Centennial Speaker Series Session 3: Will Climate Change Us Before We Change It?

Wednesday, June 16, 2021

IG Patel Professor of Economics and Government, and Chairman of the Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science


President, Council on Foreign Relations; Author, The World: A Brief Introduction; @RichardHaass

The 21st Century World: Big Challenges & Big Ideas

Nicholas Stern discusses strategies to address climate change despite the economic and political challenges of the era.

This meeting is the third session in CFR’s speaker series, The 21st Century World: Big Challenges & Big Ideas, which features some of today’s leading thinkers and tackles issues ​that will define this century. Our first session on April 13 featured Margaret MacMillan on “What Are the Lessons of History for Our Era?” and the second session on May 4 featured Anne Applebaum on “Can Democracy Survive?

This event series was also presented as a special podcast series, “Nine Questions for the World,” in celebration of CFR’s centennial. See the corresponding episode here.

HAASS: Well, hello, everybody. I’m Richard Haass, president of the Council on Foreign Relations, and I want to welcome you to today’s discussion. The subject is climate change. More specifically, the question we’ve posed for ourselves is “Will Climate Change Change Us Before We Change It?” And this is the third in our special series marking our centennial year here at the Council on Foreign Relations where we look at big challenges and big ideas.

And today we would be hard pressed to find someone better suited to talk about the big challenges and big ideas associated with climate change than Nicholas Stern. Lord Stern is the I.G. Patel professor of economics and government, also chairman of the Grantham Research Institute on Climate Change and the Environment, and head of the India Observatory—all of the above—at the London School of Economics. And he has had an extraordinarily distinguished career in the U.K., at the World Bank, and as really as much as anybody has influenced the conversation around the world about climate change and has introduced a much-needed degree of rigor to the conversation.

So, Lord Stern—who I’m going to call Nick because we’re old friends and he prefers it, and this way he can call me Richard—welcome to the Council on Foreign Relations.

STERN: Thank you very much, Richard. It’s a real pleasure to be with you and all the people with you and to see you again.

HAASS: Thank you.

So let’s start with basics. Let’s do a little bit of Climate Change 101 because I’m not sure exactly how much background everyone has. But the one thing I do know for sure is we all have less background than you.

So when you—when you use the phrase “climate change,” what is your succinct, elevator definition of the phrase?

STERN: Well, let me answer that by saying how it works. The energy comes in from the sun, bounces on the Earth’s surface, comes back as infrared. And there are some gases where they have molecules that oscillate at frequencies that interfere with that, and those are the greenhouse gases, and it’s our bad luck that CO2 is one of those. So the more CO2 we have in the atmosphere—the concentrations, of course, is what matters—the more the concentrations are, the more the heat is trapped. And that’s the greenhouse effect and why we call them greenhouse gases.

So the more there are, concentrations, the more the heat is trapped and the higher is the temperature. And that higher temperature changes the climate. Some areas, mostly the—it will be wetter and rougher. So you’ll have more cyclones and hurricanes. You’ll have storm surges. You’ll have desertification. You’ll have sea level rise. So most of the problem is through water in some shape or form, or the lack of it in desertification. But of course, in some places we’re heading for extreme temperatures. Certainly, some parts of northeast India, northeast China—not only there—we’re headed for temperatures which are so high that you couldn’t survive outside for more than a few hours. So whilst I say it’s mostly a water story or the absence of it, it is also a question of the temperatures themselves and increasingly so.

HAASS: So let me just take an associated issue, put it out there, and hopefully we can take it off the table. What you have just said, if we had the world’s scientists and experts here, would a hundred percent of them agree with that, 99 percent? To what extent now is climate—put aside what to do about it, which is, obviously, highly political. The actual phenomena itself, what you have just described, to what extent is that a matter of serious dispute any longer?

STERN: I don’t think it is. You see, the process I’ve described is very—is very basic physics. It’s that some molecules oscillate at that frequency, and that traps the heat, and that pushes the temperature up. So the mechanism is really crystal clear, I think completely uncontroversial.

Of course, how big it is is a matter that we have to try to understand and estimate, and there’s some uncertainty about how big that will be. But our best science at the moment tells us if we go on on anything like the path we’re on, you know, within a hundred years or within this century we could be headed for well over three degrees Centigrade increase in average global surface temperature relative to the end of the nineteenth century, which is our usual benchmark. And of course, that’s when the Industrial Revolution and all that burning of fossil fuels really started to kick in.

It’s OK to use Centigrade in this illustrious audience, I hope?

HAASS: Yeah. We can all do our plus-and-minus thirty-twos times nine-fifths or five-ninths. I’m sure everybody listening is doing the math in their head. Before we get—

STERN: So well over three degrees, Richard—well over three degrees is huge. We haven’t been at three degrees for something like three million years. We’ve been around as homo sapiens for something like a quarter of a million years. Way, way outside the experience of homo sapiens. It’s immense. And of course, there’s a risk that it’s still bigger, four or five degrees, still bigger there. There you’re going into the tens of millions of years. And just at three degrees, the sea level was ten to twenty meters higher than now. But of course, it’s not just the sea level. It’s all the hurricanes and the storm surges, and most of our coastal cities will be uninhabitable.

