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LSE: Public lectures and events
The growth story of the 21st century: the economics and opportunity of climate action
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Welcome to the LSE Events podcast by the London School of Economics and Political Science. Get ready to hear from some of the most influential international figures in the social sciences.
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Good evening and welcome to the London School of Economics and Political Science for tonight's exciting public event, which is the official launch of of Professor Lord Nicholas Stan's new book, the Growth story of the 21st the economics and Opportunity of Climate Action. I'm Susanna Moratto. I'm the Vice President for Research here at LSE and also a professor of Environmental economics. And it's a real pleasure to be here this evening to welcome our distinguished speakers, Professor Lord Nicholas Stern, Professor Nicola Ranger and Dimitri Zengelis. And of course, a warm welcome to you all here in the Sheikh Zayed Theatre, but also all of those joining us online today. Let me begin just with very brief reflection. The world stands at a critical juncture. The choices that we make this decade on energy, infrastructure, finance and nature will shape the path for prosperity and the environment and stability for generations to come. This evening, we launch a powerful and ambitious book by one of the world's most influential economists. In the growth story of the 21st century, Nick Stern challenges the outdated notion that we must choose between economic growth and climate action. He shows that the transition to net zero is not just necessary, it's the opportunity of our time. This is the book about reimagining the economy. Drawing on economics, finance, policy, innovation, and behavioral science, it lays out a new growth paradigm, clean, inclusive, resilient and within our grasp. It offers not just a diagnosis, but a plan. From scaling green technology to reforming finance and reshaping cities. From global cooperation to political courage, this is a call to act with purpose. And while Lord Stern does not underestimate the scale of the challenge, this is ultimately a book of optimism. It shows that with smart choices, we can unlock a new era of innovation, investment and human development. So let me introduce the speakers. Lord Stern is Ig Patel professor of Economics and Government Chair of the LSE's Grantham Research Institute, and the inaugural Chair of our new Global School of Sustainability. He served as Chief Economist of the World bank and ebrd, was Head of the UK Government Economic Service, and is the author of the landmark Stern Review on the Economics of Climate Change. He's also a Fellow of the Royal Society and the British Academy, and a member of the House of Lords. The latest book that we're launching today is published by LSE Press and it's available open access. And at the end of the event today, you have an opportunity to Buy it. All the copies are signed outside the Joining us to reflect on how these ideas can be put into action are two outstanding panelists. Nicola Ranger is Professor in Practice of Natural capital, Risk and Finance at the Grantham Research Institute here at LSE and Executive Director of the Earth Capital Nexus Initiative. She's a global expert on sustainable finance, climate and nature, and systemic resilience risk. And Dimitri Zengelis, a senior Visiting fellow also at the Grantham Research Institute, but also a senior Advisor to the Benetton Institute for Public Policy at the University of Cambridge. He advises governments, banks, financial institutions, NGOs and international organizations on the economic transition to net zero, and both worked in the Stern Review with Nick. LSE is a particularly fitting venue for tonight's conversation. We are proud to be at the forefront of research and public debate on climate and sustainability, the issues that will define this century. The event is being recorded and we hope to share it as a podcast, technology permitting. Please mute your phones now. We'll take audience questions later on. But now it's my great pleasure to hand over to Professor Law Nicholas Stern.
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Thank you. Thank you, Susanna. And that was a very good summary of the book, so I could probably stop now, but it's wonderful to see so many friends, colleagues here. There's a phalanx of four people in the second row who were on the Stern Review, two on the platform, Melinda just in front of them who ran the disseminations of Stern Review. So we're well represented and we were right. I also want to thank There's a phalanx at the back from LSE Press who produced the book at really very rapid speed, very effectively, and it's amazing that there are actually copies outside. But first and foremost it's LSE Press, so it's open access. So please paste in the link at the bottom of every email that you send and then the world will have direct access to the this is part of the Global School of Sustainability inauguration lectures. The first was Amartya Sen in the summer. Juan Manuel Santos just a few weeks ago, myself now and then Adair Turner's doing some in January. So we decided rather than have a big launch party, the Global School of Sustainability, we had a series of lectures. So that's our way of introducing the Global School of Sustainability. I wanted to thank the Global School of Sustainability and the Grantham Research Institute, without which this simply would not have happened. I chair both those also to the Suntory Institute, sorry, the Suntory Toyota Institute, which I used to chair back in the day and has always been My home at the LSE and of course LSE itself. Key further thank yous to Delfina and Maria, who are over there, who are absolutely in the engine room, and Eleanor and Roberta, who previously, because this originated with my Lionel Robbins lectures, drove that story as well. I'm enormously grateful to them. Now my wife sue and I have five grandchildren, books dedicated to them. Orlando, Orlando, Casper, Jo Rosa and Taya. Rosa's here tonight when we talk about 2100. They will be there. So it's our responsibility to leave a world that looks livable for them and all of your friends and children and grandchildren. So it's 20 years since the Stern Review. I've already said that Dmitry and Nicola were there and our friends in the second row. It's 10 years since we published while we waiting, which were the previous Lionel Robbins lectures. So this is another 10 years. The world has changed. Success will be if I don't have to write another book 10 years from now. Clearly a lot's happened in the last 20 years and it'll be reflected in what I have to say. But basically, as Susannah said, we now have in our hands not just a problem we have to deal with. My goodness. We do have a problem that we have to deal with. But we have a spectacular opportunity to build something that looks very different. It's a growth story that is at the heart of a transformation, or the transformation is at the heart of the growth story. It goes both ways for this next 30 years. This is not growth forever. This is not growth that looks like the dirty, destructive models of the past. It's growth that breaks the link between economic activity and the destructive relationship with the environment. You don't get to net zero with zero consumption. You get to net zero by doing things in very different ways. And that's the heart of this story. Now, the slides that I'm going to go through, and I have to start by making sure this works. I should have done that at the beginning. It does work. Okay. And I should also have checked. You can hear me in the back row. I normally start that. Yes, very good. Alive and well. Thank you. So the slides I'm going to go through are a summary of the book. They're my summary of the book. You don't have to go to ChatGPT. It's my summary. It's my summary of the book. And it's in places technical, but that's because it's a technical subject. There's quite a lot of economics here, but it's mostly buried. But not Always. And economics is a serious technical subject. But I'll try not to surface it. I won't surface it too much. So each slide I'll go through, I'll just pull out the big messages. I won't go through the slides in detail. And if I catch you looking only at the slides and not at me, I shall be very upset. So let's go. This is the story. So we're starting with the essence of the argument. Essentially, I've already emphasized the importance of seeing this as an imperative and an opportunity. It's the new growth story and investment. Investment. Investment is at the heart of all this. The world has to build the new before it can run down the old. But in building the new, it will create something really tremendous. Most of the action, just looking