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Home > Business > Special

An economist and a 'climate man'

Sunil Jain | December 14, 2006

Despite the enormity of the climate change problem, the author of this authoritative report is convinced the issue is not so tough it can't be tackled.

You'd expect the person who's just written up a report which says that there's a 50 per cent chance global temperatures will rise by five degrees centigrade by the end of the century to be a bit, well, stern, given that the current temperatures we're living in are just five degrees warmer than they were in the last ice age. Sir Nicholas Stern, however, is anything but that.

We're at breakfast at the UK High Commissioner, Sir Michael Arthur's official residence in Delhi's Rajaji Marg, bang opposite the ministry of defence - had we met a little later in the day, I'm informed, we could have met in the fabulous lawns that were used for Prince Charles' reception when he was here nine months ago, but with the winter just setting in, the mornings are a little cold, so indoors it is.

We're joined by Sir Michael, our host, and Siobhan Peters, Head of the Stern Review Team. Ordering breakfast is easy, and quick. We have fresh fruits put out in little goblets already, and it's only the main course that we need to decide on. It's poached eggs for Stern, and scrambled eggs and bacon for me.

Stern's quite happy with his meetings with government officials the previous day, though one of the morning's papers has reported he was told India would not commit to any cuts in emission levels. The reason why Stern's not worried though  is that he's convinced the way forward lies in the kind of commitments made by developed countries - if their commitments are low, there's no way anything can happen.

Sure, it's true that countries like China, and India as its growth picks up, will be huge emitters of greenhouse gases, which is what will lead to the global warming, but the current problem has been caused by the OECD (Organisation for Economic Co-operation and Development) countries and they have to pay to clean this up first.

But will the US join in, I ask Stern who had the previous day, at the invitation of local policy think tank ICRIER, given a presentation on his report and spoken of the ambitious emission cuts that countries like the UK have made.

The US, I argue, isn't convinced about the whole issue of global warming (and Gore says he's not in the running for presidency!), so they're clearly not going to be a part of any initiative. Look at what's happening to the WTO (World Trade Organisation) process which is, in a sense, the kind of global cooperation Stern's looking at to keep emission levels to a reasonable level.

Not true, says Stern. California's emission standards are very strict and the state is looking at an 80 per cent cut in 1990 emission levels by 2050 - seven states of the US, he says, have taken on pretty serious emission targets.

Over the past decade, Peters helps Stern with the data, US emission levels have risen only 1 per cent, and while this compares poorly with the UK's reduction of 20 per cent (its 2050 target is 60 per cent), it shows the US is definitely coming on board in its own way.

The cuts proposed by various EU countries, I ask, are way beyond those in the Kyoto Protocol, so is Kyoto redundant? They're in the spirit of Kyoto, I'm told, they follow the same framework.

Both depend very critically on the principle of carbon taxes and carbon trading as the means to pay this off - very simply, once the OECD countries make it prohibitive to pollute, firms either clean up their act or do this by buying carbon credits from countries like India where some other firm is, say, changing its production process to save on carbon emissions (ITC, for instance, says it is carbon positive and sells carbon credits that firms in the OECD buy).

But is simple trading good enough to tackle the huge problem, I ask Stern to elaborate on something he touched upon the previous day. Also, it is his view that it's okay for countries like China and India to carry on polluting the atmosphere, and in some cases, if there is money in it,  clean sufficiently enough to be able to sell carbon credits.

Even if the OECD countries cut their emission levels by 90 per cent by 2050 (and that's a big if), Stern says his calculations show countries like China and India will have to stabilise their emission levels by 2030 (China's emissions are growing by around 10 per cent annually).

But, Stern says, the Chinese are beginning to stop deforestation and there's a target for reducing energy intensity of production; renewable energy is a focus area in India as well.

As for carbon trading, Stern insists, it is vital because that is the only way you arrive at a market price and a mechanism to fund cleaning-up projects. The world needs, the report suggests, to spend around 1 per cent of GDP each year in order to avoid losing anywhere between 5 and 20 per cent of GDP each year to global warming.

Stern's categorical the current project-by-project approach is not going to work as it becomes very heavy to administer, once you look at the levels of emission cuts, and therefore projects, that need to be achieved.

Countries need to look at large schemes such as, say, "carbon capturing storage" for coal (which allows you to capture back the carbon in coal that causes greenhouse gases) or look at huge reforestation and maybe look at a common fund that will finance it. Eventually, though, he says it is funding from the carbon trading mechanism which will ensure funds will flow seamlessly (from even private sector funds) to wherever they're required.

Where does all this leave time for Palanpur, the tiny village between Moradabad and Chandausi in west UP, where Stern lived for eight months in 1974 to produce what many say was a virtual textbook for sociologists.

As we speak of Palanpur, we hear the rain on the perspex roof and an excited Stern says it's good for Palanpur's productivity. He's visited Palanpur every year between 1974 and 1993, so he's seen how the village moved to more intensive agriculture, how it moved to bore wells once electricity arrived, and migration to other towns increased.

Palanpur's sort of Stern's touchstone to measure the change in India - no, not the dramatic change the rest of the country's seen, but change in the UP sort of way. Between 1994 and 1999, when he was chief economist for the European Bank for Reconstruction and Development, Stern just managed to visit once; the visits increased after this, but now, he plans to hook up with co-collaborator Jean Dreze and go back in 2007.

Getting to talk to Dreze, he says, is a target he sets for each visit and while it's tough to find him, given Dreze's travel into the interiors of the country, he does manage eventually.

It's not as if India's concerns on climate change stop at not having to commit to emission targets. If Stern's simulations are anywhere near correct, the country will have serious problems related to the spread of diseases like malaria, for instance, and there will be a lot more disasters related to flooding due to erratic rain and sea levels rising (the kind that saw Mumbai getting flooded two years in a row); the country needs to look at new irrigation and water storage models, different crops - all things that call for a completely new and responsive type of government, the type India hasn't seen in the last 60 years.

Stern's met up with Environment Secretary Prodipto Ghosh and believes he's sensitised to the problems. But will the government be able to deliver on the schedule required? Stern, after all, began working on VAT in India at the NIPFP in 1982 - this was introduced only in 2006, and at the level of only the states.

Yes, it was a little delayed, Stern grins, but adds that we all know the pace of change has picked up in India. Is he serious, or is it just that he's going back home to his daughter's wedding that has him in such high spirits?

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