HAASS: Where are we now in terms of temperature increase compared to that pre-industrial baseline? Are we about a degree higher? Where are we—

STERN: Yeah, just over—just over a degree.


STERN: And in the words of Ronnie Reagan, you ain’t seen nothing yet. And that was—you know, we’re already seeing very unpleasant effects at one degree round the world. You’re seeing the disappearance of the ice sheets in much of the Arctic. You’re seeing, you know, very large chunks of ice break away in the Antarctic. You now, the snows are receding in the Himalayas, and indeed the Rockies and the Andes, and the glaciers are going back. And then you’re getting desertification. You know, at the kind of temperatures we’re talking about much of Southern Europe would look like the Sahara Desert. I mean, these are seriously big effects we’re talking about here.

HAASS: And so if we were to, to use the cliché, get our act together—if, starting tomorrow, the world stopped adding to climate change, how much higher would we go than a degree given what’s already baked into the cake, what’s already in motion? To what extent, if you will, is additional climate change inevitable even if we totally transformed our behavior?

STERN: Well, look, here’s a definition of getting our act together. We could go to net zero emissions as a world by midcentury. That would give us a fighting chance of holding it to 1.5 degrees Centigrade. And basically, as I argued at the beginning—and this is the basic physics—in order to stabilize temperatures, you got to stabilize concentrations. If over time concentration’s going up, temperature’s going up. So the earlier you stabilize the concentrations, the lower the temperature at which you stabilize. So if we really went—you know, if in your language you got our act together and we went at it hard, we would have a—have a fighting chance of holding to 1.5 degrees Centigrade. But we really have to start now and move quickly.

That means radical change, but it also means a new form of growth, consumption, living which many of us would regard as much more attractive, like cities where you can move and breathe, and ecosystems which are robust and fruitful. Sounds like a good idea even if you’ve not heard all that much about climate change.

HAASS: But I assume there would also be—getting ahead of ourselves a little bit, but you introduced it—that there would be many who would disagree, that they would be concerned about several things. Let me—so let me put some of the concerns about—that people have about climate change and what dealing with it could mean for them.

There’s a lot of people in the so-called developing world, in Indias and other countries, saying: Well, it’s fine you got—you mates have gotten sensitive to climate change now that you’ve got GDPs per capita of $50,000, whatever, a year, but we’re at roughly $2,000 a year. We don’t have this luxury. You’re the ones who created the problem. Now you want to solve it on our backs. What do you say to that?

STERN: The historical responsibility argument is a very serious one, and it does mean that the rich world—in my view, and it’s very widely shared—has an obligation to be helpful and in a substantial way helpful to the transition to a new way of doing things in other countries. That’s the first part for the response.

The second part of the response is that technology has moved so fast in the last fifteen years or so that at least a third of the emissions occur in activities where it’s already cheaper to do it differently and to do it clean and to do it zero carbon, particularly electricity. Through much of the world now, zero carbon round the clock electricity without carbon price, without subsidy is cheaper from renewables.

HAASS: Are you talking about solar, wind? Or are you talking about nuclear? Or some combination of the above?

STERN: I’m talking largely about solar and wind. And you know, in India, you know, three cents a kilowatt hour now round the clock solar, the latest bids coming in. So a second part of the argument, there’s—a tremendous amount of what we need to do is already cheaper. And that’s not true everywhere, it’s not true across the board, but it’s increasingly true. And perhaps in ten years’ time, if the—if technical progress goes at the same rate, maybe something like two-thirds or three-quarters of the emissions-related activities will be cheaper without carbon price and without subsidy. So the second part of the argument is actually it’s already cheaper in big parts, and then that will be true not everywhere—not everywhere—but it will be true in much bigger parts.

And the third part of the argument is that burning fossil fuels is absolutely devastating for air pollution and lives and soil pollution and other ways. Probably ten million or so deaths a year are associated with air pollution—some inside the house, some outside the house. In a world where deaths per year are a bit over fifty million, the ten million in fifty million or fifty million plus associated with air pollution, that’s a very big deal. Now, not all air pollution comes from burning fossil fuels, but a big part of it does. And of course, you degrade your biodiversity with all sorts of consequences there. So the third part of the argument is it’s not just the ordinary calculated costs; it’s those other costs which are so important. And in India, a country where I’ve been working since 1974 and lived for long periods and love, nine of the ten most-polluted cities in the world are in India.

HAASS: It’s interesting just to point out as an aside that before this past year with the pandemic virtually all—I think six of the top seven causes of death worldwide were not infectious disease.


