Stern, who is professor of economics in the London School of Economics and chairs the Grantham Research Institute of Climate Change and the Environment has been at times an exception.

His 2006 key finding – that it would be more cost-effective to do nothing than take early action on climate change – was vilified by many as alarmist.

However, if a recent Reuters poll by climate economists shows that consensus is coming around after fifteen years of more greenhouse gasses being pumped into our atmosphere.

The costs of taking action are down, and inaction is more expensive. “15 years ago, there was a significant difference. Today it’s immense,” he stated.

Stern said that solar and wind-based renewable energy is more cost-effective than many fossil fuel-based resources in most parts of the world. Meanwhile, the lifetime costs for electric cars are becoming less expensive than those for internal combustion engines.

Others trends could shift the differential in favor of a greener transition. These include spreading carbon-pricing schemes and cheaper development of renewable technologies.

You are obligated to invest

Stern said that such factors must be included in the economic models, which will shape the most important investment decisions on the planet over the next decade.

He said that these things were crucial in shifting our perspective and influencing the major decisions. We must invest in order to realize the tremendous potential.

Stern believes that if we don’t get there, many people on this planet will be exposed to existential risk. Economists cannot build these risks into their analysis without collaborating with scientists from all disciplines.

He urged, “Understanding these risks absolutely requires moving outside of economics.”

U.S. economist Bob Solow said in 1987 the “computer age was everywhere except for the productivity statistics”, a quip Stern says also applied to climate change when he and a few other economists started looking at its implications.

The economic journals had hardly published anything. “Where is the literature? This is the biggest problem of our times. He said. He said, “But it’s changing. I’ve been criticizing economists, but I should recognize that there is a movement.”