Cooking the global economy

BRITAIN'S Stern report on the cataclysmic economic effects of global warming is the 2006 equivalent of a warning to world leaders in the 1920s that they faced a Depression without certain preventive steps. That is the size of the downturn predicted by Nicholas Stern, former chief economist of the World Bank, if the world does not take serious concerted action against the greenhouse gas emissions that contribute to global warming.

Stern's report takes the issue out of the realm of losing a species here or there and considers it in its true dimensions. Humankind is conducting an unplanned experiment with its habitat that will in all likelihood result in droughts, floods, famines, severely damaging storms, and the movement of diseases, such as malaria, into new regions. The impact will be greatest in developing countries, but no region will be exempt.

Unchecked, climate change could reduce global economic activity by 20 percent, Stern says. On the other side, the changes in transportation, power production, and other energy uses needed to avoid this disaster will reduce global economic growth by just 1 percent a year.

British Prime Minister Tony Blair, who commissioned the 700-page report, gets it. His US counterpart, President Bush, does not. The intransigence of Bush, who rejectsany tax or cap on the principal greenhouse gas, carbon dioxide, stands in the way ofeffective international cooperation on the issue.

Without US participation, it is difficult to imagine the two fast-growing economic powers in Asia -- China and India -- submitting to any new agreement beyond the current Kyoto accord, which expires in 2012. China, India, and other developing nations faced no limits under Kyoto because at the time of the protocol's drafting their emissions, especially on a per-capita basis, were so slight.

The same data that persuaded Stern of the severity of the threat of climate change has been available to corporate leaders. Firms like GE, DuPont, AIG, and the electric utility PG&E, which was instrumental in getting California to limit greenhouse gas emissions, have recognized the need to include climate change in their corporate strategies. Wal-Mart just announced it was devoting much more shelf space to energy-efficient bulbs. The insurance broker Marsh recently agreed with Boston-based Ceres, a network of investment funds and environmental organizations, to train corporate directors on the implications of climate change.

But for every GE or PG&E there are many corporations that, like the Bush administration, are wishing the problem away. With the Stern report on the table, neither business leaders nor politicians can any longer say they were not warned.