at the numbers and where the growth will be and where the infrastructure will be created, will be in the emerging markets and developing economies. But of course, it's a global problem. Everybody has to act and the rich countries have to reduce rapidly. But the big action, the big investment, the investment we have to facilitate will be in the emerging and developing economies in the majority. And that is a big, attractive development story, but only if we get on with it and get it right. So the book is about how to foster and create the kind of investment we need and how to finance that investment. It's a story of investment and structural change. That's the two slide summary. Now let's start. I'm not going to spend long on the science. If you want to understand the science, the first port of call that I suggest to people is the Royal Society. It's been around for a few hundred years. It knows how to evaluate and assess and it also knows how to explain, and it's got a very good explanation of the science. But basically, these greenhouse gas molecules oscillate at a frequency that prevents the infrared getting out, and that's the greenhouse effect. So every time you look at the science, it looks worse. Partly it's because the concentrations have got on rising, but it's partly because we understand that those issues and dangers that the science was pointing to us are just coming through faster than we thought and more severely than we thought. A lot of the things that we thought were at risk, for example, tipping points are. Mention what they are in a moment. But those things we thought were at risk at higher temperatures of 3, 4, 5 degrees now look like tipping points kicking in at 1.5 or 2 degrees centigrade. The IPCC reports are published every 5, 6 years. When we did The Stern Review, there were just three and now the seventh is in preparation. And there was one was looking at the difference between 1.5 and 2. Each time we look, it gets more worrying and that is just underlining again and again the urgency of this. The tipping points we talk about are coral reefs, ice sheets, permafrost, Amazon forest, the ocean currents, and particularly in the Atlantic, summarized as amoc. If those collapse, if those change radically, is potentially devastating, and we shouldn't forget the third pole, which language that my Indian friends use, which is the Himalaya, and the consequences of the melting of the snow and the ice, the collapse of the monsoon, and of course the intense heat on the Indo Gangetic plain. So we're headed for two and a half, three degrees on current policies, current promises as distinct from policies. Current policies could bring it down a fair bit more. But the last time we were at 3 degrees was something around 3 million years ago and sea levels were 5 to 20, 25 meters higher than now. That would be London by the sea. If you imagine how devastating that would be, that the populations who live so strongly in coastal plains and so on. And on the right hand side, you've got a map of the different kinds of tipping points that could kick in. If you're worried about migration, as many people seem to be, in the words of Ronnie Reagan, you ain't seen nothing yet. If this kind of thing really starts to move and you think of the populations at risk. Now that was the science that was quick. I'll be rapid on the ethics, but the ethics really, really do matter here. Economics quite understandably tends to take a consequentialist view of ethics, and that's for the most part what we have done. But it's very important to recognize that I think whichever, you know, if you think of Aristotelian and virtue ethics, if you think of the Kantian categorically imperative, which do as you would wish other people would act, if you think the underpinnings of the social contract and so on, whichever one you look at doing damages, severe damage to other people's rights to development couldn't be conceived as moral in any of those codes. And I think it's very important to keep that bigger picture of ethics in mind. Of course, in most of the major religions you'd get similar kinds of conclusions about destroying, of course, destroying the environment itself. Many people would take, and I would, a moral view of. But actually doing damage to other people's right to development does, I think, come in, and rightly so, with Most moral codes. The sustainable. This is the global school of sustainability. Sustainability is offering to future generations opportunities at least as good as the opportunities available to us, assuming that they behave in the same way to those who follow. What are opportunities determined by? Opportunities determined by endowments and assets. And the key ones are physical, like our infrastructure, buildings and so on. Human, that's health, education, ability to perform, natural capital, that's our endowment. Forest, lands, oceans and so on. And social capital is, you think of our institutions and how much we support and trust each other. It's clearly our capital in the sense that you can add and take away, and my goodness, we know how to take away from it, as we've shown across the world in the recent past. But social capital matters to taking decisions, it matters to sticking with things, it matters to social acceptability and so on. So everything I'm talking about is situated within the right to development and the Sustainable Development Goals. Climate action. Climate investment is part of investment for the Sustainable Development Goals. Don't let anybody get away with the idea that somehow there's climate on the one hand and development on the other. That is just a fundamental analytical mistake with huge political consequences. So this is nested within that story. And of course Sustainable Development Goals refer directly to, and this is the quote on the right here, human beings fulfilling their potential in dignity, equality and a health the environment. So if you look at the Declaration of Independence based very much on the rights based philosophies of Tom Paine and Mary Wollstonecraft of the 18th century, you get a very similar set of ideas. Declaration of Independence of course emphasizes the right to the life, liberty and the pursuit of happiness. So the right to development, I think is a good starting point. It can be pulled out of all the kinds of philosophical traditions that I've described. But the right to development is a good way to start to understand the ethics of all this. I always remember being on the platform with my great friend and very sadly lost a dozen years or so ago, Melisanawe, the Prime Minister of Ethiopia back in 2011 and he spent other people were saying, well, we have a right to do this because the rich countries polluted the planet in the past. And of course they did, and that's highly relevant. But he said, and this is his words, it's not justice to foul the planet because other fouled it in the past. Emissions kill people. There's no right to kill people. It's true that development needs energy. Development absolutely does need energy, but energy doesn't need emissions. That energy doesn't need carbon. So that's our challenge, to find ways of development without doing all that damage. Of course, the moral obligations, the moral obligations of the rich countries, because of what they've done in the past, to move quickly, not to do that kind of thing for very much longer, are very strong because they're damaging people's rights to development and because they have damaged people's rights to development, then it's important that they support this investment process. But I'm not, not one who looks at all this kind of story in terms of reparations for past emissions. I think that's divisive. It's not easy to find its moral foundations. But if you start with the right to development, the moral obligation for the rich countries both to cut quickly and to support other people as they find different ways of development are I think very important. And of course, as I've already argued, it's in their self interest. I think the moral argument is the right one to start with, but it's also in the self interest of rich countries to support. I'm not going to go into this one. But essentially economics, at least the discussion of economics in the economics of climate change around discounting was not very good. And it was not very good because it didn't start from the ethics. And it was not very good because it didn't start from the right concept. The right concept is the social discount factor, not the social discount rate. Social discount rate follows from the social discount factor. And it's obvious when you define the social discount factor, that is the relative value of a unit of output or consumption that comes down the track to now. And that's exactly what you're doing when you're talking about discounting, then the discount rate is the rate of fall of the