HAASS: They were—they were all noncommunicable diseases, many of which had some linkage to what it is we’re talking about.

I want to drill down on one thing you said because everybody may not follow it. What you’re basically saying is because of renewables it’s now possible to essentially have our cake and eat it—have economic growth and have cheaper energy sources. And you said without a carbon price. Why don’t you—because a lot of the conversation has also been about putting a price on carbon in order to shape behavior—if we make carbon more expensive, essentially, to emit it, then it will channel behavior in directions, say—it’ll accelerate the move, say, to renewables. And what you’re essentially saying, as I hear you, is the technology may in some ways be solving that issue for us, that we won’t have to incentivize people; they’ll simply look at comparative costs of various energy sources and say you’d have to be stupid to use fossil fuels if you have a cheaper option from the sun.

STERN: For a big—I mean, Thomas Edison saw that coming. But the big—the big part of the story is that, but I don’t want to go over the top on that one because there are areas—steel, cement, aviation—where that’s not yet true and it is likely to be quite a long time before it’s true. But roughly speaking, we need to quadruple the electric power in the world between now and 2050, and we need to make it all zero carbon by 2040. And if we do that, we can hang off it a tremendous amount—the big majority of transport and we can hang off it all that zero carbon electricity, a lot of heating. But there will be some parts for quite some time—aviation, steel, cement—which will probably be quite a lot more expensive doing it zero carbon, even though we actually can see how to do it.

But if we get really cheap zero carbon electricity, we use some of it to make hydrogen, you know, with—you know, using water and electricity you can make the hydrogen, and you can use the hydrogen. We can solve a tremendous amount of the problems in those areas which are not net cheaper. But that doesn’t mean that you don’t need a carbon price, yeah?

HAASS: Why don’t you then say something about what a carbon price is and how it might—how it might actually operate in reality.

STERN: Well, there’s a basic—excuse me, but reverting to economic professor at The LSC just for a moment—but we have market mechanisms which are really efficient and pull all sorts of things through on the whole because they flag the cost. You know, if you’re facing something that’s very costly to produce, you see that high price and you economize in relation to that high price, you are influenced by that high price. And, you know, if it’s a meal, then you’re paying for the people who serve and cook the meal, you’re paying for the space, you’re paying for the fuel that goes into cooking. And you expect to pay the costs of what you’re demanding. And you react to prices.

So the price mechanism is a very powerful phenomenon in the allocation of resources. But if it’s going to be a good allocation, it’s got to reflect the costs that are involved in the production. Now, if in the production process you do things like emit carbon or emit air pollution, which are very damaging to other people—and they are—then you are not paying the cost for what you do. You’re getting it too cheap in relation to the cost of what you’re consuming. And we need disincentives for that. And that’s what the carbon price does. It tries to face people with the real cost of what they’re doing. So the carbon price is actually a phenomenon for people who think we can actually try to make our markets work well, and if we do then they’ll allocate resources much better.

HAASS: What about using existing or potential trade agreements to do just that? That I, for example, suggested that something like what used to be the Trans-Pacific Partnership, now the CPTPP, that they should have that type of rule, that if you want to export to them the price of what you want to send to them would be modified depending upon everything from how much energy you use to produce to how much energy the item might consume in its—in its lifespan. What about that idea? Essentially use trade to be a climate change influencing vehicle?

STERN: Well, we need shared action. This is a world problem. The concentrations of the greenhouse gases in the atmosphere are a global phenomenon. It doesn’t matter whether it comes from Johannesburg, or Beijing, or Memphis, Tennessee, or wherever. It’s still the carbon in the atmosphere. So we have to try to discourage it everywhere. And that’s the spirit of your question. The IMF has been pursuing recently—and I think it’s a very sensible idea—is the idea of a minimum price for carbon. You try to get countries across the world to agree. And my instincts are to go for agreement and collaboration.

It’s remarkable now how much there is agreement and collaboration about the need to do things, about the importance of bringing through new technologies. So the first part of the reply, Richard, is: Before we get to address it on the border things, let’s see what we can do to work together on technology, policy and so on. You know, China is putting in place carbon markets. But there may be—there may well be some places which are not ready to do that. I mean, shame on them. I don’t think they understand—that would reflect a misunderstanding of the problems and the opportunity. But in that case, there is an argument—a correct argument, in my view—for a tariff that reflects the extra cost of the damage done in the production process, which is not reflected in the price that they’re selling to you at.

Now, that actually applies only to very few products in any degree of importance. They are what we call energy-intensive trade-exposed products. I mean, think about steel. Steel is actually most important of those. So cement’s important too, but actually cement’s so heavy that we don’t, you know, move so much of it about. But there are some other places where some sorts of plastics and so on—there are four or five, six industries for which this is important. And I—my instincts would be to focus any border adjustment on those very few industries which are important.

