At the request of the British government under Prime Minister Blair, the former Chief Economist of the World Bank, Sir Nicolas Stern, produced a 700-page report analysing the financial, social and environmental impacts of climate change. The report was published in October 2006.
In contrast to previous reports on the same issue, Stern reached the conclusion that the negative impact on the economy as a result of climate change was far greater than initially assumed.
On the basis of recognised economic models, the review estimates that if we do not act now, the overall costs and risks of climate change in the form of damage to infrastructure, disruption of water supply, food shortages and so on will correspond to at least five per cent of global GDP (Gross Domestic Product) each year. If a broader range of risks and effects are taken into consideration, the evaluation of the damage rises to 20 per cent or more of GDP.
In contrast, the cost of action, for example by reducing emissions of greenhouse gases to avoid the worst effects of climate change, is limited to about one per cent or more of global GDP. Among other things, the review proposes environmental taxes as a means of minimising economic and social consequences.
Stern's opinion that the global community must act now to prevent major damage has direct consequences regarding the need to submit our energy future for renewed consideration. Since the conventional energy sector is a major producer of greenhouse gases, it is vital that our future energy supply be restructured in order to produce more clean energy.