proportional rate of fall of the discount factor. So once you start that story that way, which is simply starting with the right concept, you immediately get to this, which is that if you're evaluating a unit of output to somebody down the track relative to now, the first question you'd ask, I think is, well, how well off is that person going to be? If you think that person can be very well off, then you'd perhaps attach a low value to a bit more. Of course, if that person could be very poor, you might attach a higher value. The second question you ask is what does a life in the future? How is a life in the future? Let's assume it's exactly the same in all relevant respects to a life now in all relevant respects in relation to Its consumption. How does that look? How does that has that valued relative to a life now? So you take two people, the only difference between them in this hypothetical sort of moral experiment is that the second person was born later. Well, where is the moral argument that that person should be treated differently? I haven't heard one and it's very hard to make one. So in other words, pure time discounting, which is attaching a lower value to somebody who comes later just because they come later is, I think, eth politically indefensible. If you can defend it, let me know. But I'd be surprised. So essentially, if you start this way, just simply start from the concept that you're trying to get at. You get straight to the basic set of issues and of course, you immediately discover that the welfare of the people in the future relative to now depends enormously on what we do now. So in the jargon of economics, the discounting is endogenous. You can't import it it from somewhere else. It depends on what you do. Now. I banged on about this because somehow when we'd published the Stern Review, everybody thought that discounting was the big issue. Actually, the risks were the bigger issue, and they still are the bigger issue. But we were right on discounting. I'll try not to say that any more times. I think I've said it twice. I think. Okay, all right. So I've already started to say what's in here that wasn't in the Stern Review. The basic three propositions of the Stern Review, that costs of action are much less than the cost of inaction, that the world doesn't have to choose between averting climate change and growth, and that the climate change is the greatest market failure the world's ever seen. I think all those statements, which are the key statements in the Stern Review, the people who drafted the summary are in the second row. And that was highlighted. And I. Those were right. They're stronger now, even stronger now than they were then. But let's focus on the change. I think the question of do we act or not act? Which was comparing costs of action and cost of inaction. I hope that's settled. We have to act. It's deeply irresponsible not to. And in the sense of driving towards a cliff, can't be described as realism. It's unrealistic not to act. So this is a story now of how we act. Let's put the story of should we act behind us. How we act, how do we do it? How do we get the investment going? That's where the real economics, the political economy, the policy side comes in and how do we finance it when we do it? Vera Songwei, sitting in the third row here, co chairs the independent high level expert group on climate finance which has served the last four or five cops. We're publishing a report, we thought we might beat the book, but we haven't beaten the book, but it'll come out in the next day or two. It's all about how you finance that. That's a part of this essential part of the story. So we've moved from cost to investment and we've moved from cutting emissions by 80% 1990 to 2050 to net zero. And that's very important. I mean if you're going to stabilize temperatures, you have to stabilize greenhouse gas concentrations. If you're stabilizing greenhouse gas concentrations, you've got to have net zero emissions. It's a very simple that argument. So that's been the change and I think very importantly, and I'm sure that Nicola will have more to say on this. We see now much more strongly, I mean we recognized it then, but much more strongly now the importance of natural capital and biodiversity. So that's how the Stern Review stands in retrospect. And what we're doing now and how what we're doing now is different. The urgency, if you look to the middle of this century, the next 30 years or so, the global building stock will probably double, GDP will probably roughly double, the urban population will more than double. These are two or three decades of intense building. And if we do our buildings and our infrastructure anything like we've done in the past, then you can say goodbye to 3 degrees and the immense risks that that would be involved. So that's the sense of urgency. And of course where will most of that building done? In emerging markets and developing countries. So that's the challenge. Even in a rather well developed middle income country like India, the majority of the infrastructure which will exist in mid century will be built between now and then. So that's a measure of the urgency of all this. I'm going to come back to the absence of the horse race between climate action and development. I've already emphasized that. But what I want to emphasize here is there isn't really. We shouldn't see there as being a horse race between cutting emissions and adapting. We sometimes say that mitigation is avoiding the unmanageable and adaptation is managing the unavoidable. And we clearly have to do both those things and a great deal of what we do when we pursue development is in fact doing both those things. You know, think of mangroves, I.e. adaptation, mitigation, development. Think of restoring degraded land, think of public transport, think of decentralized solar. That's all of each one of those is big time adaptation, mitigation and development. This is a diagram. I haven't got time to go into the detail, but that looks at all those inter relationships. We've got one big development problem which we have to make sustainable and resilient. We haven't got, you know, mitigation over here, adaptation over there and development over there. That's absolutely the wrong way to understand it. It's intellectually misguided and it's practically very damaging. So the growth story. I highlight six drivers of growth doing things most cheaply. The clean is cheaper than the dirty. Across a lot of what we have to do. There's lots of increasing returns to scale down the track. Resource efficiency, well, particularly energy efficiency. But if you do things more efficiently, you're more productive and you have stronger growth, stronger system productivity. I'll have a few words to say. Improved health, fundamentally important. We kill probably from air pollution 5 to 10 million people a year. That's about a number. Think a number of people who die a year in the world is a bit over 50. So 5 to 10 million associated with air pollution is huge. Not all of air pollution is associated with burning fossil fuels, but a lot of it is. So those are very big numbers. In the UK we kill what, 35,000 a year from air pollution and maim a lot more. That's about 20 times the deaths from road accidents. If the deaths from road accidents doubled, people would quite likely be up in arms 20 times more for air pollution. That doesn't count the people that we mate. So that is a very big part of the story that comes with moving away from fossil fuels. And of course increasing the share of investment is very important. Now I love my fellow economists, but most of the five out of those six things would not really appear in the kinds of macro models we build. They'd creep in here and there, but it's only really the investment story and that would be in the macro models we've built. So it's very important that we think about the modeling here. And I'm not going to go into too much detail, but this is modeling about transformation. It's structural change, it's economic policy, as if time matters. You can't just compare an equilibrium with the new policy against an equilibrium without the new policy and think that you've told anything like the full story. This is about the dynamics of change. It's about public policy, as if time matters. And of course, I've already emphasized the importance of these physical capitals I'm looking at how much more have I got? Suzanne okay, so time to accelerate. So this is the falling, very rapidly falling costs from, in this case, renewables and batteries and electric vehicles. I've already emphasized the importance of these six drivers of growth. This is very important. This is system productivity, cities where you can move and breathe. This is one of the, the elements I drew attention to. Cities where you can move and breathe are much more productive than cities where you cannot. And that