And on the whole, people don’t relocate their production in response to environmental regulation or policy. Why not? Because when you choose where to produce you think about the availability of skilled labor. Does the infrastructure work? Does the electricity stay on? Is the government predatory or not? Those are the kinds of things we think about when we think about the location of production. And all the data shows that actually the regulatory or the carbon tax side of things from the perspective of the environment don’t make that much difference on location decisions. But there are some—and I think steel is an important example. But I wouldn’t let it escalate too widely. Let’s just focus on the one or two things where it really counts.

HAASS: Let me give you another case where there may be an argument for tariffs, which is the case of Brazil. Brazil oversees as custodian for the Amazon—a large percentage of the Amazon rainforest. Deforestation has not just continued, but in many cases has accelerated. I would—what about the idea—I have argued it, I’ll put my cards on the table—that if Brazil won’t act responsibly, it’s irresponsible behavior is not just their problem but it’s our problem. Again, climate change doesn’t respect borders. And we’ll help them act responsibly if they want to. We can give them—build up their capacities to prevent deforestation. But if they refuse, then there should be a price. And we should basically impose a tariff on Brazilian exports in order to discourage them from continuing to let the Amazon be developed. What’s your instinct about that?

STERN: I would agree with that, but as in my earlier answer the first thing is to try to do it collaboratively.

HAASS: You’re a nicer guy than I am, clearly. (Laughs.)

STERN: Yeah. You know, people—the people who’ve just done first year economics or, you know, they tend to believe too heavily in the models. You know, that everybody acts only very narrowly in their own self-interest. I actually think on this kind of issue people are ready to get together. And there’s evidence that they are getting together. The first thing is the collaborative story. But—and it’s a big but, you’re right, Richard—if you cut down the rainforest to produce your soya, if you cut down the rainforest to expand the range for your beef cattle, then your soya and your beef are actually being sold far too cheaply, because you are imposing a great cost on the world by cutting down the forests to produce the soya and to produce the beef.

So just as in the case, you know, we’re discussing about steel, there’s a very powerful argument for tariffs if the stuff is produced that way. And actually, it’s not that hard to tell whether or not—in these days of satellites and tracking things and supermarkets which tell you where your lettuce comes from—you know, it is actually possible to do that. And I do think that what’s happening now with the Amazon forest is just terrible. And it’s climate change, of course, big time. But it’s also the biodiversity of the world. It’s also the rainfall patterns. You know, if the Amazon starts to collapse, Sao Paulo turns into a desert. It’s madness from the point of view of narrow Brazilian self-interest as well.

So, you know, I think that in these kinds of cases the type of action you described is wholly justifiable. Having said at the beginning, and I repeat it again, the collaborative solution—what can we do to help, how can we invest in the Amazon, it’s in all our interest if we do—that should be on the table as well.

HAASS: Agreed. So, Nick, we’ve been talking for twenty-five minutes. And there was an over/under in Las Vegas about how long we could go without mentioning the word “Paris.” And we just defied the oddsmakers. We’ve gone on for twenty-five minutes and we haven’t mentioned the Paris accords. So let me be provocative here. Is that because they’re really not that significant? That Paris is less the driver of climate action so much as the reflection of national decisions about their own climate and energy trajectories? So we really think of Paris less as the engine and more as the caboose? What do you think about that?

STERN: I think it’s both. I mean, if you—if you look back at Paris and you asked how technology has accelerated as a result of Paris, I think you’d have to come to the conclusion that it’s a lot. The figure that I gave of something like a quarter or a third of emissions occurring now in places where it’s actually cheaper to do it net zero and clean, a lot of that’s emerged since Paris. It started before Paris, of course it did, but it’s emerged since Paris. Why? Because those people who make investments have a reasonable time horizon. They’re investing for ten, twenty years. They’re asking where the world is going. And Paris, I think, was quite a signal of where the world is going. They saw the virtual unanimity in Paris, that everybody had signed up.

So I do think that Paris, as a signal of where the world is going and as a signal that countries are ready to collaborate, was very powerful, even though there’s no formal enforcement mechanism, there’s no police force in Mars that’s going to swoop in and knock people around if they don’t observe their commitments. The signal about what people should do, the signal about what was possible, the signal about what was attractive and desirable, the signal about where we’re going, I think is very important in Paris. And it’s come to be a bit more than that, because we’ve had two very important court cases in Europe in these last few months.

One was when the German courts told the German government that their action on climate change that they were proposing was nowhere near strong enough. And the German courts invoked Paris as a treaty that the German government had signed. And the Dutch courts in the last few weeks ruled strongly against Shell and told them that their plans to reduce emissions were nowhere near strong enough and referred to Paris in making that statement. So I said there’s no court from Mars that’s going to impose this international treaty, but what’s remarkable is some of the country courts are starting to do that.