shows very clearly that this is about investment, it's about structural change, it's about organization. You can't really understand what you have to do unless you get inside how a city works, how land systems work and so on. I won't say very much about AI, there's quite a lot about it in the book, but, but the one piece of luck in all this is that AI has come along just when we need it. This is about managing systems, redesigning systems. It's about discovering new material. It's about understanding the complicated ways in which climate change can impact on different parts of the world. It can be enormously valuable from that point of view. Much more valuable than interrupting that, finding out that I am a person of a certain age who likes cricket and football. Then it learns how to interrupt me when I'm just going about my daily business business of doing a search that is negative value added from artificial intelligence. But these areas are huge positive value added from artificial intelligence way outweighing any cost of the energy used in doing it, at least in this case. So tipping points of the good kind come. I mentioned tipping points of the bad kind in climate, they're tipping points of the good kind. As these new technologies gradually take hold and come in and this is a little diagram saying up on the right hand side side, we're starting to get to the point where the clean is actually very attractive, it's very accessible and it happens over to the left hand side. We're much further behind. But our challenge is to accelerate that process of switching over where the clean becomes cheaper than the dirty and it's more than the clean and the dirty. It's just a much better way and much more efficient ways of doing things. You know, the low emissions, aircraft fuel economy, quite a long way off, but we're already there in larger measure with electric vehicles, battery storage and renewable generation. Public policy Must be in large measure about accelerating that process. New economic geography here. The advantages of clean, cheap electricity are going to be enormous in this new AI age particularly. And this is not an AI point, particularly when they're near to minerals and that that offers, for example, for much of Africa tremendous opportunities. And that's why investment in Africa is so important to all our futures. But when we were at school, we were told that Manchester and Newcastle were where they were because there was iron ore and coal and they were rather heavy things that cost a lot to transport. So that explains why those cities grew up where they did. If we now have a different kind of, kind of energy story, a different kind of mineral story, and that's going to rewrite our geography. This is a story now of who led what. And this is very important in the international geopolitics. Who led what in the different industrial revolutions. You know, I follow the splendid Chris Freeman in looking at six of those essentially as does the Rocky Mountain Institute. But you saw that, you know, the UK was in there early in the 19th century. The US probably dominated the industrial revolutions of the last century century. And it's China that's dominating the industrial revolution of this. And bringing down the cost of the new ways of doing things is something that they really are onto now. The biggest, the most important event in the future of the climate will be the 15th Five Year Plan, which is 2026 to 2030. Just you gotta look at the numbers. That's where the biggest emissions are. And that will be for the second half of this decade. It'll be published in February, but we've already seeing the outlines. The high tech manufacturing, clean manufacturing is very much at the center of it. And it's, you know, more than half of the electric vehicles on the road are in China and so on. So that's a big part of the story. Investment. Well, the big investment here we're already to the point where the investment in energy in the new and the clean is surpassing the investment in the old. It'll be two to one in a year or two. Probably five years or so ago it was one to one. That's changing. I'm trying to point to some of the positive things. Every time I say something's changing. Could you add, comma, not fast enough. That will help me save words in all this. But it's very important to recognize that that change is taking place at the moment. The biggest part of the investment in the new is in the rich countries in China, but it's changing in the other parts of the. Also now this is from the work that Vera Songwe, who I mentioned, and Amar Bhattacharya and I are doing, and Eleonore, I don't know if Eleonore is here, but Eleanor Subirin very much involved in all this. What we do then if we say, well, what's this? We've emphasized investment, we've emphasized finance. How much investment? Well, I've said that climate investment is nested within investment for the Sustainable Development Goals, but the climate investments that we talk about are the energy transition, adaptation and resilience, natural capital, coping with the loss and damage, the damage that occurs, even though you tried your best to be resilient and of course a trust transition, looking after the dislocations that are going to take place. So Amar Bhattacharya, Veer and I, working with Eleonore, closely with Eleonore, looking at the numbers for emerging markets and developing countries and saying, what does the flow of investment have to be if we're to get anything near, anywhere near the Paris Agreement? And those were the numbers you came up with in 2013, $32.4 trillion as the flow of investment, of which the energy transition would be roughly 2/3. But of course, big numbers for adaptation, resilience, natural capital and so on also. Now this is for my fellow economists. There's a whole range of market failures here and all too often we've heard just get the price of carbon right and the wonders of the markets and the competition and the entrepreneurial spirits will sort out everything else. Well, that is really go to the bottom of the economics class. I mean, the first market failure is exactly that. And we always put it top of the list and we should always put it on the top of the list. And carbon pricing is enormously important, but if we think it stops there, we're never going to get where we need to go. R and D is extremely important in all this. Ideas of public goods. So we have to support those, particularly since the use of these ideas benefits everybody and not just the person who's used them. This is about managing risk in capital markets. We know that there are lots of imperfections in capital markets, but we also know there's quite a lot we can do about that. Development banks, a big part of the story there. A lot of this is around networks, recycling, transport networks, Internet networks, and those don't function without government support. Information, of course, very important. I've already mentioned the co benefits, particularly around health. And this is the work that Amar and Vera and I and Eleanor have been doing on the finance. You ask yourself how much of these investments could be financed internally in emerging markets and developing countries. In this case we looking at the different types of investment we say ballpark 60% and then how much could be financed outside. That gives you to the number 1 trillion, the blue on the the right there. So that is the external financing for 2030. Scale that up by 30% for 2035. I like to do 2030 because it's so important to get going quickly but 2035 is the language, it's a date that the UNFCCCs and COPs have been using most recently. Scale up that 1 trillion by 30% to go to 2035. That's the 1.3 trillion that is embodied in the roadmap from Baku to belem that the cops 29 and cops 30 have been working as. It's not a mysterious number, it's actually quite straightforward how you get to it. Importance of natural capital here and I'm going to let Nicola talk about that. All the things I've described require an active state. This isn't a 1990s market fundamentalism story where you balance the budget, do your best with prices and let investment fall where it may. We're not talking about investment fall, falling where it may. We're talking about the kind of investment in our cities and in our land and our energy and our transport that we have to make to get where we know we need, we have to go. And we're talking about dealing with the market failures that stopping us getting there. We're talking about promoting this structural change. This is a story of an active state and we have to recognize in order to get where we need to go we are going to need that active state. The investment will be mostly big majority private sector but it's the signals and the conditions that you create for that investment that's the heart of the story of dynamics of public policy. Public policy as if time