HAASS: So, Nick, let me ask you a few more questions, then I’ll open it up. We talked before about a degree of climate change. One degree-plus is already here. It’s already having the effects—these storms, both the severity and the frequency. We’re seeing an increase in global migration because of water shortages and desertification.

STERN: Wildfires in California and Australia.

HAASS: Fires are horrific, different disease patterns—anyhow, lots of—lots of effects. And one of the effects is obviously low-lying areas and countries are particularly vulnerable. So one—we’ve been talking up to now about so-called mitigation, ways of slowing or stopping climate change. But let’s turn for a second to adaptation, to the challenge of dealing with climate change that’s too late to prevent, it’s already—it’s already with us. A global fund was set up to help countries. It hasn’t been, shall we say, adequately funded. What is your sense about the present and future role of what’s called adaptation?

STERN: It’s extremely important. It’s underappreciated and underinvested. So much of the world—the world cities are built on floodplains. So much—I mean, London, you know, the city where I was born and grew up, is on a flood plain. And the kinds of temperature increases that we’re talking about, even 1.5 and two degrees—and let’s hope we keep to that—but even at those levels the challenge of adaptation and resilience is going to be intense. You know, the hurricanes in the Gulf of Mexico and, of course, on the East Coast of the United States, they’re going to get more intense. You have to prepare for that. And if you’re talking about desertification, you have to prepare for that. You know, if you’re talking about managing the water flows off the Himalayas, you know, a few million people depend on the rivers coming off the Himalayas.

And if you go—you know, if you go around the Yellow River and the Yangtze in China and around to the Mekong and, you know, the Ganges and the Indus—those really big rivers of the world, serving billions of people, come from the Himalayas where it’s the snows and the ice that hold the water. If they stop holding the water actually rainfall is going to go up, you’re going to get unmanageable torrents and landslides in the rainy season and you’re going to get deep, deep droughts in the—because the flow off the snows and ices is not coming because they’re not there. I mean, these—right across all sorts of ways adaptation is going to be important.

Now the good news is there’s quite a lot we can do that’s mitigation, reducing emissions, adaptation, and development all wrapped up together. Not all of adaptation is like that, but a lot of it is. If you think of the mangroves, now the mangroves protect you from storm surge. The mangroves help the fish, and that’s good obviously to the incomes of fishermen and those who like fish. That the tigers in—you know, in India, in the Bay of Bengal—around the Bay of Bengal, they’re attracted by the mangroves. And tourists come to see the tigers. And the mangroves capture the carbon. It’s all of development, resilience, adaptation put together.

Go to somewhere else. Public transport is good adaptation, mitigation, resilience. Decentralized solar, so that you’re not dependent on the grid. That’s resilience, development, mitigation put together. So a lot. If we’re smart, a tremendous amount of what we can do actually puts those things together. But not all of it. You know, things like early warning systems are enormously important. Things like seawalls are going to be enormously important.

HAASS: But also potentially things like zoning, insurance policies, relocation. Because it may simply be people who have been living in low-lying areas that easily get flooded or horrible storms, people who live on the edge of large forest, this may not become—this may no longer be viable moving forward. And governments, part of—I would think that part of the cost of climate change is going to be coming up with adaptation strategies that essentially take into account the climate change that’s already with us.

STERN: Adaptation can be done in the kinds of ways I’ve described, but some of it’s going to be people moving. And actually, that’s already with us. You know, some of the problems in Syria were associated with desertification and people moving. Not all of them, of course. We managed to make the problems in Syria pretty horrible in other ways. But there was an unchanged element there. You know, in the Sudan, you know, Darfur, you know, there are already climate refugees.

If we got anywhere near three degrees—and we’re heading for at least that or over unless we change our ways—hundreds of millions or billions would have to move. And if we’ve learned anything from history, very big population movements carry very big risks of conflict. And you couldn’t turn off the reasons for the conflict. So there are two lessons there. You’re going to have to deal with the movement of people. But it’s much, much wiser—you have to. But it’s much, much wiser to avoid the movement of people on the kind of scale we risk.

HAASS: Nick, let me introduce one last part of the climate change debate. In some ways it’s among the more controversial. Which is, if everything you’re talking about continues to happen, the world does not act as you and I might agree it could and should to deal with this growing problem, so we get to one and a half, we get to two degrees, we get to two and a half degrees of net increase, with all the consequences that you’ve been describing. What about the idea of geoengineering? What about where we basically say: We can’t come together to deal with—to mitigate this, for whatever set of reasons. Shortsightedness, selfishness, what have you. It’s gotten so severe that we’ve got to look at ways of, if you will, interfering with the planet in a conscious way to reverse what is going on. What is your view about the potential for geoengineering? And to what extent, as some people are worried about, to even talk about it takes the pressure off? That if people think there’s a “technological solution,” quote/unquote, they’ll be less likely to do a lot of the steps that you’ve been advocating?