matters, public policy as if structure matters. I spent a little time and Vince Cable is here and Vince prompted me to do this. Thank you Vince for that. He said look leadership involves dealing with the bad arguments as well as trying to offer the good arguments. But some people will say look we live in an efficient world world I mean more fool then but we live in an efficient world. That means that if we introduce a new criterion worrying about the environment then we have to cut back on the achievement on the other one. Right? That's the trade off. Well we don't live in a, in a. And all These stories I've been offering about public policy and market failure are all about how you deal with an inefficient world so you can advance on both these things at the same time. You know, I've already dealt with the argument development needs energy, therefore we have to have fossil fuels. Well, oh, development does need energy, but we don't need the fossil fuels. Now, some of you will have noticed, and I am getting near the end now, and thank you, Susannah. Some you may have noticed that a major country has stepped back from all this. And they're not alone. Those arguments are coming in other places too. If somebody steps back in the international arena, that's an opportunity and indeed an obligation for others to step forward. Forward. That's beginning to happen. And China recognized this long ago and they are stepping forward. I think it's enormous opportunity for the European Union, if it can get its act together, to step forward and take much stronger leadership. India is emerging. I was fortunate to be part of the work on India's G20 in 2023, and they did indeed push hard on international action on development, on the multilateral development banks and so on. So there's real potential for leaders out there. It's very important to encourage it. And I've already emphasized the enormous potential of an opportunity for investment in Africa, of course, steered by Africa, chosen by Africa, but where the world can and should may operate largely in support. This is a little diagram for those of you going to cop 30. So if you go into cop 30, you can take a photo of that and it looks at the relationship between the growth story here and the six axes that our friends in COP 30 are offering. I hope this will be up on the website before COP30 starts. So this is a story of collaboration, it's a story of opportunity. But it does involve restoring trust. It does involve acting in a strong way. And we've got to remember that. If you look back through the vaccine apartheid of COVID if you look at what was suddenly expected of poor nations around the time of the the beginning of the war in Ukraine, if you look at the slowness of delivery, on climate finance obligations, we fractured trust largely at fault of the rich world. We fractured trust and we have to rebuild that. And one way of rebuilding that, for me, the most important way of rebuilding that is supporting the critical development investment that we need in all this. I'm not allowed to say, yes, we can can, but yes, we can. This is an enormous opportunity. The savings, the potential of savings in the world is there. The technology is Moving the Paris agreement is still a very powerful foundation. I'm enormously optimistic about what we can do and we've tried to set it out, what we can do, try to set out not just the investments, but also the policies and the finance. We can make all this happen. But am I optimistic about what we will do? Not really, but that's our job. You know, the LSE is about understanding the causes of things for the betterment of society. And I take it that we mean world society and not just uk, and we do mean world society. We can do this and it's our job as academics, as communicators, to show that it can be done. And that's a major part of the contribution solution to turning what we can do into what we will do. You've got key messages. I'm not going to do that again because you should have absorbed them by now. Thank you very much.
- [43:20]
B
Nicola, over to you now.
- [43:22]
A
Hi. I'm interrupting this event to tell you about another awesome LSE podcast that we think you'd enjoy. Lseiq asks social scientists and other experts to answer one intelligent question, like, why do people believe in conspiracy theories? Or can we afford the super rich? Come check us out. Just search for lseiq wherever you get your podcast. Now back to the event.
- [43:50]
D
Thank you so much, Nick, and it's a huge honour to be here. And wow, following Nick Stern is quite something. So my name is Nicola Ranger. I lead the Earth Capital Nexus initiative here, particularly focus on natural capital and its links to growth. I wanted to focus actually more of the book and what it tells us in a wider sense. So Nick has talked a lot about how things have changed in 20 years, and I think that this comes across very, very strongly in the book. He also talks about the role of AI. So I haven't warned Nick that I'm going to do this, but I actually, last night did a chatgpt analysis of the Original Stern review versus Stern 2025, which is really, really, I think, really captures how things have changed. And I think. I think it really encourages us and the book itself does, is to reflect on how far we've come. And I think sometimes, particularly for us that do this every day work in this area, it feels really hard sometimes. You know, a lot of things happen that feel like big setbacks, but actually, when you reflect back to where we were 20 years ago, we have come an enormously long way. The policies that we have in place now, the changes that we see in the rollout of renewables, what we see in Terms of what's happening on finance, finance being mobilized into this area, there's been huge changes but I'm a physicist by background so I like some objective evidence which is what this is trying to do. And what you can see here for example is some of these big changes as Nick mentioned. So this rebalancing of our thinking about the policy tools. So the original Stone review was very big on price, prices and markets. And I remember spending many hours in meetings with Nick and Dmitry, them debating is it prices versus quantities, how do we solve this problem? And actually this reflection that it's now much more thinking about the wider market failures and the role of policy and institutions really comes out of this. The link between adaptation and mitigation comes out and actually at barely the. The new book barely talks about mitigation, it talks about transition, it talks about positive growth. You can see actually the mentions of the word mitigation has gone down 44% in the last 20 years. So it's much more our understanding about the link between this rollout of a new energy technologies, this sixth industrial revolution as being a positive growth agenda comes through much, much more strongly than previously. They're linked to justice, to issues around transition. The need to bring everyone with us is very, very strong. The opportunities, the innovation, the potential of AI. See something that I'm particularly passionate about is nature. So you can see here that actually nature and biodiversity, natural capital has gone up 2,700% in the last 20 years. So this is a really big part of the story. I just want to pick up sort of three key things I think are really important that come out of the new book, which I think key things that we've learned that a big focus for me. One is the role of shocks. So this isn't something that Nick mentioned but is in the book very strongly. So I think when we started out in this area 20 years ago, we saw that this transition would be smooth, but we found very much that it's not smooth. So since the original review was released 20 years ago, we've had a global crisis, a global financial crisis, we've had a pandemic, we've had wars. And what we see when those happen is that the agenda seems to roll back. Political capacity is reduced, fiscal space is reduced and that means that things are slowing down and we're in a phase of that at the moment. But I think a key takeaway from that is that we need to understand that this isn't going to be a smooth process. This is going to be a Process of shocks. And we need to get better, I think, at thinking about how can we make sure that this transition happens, happens through these shocks. The next quit worry I'm going to make is on nature. And this comes through very strongly, as you can see from my objective evidence. But nature is not just. We often think about it as a cost. It's a trade off between growth and nature, natural capital. But what we see now and what comes across really strongly in the book is that this natural capital is underpinning everything. It is a productive asset in the same way as any other productive asset. It's infrastructure. So when hopefully the Chancellor soon will be talking about