STERN: I think the risks are so great that we have to look forward, we have to think about these things. But I prefer to use the idea of carbon removal. And the problem about geoengineering is you send—you know, the versions of it, you send quite bit reflectors up into the atmosphere, or you fire dirt up there to stop the stuff, the solar energy, coming in. I worry deeply about those kinds of things because we really don’t know what comes with it. We really don’t know. And there could be all kinds of collateral damage, if you use the term. And it doesn’t stop the acidification of the oceans, and so on. So I much prefer to think about carbon removal.

And there are a bunch of ways that carbon removal can happen. Like trees, yeah? Like restoring degraded—restoring degraded land will be very important in all this. And that’s a classic example of development, mitigation and adaptation coming together, is restoring degraded land. You make it productive. You make yourself more resilient against the bad weather. You capture the carbon in the soil. Those black soils, right, are—that’s the soils of the carbon. And they’re the ones that are fertile. So carbon removal, natural capital, is very important. Of course, natural capital comes with all sorts of other benefits as well, like, you know, if we have trees on our hills, it means you have less landslides, we manage our watersheds, and so on. And of course, the biodiversity part of the story is very important.

So carbon removal is where I would focus. Geoengineering makes me worry. It’s about firing stuff up that you don’t understand. But carbon removal we do understand. And actually, a lot of smart guys—and I’m an economist not an engineer, but I have lot of friends who are engineers working on direct air capture. And probably the cost of that will come down to a couple hundred dollars a ton before too long. Now, that’s a high carbon price. But, you know, at some point you might be willing to pay that, given the dangers that are avoided. You know, you can scatter various forms of rock, limestone, that can improve productivity of soil and also absorb carbon. You know, you can burn bio and do carbon capture. There are a range of carbon removal stories which I think we should be pursuing and will actually need. But geoengineering is firing up muck or firing up all sorts of complicated mirrors makes me a bit nervous.

HAASS: So I listen to you, a last question. You come off as an optimist. So my question is are you an optimist because you’re really an optimist—because you’re one of the most analytical people I know—because this is as much of a political issue as anything else—or you’re an optimist because you couldn’t get up in the morning otherwise and do what it is you do?

STERN: (Laughs.) Look, I’ve got five grandchildren aged five to ten. So you have to think about the future. But whether or not you’ve got grandchildren, you should think about responsibilities to future generations and justice. You know, that’s what—a large part of what motivates us, justice between generations, justice amongst people in the world, particularly the poorest people in the world who suffer the most from climate change and who contributed the least. So that’s what—a big part of what motivates me.

But actually, a second part of what motivates me is seeing what we can do, and seeing how much sense it makes, right? I do think—I was born and brought up in London, I’ve worked in India, and China, and Africa, many other countries of the world. You know, cities where you can move and breathe, ecosystems which are robust and fruitful really are good ideas. So I’m very optimistic about what we can do. I worry deeply about what we will do.

But, you know, where people, Richard, are supposed to think—you know, academics, people who have also spent a lot of time on the frontline, in the kitchen of policymaking, which you and I have both done. And the first step in getting stuff done is showing why and showing why it’s attractive. And that’s why it’s so important that you have to be analytically optimistic about what you can do. It’s not optimistic without foundation. What we can do, we can really start to see pretty clearly. But will we do it? That’s what worries me. And I’m not fully optimistic about what we will do. But that’s our task, to show what we can do, show why it matters so much, or how attractive it could be as part of a contribution to the discussion which determines what we will do.

HAASS: Thank you, sir.

Kayla, over to you. Let’s get a few other questions.

OPERATOR: We’ll take the first question from Chloe Demrovsky.

Q: Hello. Chloe Demrovsky, president and CEO of Disaster Recovery Institute International. Thank you so much for this important discussion.

I’m curious what your thoughts are on the activist investor approach taken at ExxonMobil at the board level by the hedge fund Engine No. 1, and if you think that that sort of corporate approach might actually generate some positive results. I know we’re sort of lagging in that in the U.S. And if I may, a second question perhaps is what do you hope to see out of Edinburgh later this year? Thank you.

STERN: Yeah. I do think that firms around the world are seeing that there’s a duty to act as if they are a part of the world, and a duty to act in a way that protects the environment. And that’s a good thing. And it’s a good thing that their shareholders remind them of that. But I think they’re seeing more than that. They’re seeing that taking a long-term view, acting responsibly, is actually pretty good for the conventional bottom line as well. And let me take the example of Unilever. I’ve worked very closely with Paul Polman over the years. He stepped down a year or so ago. He transformed Unilever. And they’ve done very well under this leadership by making it much more responsible, looking happily at the supply chains and so on, taking part in protection of forest through action on their supply chain.