the investments in infrastructure, that natural capital is key infrastructure that is powering our growth and innovation in our economy. It's also too big to fail. So we need to think about a new economics of too big to fail to deal with this. So I think that comes across and is really important. And the final piece, I think that comes across really strongly and Nick mentioned this is this new geography, this new economics, is that actually that the role that developing countries are going to play in this story comes across very strongly. So back in 20 years ago, we talked a lot about developing countries as being aid recipients. We need to think about how do we support them. But now, again, it's a shift towards actually these will be engines of growth, these countries, and they are rich. They are rich in natural capital, they are rich in critical minerals, they are rich in people and skills. So how do we work with, work globally in cooperation to drive progress? So those are three points that I wanted to make. And just a final one, just a reflection in pulling out this analysis. Last night, looking at an old PDF of the Stern Review and tried to find this PDF, which is quite hard to find a PDF of the original Stern Review, but I did manage to find it. You find the thousands of papers that have been written about The Stern review thousand. This review that was done 20 years ago has catalyzed this whole new economics of thinking about these issues. And I really want to thank Nick for that huge leadership this, this whole new economics that has come out of this work. So thank.
- [50:20]
B
You, Dimitri, to overview.
- [50:31]
E
Thank you, Susanna. Good evening, everyone. So I thought I would start. I mean, it's very unlikely after two fantastic speeches, talks, discussions that anyone here is falling asleep. But nevertheless, I want to try and rouse you with a poll. I want to see a show of hands amongst the audience, amongst those who think the world as a whole will not, will not achieve net zero, who thinks the world Will not achieve net zero. Don't be shy. Your hands. Good question. Bright by when is a critical question. Those of you who put your hands on unfortunately, unfortunately fell for the trick question because you're all wrong. And I say this not out of a matter of eco evangelism or hubris. It's simply a statement of the science. These greenhouse gases, they sit in the atmosphere for tens, maybe hundreds of years. And it's the stock of greenhouse gases, not the annual emissions. It's the stock of greenhouse gases that correspond to the temperature we are likely to stabilize at. And if you want to stabilize a stock, whether it's a bathtub or a reservoir or the global carbon stock, you need to get inflows to equal outflows. And that means essentially net zero. Now, we either do this the easy way by managing that transition and doing it quickly so the world stabilizes at a stock that we consider more or less safe, or we do this the hard way by allowing nature to create such a hostile climate that we deindustrialize and depopulate the planet. But what we're not going to to have is people sitting in rooms like this forever talking about it whilst the global temperature goes up and up and up. And that, I think, sometimes sobers the mind a little bit, the fact that we are going to make net zero. But it is within our gift to decide how we do that. And I think Nick's book is critical in showing that many of the technologies that we need in order to achieve net zero have already become competitive with the incumbent fossil fuels. Their costs have fallen like a stone in key sectors like electricity and carbon cars. These are not trivial sectors, okay? Costs have come down very, very quickly at the same time as deployment has gone up very, very quickly. Much faster indeed than anybody expected. It's fashionable now to talk about how slow progress has been, but in fact, if I stood before you 10 years ago and I told you that I thought the cost of solar PVs and battery technologies would fall by about 80 or 90% over the next decade, you would probably see me escorted out of the auditorium by security. These were crazy, crazy, crazy things to say. And no one, and I mean no one, no authoritative body predicted that that would happen. And yet it has. And as Nick's book shows, this is probably just the beginning. We've seen prices fall, we've seen deployment increase. And the two, of course, are related. You would expect something that becomes cheap and competitive to be increasingly deployed. But the more interesting causal link goes the other way. It goes from Deployment, deployment to pricing. And as Nick's book outlines, we have seen immense learning by doing both in the lab, but also in the factory, in distribution and installation and maintenance of these new technologies, which has helped bring the cost down. We have seen economies of scale in these huge factories, these gigafactories, these massive production plants for batteries and EVs in Southern China that reduce the unit cost of any one of these technologies. And we are seeing behavioral and institutional change that moves in lockstep with this. As more people, people have, you know, their neighbors have solar PVs on their roof, you may be more inclined to support a political party that favors renewable energy. As new businesses start to lobby politicians again, you might see a change in policies. Of course, that's not going to happen in a straight line. We're seeing that it's not happening in a straight line, but it is happening. And arguably it is happening faster than we think. So what you have is costs for falling faster than expected, leading to more deployment, leading to faster falls and costs. And that's a reinforcing feedback. And think of any reinforcing feedback. Think of what happens if you put a microphone in front of a speaker, right? What happens? You get rapid and unexpected change. And that's exactly what we are seeing. We are seeing rapid and unexpected change in the development of alternative technologies. To give you an example, the cost of solar PV since it was first deployed for commercial satellite technologies in the US in the 1950s, has fallen by 99.9%. Not a trivial amount, you may argue. What would you think the costs of burning in terms of generating a therm or a BCU or a joule of energy, final energy? What would you expect the costs of burning coal or gas to have done over that same period? Well, to the important, to the closest approximation, it's done zilch. It has not fallen one iota. Now, that may surprise you, right? Surely we burn these things way more efficiently than we did in the 1950s. Yes, we do. But we employ one vital commodity in an extractive economy that is increasingly expensive and that is labor. If you want to get more oil out of the country ground, you need to employ a lot of people to dig it up or to pump it up, to put it in pipes and ships and transport and trains and transport it across the world, to refine it, to get it into vehicles, to get it into energy generating plants. And then you've got to go and do it all again because you burnt the stuff. You've got to go and burn it again, okay? You face diminishing returns to scale, which is completely different to the increasing returns to scale that Nick's book outlines for some of these renewable technologies, not all technologies, but certainly the ones that are modular, that are replicable, that are scalable, the kind of stuff that falls off a production line. It is falling off a production line in southern China. Now, that's not going to happen for free. It requires investment. It requires, in particular, investment in the grid. Any one of you who's on Dieter Helm's mailing list will know that that doesn't come for free. But it is an important part of the investment, and the returns more than outweigh that investment, as strategic decision makers in China and elsewhere are finding. It's important here that we see the wood from the trees. There will be disruption. There will be investment. That's inevitable, an inevitable part of structural change. It requires, as Nick says, action to kickstart the economy. To kind of coin a phrase from Acemoglu and Aghion, you need to kickstart the green transition. It requires a change in the way we as economists think, moving from models that are focused on static optimization and unique equilibrium. I feel I can say these terms in a room at the lsc. Both Nick and I have got papers coming up in the next edition of the Oxford Review on Economic Policy that talk precisely about this, talk about dynamics. And it requires for policymakers and businesses a need to move to recognize the presence of path dependencies and multiple equilibria from a practical perspective, as meaning that you need strategic leadership to kickstart that kind of change. These economies. Sorry, these technologies, these changes in