They get a couple of million of job applications a year. I live and work in a university. The brightest kids want to work in places that they think are doing good things and making some money. And what we’ve seen now is that firms are recognizing not only their responsibility, but—to be very careful about the environment, and they do have it; they’re part of the community and part of the world—but also that it makes sense from the point of view of profitability. And that’s entirely understandable, right? If your investment manager got done for drunken driving, then you’d worry about—it probably would be a he; let’s suppose it’s a he—then you’d be worried about him looking after your money. Doesn’t sound like a responsible person.

So, you know, for all these reasons I think pressure is mounting. And I do think that activist shareholders are really beginning making a difference. And also, certainly in Europe, you’re starting to see the pressure of the courts as well. And in the—I think you meant—I think you meant Glasgow, Chloe, in terms of the COP in the Conference of the Parties of the U.N. Framework—

Q: I sure did. Thank you.

STERN: That, I think, is something which could really see major advance. But the rich countries—and this is true beyond the COP of this year and into the other COPs—the rich countries are going to have to reach out to the poorer countries of the world and be helpful on finance and technology. That’s going to be a critical element. It has always been so and it will be so. But I’m reasonably optimistic that we’ll make important steps forward. But this is a story that grinds on through the years. We’ve got to do this right through this decade, which will be absolutely decisive in the world. We’ve got to get that new kind of investment going and keep it going. But I hope that the COP-26 in Glasgow, in 2021, will be a major step forward.

HAASS: Kayla, get another question in?

OPERATOR: We’ll take the next question from Afsaneh Beschloss.

HAASS: Two World Bank alumni talking here.

OPERATOR: We seem to—oh, Ms. Beschloss.

Q: Can you hear me now?


Q: Great to see you, Nick. I think last time I saw you was in the corridors of World Economic Forum, and I asked you this question, which I’m going to ask again, and I think Richard will particularly enjoy.

Because if you were suggesting to an economic student today what should be the subject of their doctorate thesis, would you suggest they work exactly on what you were just talking about earlier, which is externalities and how do we put a cost? Because we’re still teaching the word “externality” when we teach economics, right? And it transfers then from the student of economics all the way—when you talk to large investors, when you talk to university endowments, they’re not doing $35, you know, carbon tax in their—you know, looking in terms of their long-term investments, form a risk mitigation point of view. The things that you just alluded to, they’re not taught, and they’re not used by investors today. Speeches are long, by the way. The longer the speeches, the less they’re doing. So what is your solution to that problem?

STERN: So if students come to me and say, how can I change the world, I say: Good that you want to. But be—really work at your subject. You got to bring something to the table. You know, just wanting to change the world is not enough. You got to bring real skills. So I do encourage them to work very hard. But, Afsaneh, I would go beyond externalities now. What we’ve got is a fascinating, vital challenge of changing the world’s economy radically in thirty years and moving very fast now. That’s the kind of problem we don’t discuss enough in economics. It’s beyond externalities.

It’s how you foster very rapid technological and structural changes, how you foster the right kind of investments, how you manage the dislocations that are inevitable in this kind of industrial transformation. How do you manage the changes in relative prices? Put crudely, some of the things that people like to do, like fly, are going to become more expensive. I actually think that before too long we’re going to get zero carbon aviation fuels, but they’ll probably be pretty costly for a while.

So how do we get the investment done? How do we get that change? How do we manage our cities’ energy transport land systems? How do we get the radical change there in real time? And how do we gain the benefits I’ve tried to describe? But how do we do it in a just a decent way, because not everybody gains in the short run in this story? So that’s the kind of economics I would focus on. Does a bit of the externality underlie it? Of course, there is. But this is a big, dynamic change story. And I don’t think economics have focused anywhere nearly strong enough on it.

Q: Thank you.

HAASS: Thank you. Thanks, Afsaneh. Thank you, Nick. Kayla, let’s get another question.

OPERATOR: We’ll take the next question from Sabia Qureshi (sp).

Q: Hi, everyone. Can you hear me, just—OK, good. That’s always good. Formerly from UNICEF and USAID, now working on the COVID-19 response in the U.S.

And truth be told, my gauge, or my viewpoint kind of shifts towards the consequences of green energy. Foreign Policy Magazine had a really wonderful article on the global transition to renewables and how it could lead to human rights abuses, specifically looking at when it comes to mining in DRC, and child labor. And I think whenever we’re shifting to something new there’s always consequences about, you know, who is going to end up paying, oftentimes, in child labor, or Democratic Republic of the Congo. So how can we, as we shift towards this new type of fuel and strategy, actually create a safety net to prevent these types of abuses? Thank you.

STERN: Thank you, Sabia (sp). And it follows really from the kind of issue I was trying to raise in the answer to Afsaneh’s question, which is how you manage transitions where people are going to have to change patterns of consumption, change the kind of places where people can work. I do think that getting people out of coal mines is probably a good idea. That’s not a dream job. There are many other sorts of jobs that we can think about. But that remark isn’t good enough, because what you’ve got to do is help people find other things. So help with that kind of transformation. You’ve got to be aware as to whether the technologies that you’re starting to talk about will carry consequences that you haven’t thought of for different kinds of labor.