behavior, they're not going to happen as manna from heaven. They're going to require concerted action for policymakers. As Nick says, just carbon pricing, that's not going to do the trick. You need strategic thinking and you need directed investment. Carbon pricing on its own would just lead to a very efficient fossil fuel system. Directed investment will allow you to get over the hump and of the technologies that don't start cheap but have the potential to radically change the world. So I think, to conclude, I think this book, Nick's book, is a fantastic book. He said, yes, we can. And I think what he's doing there, and I'm going to borrow the phrase from Paul Romer, is he's applying conditional optimism, which is to say, if we just sit back and expect the technologies and the behaviors to change in order to deliver net zero, we're going to fry the planet. And we're not going to deliver the kind of economy we want. But if we take action now, if we spend less time trying to fruitlessly forecast the future and more time trying to steer and design and build that future, then we're in a very strong position to deliver an economy that's not only cleaner, quieter, safer and more secure, but also actually more innovative, more efficient and more productive. And that's why he talks about a growth plan for the 21st century. Thank you very much.
- [59:20]
B
Thank you so much, Nick, for the fantastic presentation and Nicola and Dimitri for your fantastic comments. And I had a question, but I think given the time, I'm going to go straight to the audience. So any questions from the audience? I'm going to ask questions in groups of three. So in the middle there, the woman with the pink.
- [59:45]
E
I just showed that.
- [59:49]
B
Yeah.
- [59:51]
E
What's the insurance industry?
- [59:53]
B
Sorry, can we go first to the person at the back? Yeah, yeah. Wait for the microphone to come to you, please, please keep the questions short and identify yourself. Name and institution affiliation, please.
- [60:06]
F
Thanks so much. My name's Flo. I'm a policymaker. Found the optimism in your talk, Professor Stern, to be really inspiring. And the policy solutions that you've kind of outlined on the slides as well, like, really helpful way of looking at government support. But how do we act in the current political context, which only seems to be getting more difficult both here in the UK, but also, as you kind of alluded to, globally.
- [60:41]
B
The woman in front with the white. Hi.
- [60:47]
G
First of all, thank you so much. You have all been brilliant tonight. My name is Vera and I work with Startup Coalition. So it really warmed my heart to see how much innovation and clean technology was mentioned. Do you believe that the current labor government is doing enough to incentivize and encourage these clean tech technologies? Because from what we're hearing from startups tops is that they're currently being alienated and is not doing enough in that space.
- [61:14]
F
Thank you.
- [61:14]
B
Thank you. And final question here at the front.
- [61:19]
H
Nick Gowing. From the thinking, the unthinkable operation. Let me challenge you on communication. You're facing a war now on disinformation, misinformation. And they are well funded and they're determined to crush much of what you've said here. Nick, you and I have talked about this many times before, but it's getting worse. It is a war. And I'm just wondering what you can do now to confront what you call lukewarmism. In other words, you are facing an indifference almost to the positive language you've used. You talk about flawed arguments being deployed against the science. You highlight confusions and misdirections. You're in a communications war and the science is being discredited at the moment. So how do you win that argument, particularly with governments, since focusing on the.
- [62:08]
B
Difficulties how to act in the current political system? Is the Labour government doing enough? And misinformation and lukewarmness. Do you want to comment, Nick? Do you want to start?
- [62:19]
C
Let me start. And I hope that Dimitri and Nicola will pitch in Nick Gowing's question at the end. The first part of my answer, and it's not entirely facetious, is that I talked to Nick Gowing and many of you will know that he was a very effective presenter, explainer, discussing person on BBC for a long time and thinking the unthinkable. I encourage you to go to that website. I think we. Let me just say one or two. There's no complete answer to your question, Nick, and you know that. But let me just point to one or two things. When we first started on the Stern Review, I called Danny Kahneman, who's, you know, sadly, Danny's died now, but he. The great sort of psychologist, economist and one of the world's great pessimists. And I said, danny, how, you know, the argument is already pretty obvious to us, but how do we take it out there? And he said, it matters enormously who is saying it. And I draw your attention to Pope Francis, who was extremely good at this. If we destroy creation, then creation destroys us. I have a problem with creation, but you can see exactly what he means. And it was very effective communication. He said that God always forgives, people sometimes forgive and nature never forgives. It's getting across things in a simple way as possible from the right person or the right people. And I think that's a big part of the story. And Pope Leo has started off pretty well. You've probably guessed I'm not a Catholic, but these, that kind of communication is enormously important. We at universities have a duty to really kick the arguments, create the arguments, test the arguments. Now, you can't beat irrationality with rationality all the time, but you can try. And I think our task is to develop analytically the logical arguments and to take them out there. But we do have to work with great communicators and that is part of the story. Next, we have to fight. We have to spend some time exposing the rubbish and exposing who it's coming from. And Naomi Oreskes, professor of the history of science at Harvard, did her splendid book with Conway, the merchants of doubt. So one part of the story is to show who's doing it, show their self interest and take their arguments on directly. I'm not going to say that this is a complete solution, but it's got to be concentrating on the simplicity of the message. Who, who gives the message, the rationality of the argument and exposing the malicious and the completely mistaken. We look for your help, Nick. And we're going to the Global School of Sustainability. Have a program in the coming years exactly on misinformation and disinformation. But it ain't easy and we're naive if we say we can win on this recipe. But it would be derelict to give up on a really strong focus on how we best communicate, how to act in the current political environment. I still think that we've got a chance in many countries of really taking out the message if you want to grow. I mean, we've had a world, particularly since the global financial crisis, that's had weak investment and weak productivity growth. If you want to grow, this is the best way to do it. India wants to be a developed country. It's Vixit Bharat, the developed India. In the 100th anniversary of independence in 2047. That is a story where we can collaborate, where we can be involved, we can be supportive. It will be India that makes a plan, but we can, as a university, we can be supportive. And what's the point in getting to 2047 where on current measures you sort of made it, when you've actually in the process created an unsustainable world and it ain't going to last very long. So I think those are the kinds of ways in which we can make the arguments through action and through giving examples, through supporting the positive. But particularly at the moment, moment we have to show that that growth story can be a reality. And in terms of the practicalities of next elections, I think it's very important that the Labour government, and this is a partial answer to the second question, that the Labour government brings down the cost of electricity before the next election. We've banged on for a very long time, correctly, I believe that the clean is cheaper than the dirty. People don't yet see it. Why don't they see it? Because we have very strange electric market where everything is priced off gas and we have a notion of marginal cost, which is very short run marginal cost, when we should be thinking of the marginal cost over a medium term, taking into account capacity and so on. But we have to bring down the cost of electricity. Not particularly keen on bringing down the cost of gas, but we have to bring down the cost of electricity before the next election. And that together with the growth story would be the biggest message I'd give to the labor government. Are they doing enough? No. Could they? Yes, they could.