But I do think, you know, that things like decentralized solar—I mean, I’ve lived and worked in one Indian village now since 1974. And if you see what opportunities decentralized solar can bring, they really are quite striking because, you know, if you keep a solar panel in the house, and then people can leave their mobile phones there to recharge, or they can run their—run their electricity off it in the evening. In these cases, it would usually be women would be looking after those solar panels. But you’ve got to look into the structure of the technologies that you’re talking about and asking what’s involved.

I mean, lithium mining will be something that we have to look at very closely too, because you might stop one kind of mining activity, coal, but you’ve got the intensification of another kind of mining activity. And you’ve got to look at the consequences of those as well. So the warning I think that you give, Sabia (sp), is a—is a very important one. I think that net we’re looking—when historians look back on this they’ll see that the business of producing renewable energy is much kinder all around to people, and of course the environment, than the older ways of doing it with fossil fuels. But I do think the question you ask is crucial and part of the story of a just transition.

HAASS: Nick, let me ask you a question about the moment. We had a temporary decrease in a lot of emissions not because people had become more climate responsible but because of COVID-induced recession. Now we’re in uneven but early phase of a post-COVID or trans-COVID recovery. I know you’ve thought about it a lot. How critical is the coming, what, six months, a year, when there’s a lot of retooling, a lot of ramping up of economic activity, to basically not resume the pre-COVID trajectory but to embark on a new trajectory? How critical, say, are the next six months or twelve months for everything we’ve talked about over the last hour?

STERN: I think it’s a special moment where people want to do something different. They look back at the decade before COVID, which was not good. Slow recovery from the global financial crisis, fractionate, you know, in many countries social cohesion becoming much more problematic in various different ways. And of course, they see the consequences of not—you know, of air pollution, which was revealed when we stopped, as it were, paused for COVID. So I do think the willingness to build back better is a real thing. But it has to be—the recovery has to be led by public policy and it has to be led by wise investment from firms. So it’s an opportunity to catch the wind, as it were, if you excuse the metaphor. But it’s one which requires leadership and vision to capture. But it is—it is an important moment.

HAASS: You’ve made the point earlier that we’re getting to the point, but we’re not there yet, where actually renewables and the rest will be cheaper than, say, fossil fuels. So you’ll be able to do well and do good simultaneously. But we’re not quite there yet in many cases. In some cases we are. So how do you—how do you avoid the argument, essentially, well, that to do the right thing is a bit like eating spinach? Or is that where carbon pricing and the rest come in, as a transition tool? But how do you—how do you win this? Because in the United States, I’ll be honest, very different than Europe, the public debate has not been won here.

STERN: And that is something which I think the changing technology will be very helpful. Now, I’ve never had a Ford F150, but—you know, the big truck of the USA. But you know, what you’ve now got is the Ford 150 Lightning at $40,000 which goes from naught to sixty in less than five seconds, you know? That transforms people’s preferences about the way they are ready to do things. I don’t want to ride the whole argument on one truck, but it’s an illustration of how opportunities change.

I do think, you know, in the United States and elsewhere in the world you got rid of leaded petrol when public discussion demonstrated, and science demonstrated how bad it was to children’s development. So I think that the discussions about air pollution and the discussions about climate change can be helpfully evidence-based. Now, I hope I’m not sufficiently naïve to think we just assemble the evidence, and you win the argument. I mean, a lot of these are about ways of life and what you can do and how you do things differently. A lot depends on the leadership of trusted figures. I think Pope Francis has played a tremendous role in this—in this whole story.

I think the young people of the world have played a wonderful role in this story. I live and work in a university. And students of my university, The LSC, from all around the world, they’ve been taught about climate change at school for ten years. That’s a different generation from the one that’s come through six, seven years ago. So I think ideas change with evidence, with opportunity, with technology, with leadership, but also with pressure. And it’s the pressure from the young people that is my biggest source of optimism.

HAASS: Well, it’s a rare meeting at the Council on Foreign Relations that we end on a somewhat positive note. I doubt this will be a precedent, but it’s welcome all the same, particularly given the subject we’re dealing with. I want to thank Lord Stern, not just for being with us for the past hour but for the work he’s done over these many decades. He is, to me, a real example of how someone can bring to the public space tremendous rigor and tremendous commitment, and really make a difference in shaping the public as well as elite debate. So thank you, sir. Keep doing it.

STERN: Thank you, Richard. But remember, I’m optimistic about what we can do. I really worry about whether we will. But, you know, that’s our job, right?

HAASS: That is our job, exactly. And the stakes could not be bigger. Thank you, sir. One and all, thank you for joining us today. Stay safe and well, and we look forward to the time not too far off when we can continue meetings such as this, except do them, at least in part, in person. Thank you all.


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