- [68:44]
G
Thank you, Nick.
- [68:45]
B
Do you want to add anything to.
- [68:46]
F
These or shall I ask three more questions?
- [68:48]
E
I'm very happy to. I mean, look, it's just worth saying straight away that narratives and psychology are a critical part of that reinforcing feedback I talked about before. You know, if you tell a politician or a business person or an investor that this is all prohibitively expensive and it's not going to happen, and the finance is niche and all the rest of it, they're unlikely to invest in these clean technologies. I said in the past that some of the bad economics that we see around here is an example of economists not only getting the future wrong, but they're also making the future wrong. Because the extent that they're believed, they stop the very deployment that is necessary to bring the cost down. Because to some extent, if you convince people this is going to work, it becomes a self fulfilling prophecy. Obviously the technology and the economics actually has to work, otherwise it's a massive Ponzi scheme, but lo and behold, it does. So I think that's critical in terms. Yeah.
- [69:43]
C
You quoted Philippe Aguillon, Daron Azemoglu as people who are.
- [69:47]
E
Sure, absolutely, yeah. And I mean, there's a rich cadre, increasingly large actually, that recognizes that this is about risk and opportunity and dynamics rather than narrow cost benefit analysis. In terms of communication, I think, you know, there are so many elements to this story. I mean, Nick talked about health, others talk about energy security, we talk about climate, we talk about growth, we talk about better, you know, livable cities, that sometimes when we try and communicate all this, we sound like slightly kind of hyperactive, you know, school children trying to explain why they lost their homework. There are just too many good arguments. And I think from the perspective of clear communication, I think we should just bring it down to two. One is the climate risks. People care about the climate and these risks are growing and they're looking more and more terrifying. But we don't want to get a sort of derailment response where people kind of almost feel they've lost all agency because this is bigger than their ability to manage it. So then you want a story of opportunity and self interest. And that's, I think, where we've moved from talking about burden sharing. We've all got to chip in and do our bit for future generations. Which of course leads to the tragedy of the commons and free riding to something that says, actually, no, you can all get something out of this and you can all get something out of this in a relatively short space of time, maybe within the next five years or so. And if you want an example of how we've got this wrong, you need to look no further than the European car industry, which for years has said it's too soon to deploy electric vehicles. It's too soon, it's too soon, it's too soon. And then they wake up one morning and lo and behold, it's too late, the Chinese have eaten their lunch. We don't want to keep going down that route. I think we need to start thinking more strategically and probably proactively.
- [71:33]
D
Just a brief point on communication. One is, I don't think the war footing narrative is the right one. I know it feels hard sometimes, but how do we deal with this? How do we deal with bullies? How do we deal with difficult narratives? I go back to our friend and we were here last week with a Nobel Prize winner in a Nobel priest prize, going back to Michelle Obama. When they go low, we go high. So we have to keep the narrative positive and we have to, I think, realize that actually the public is still is understanding it. The public want this transition. Surveys have shown that they want clean energy, they want renewables, they want investment in nature. So actually, I think it's not a war. We need to communicate positively and then we need to communicate on the issues that people care about and in the language that they care about. And a lot of what we've talked about here in that language is, is very. The language of economics is to convince ministries of finance and financial institutions that this is important to them. But, you know, communicating to people in the public, something else might be is what the way we need to communicate, it's about people, it's about their health, it's about their livelihoods, it's about, you know, their feelings of their connection to nature. All of these things are important. So I think we just need to be much smarter, I think, in how we communicate, but also really address those key issues. Because there are big questions, these are difficult questions. And our role as academics is to provide them the evidence that they need.
- [73:06]
B
Thank you. Nicola Maria, can you give me two online questions, please?
- [73:11]
I
Very much. These are questions from online. So from Ashfaq Kalfan in discussions on climate Bill gates recent memo 3 truths about climate change has been unfortunately unavoidable he argues that in the context of limited resources, we should focus on improving lives rather than focusing relentlessly on temporary temperature. Interestingly, his note does not include the term tipping points. What's your take on this note? That's the first question. And the second one from Niti Sabnani, LSE alumni. What are your recommendations to solve the not fast enough problem? How do we prioritize investment allocation to all these various dimensions of climate action where each one requires investment acceleration?
- [73:53]
B
Thank you very much. So, comments on Bill Gates recent narrative and prioritization of investment.
- [74:01]
C
I didn't think it was a great piece, but I think the headlines were stronger. Actually, if you read it carefully, the headlines were excessively strong in highlighting what was just said in that question relative to what was really in that. And there's one key thing which is absolutely critical. Bill has been a great man in terms of the contributions he's made to health and development. One of the great people of our generation. And what he works for would be, if you run this through to 20, what he works for would be thoroughly undermined by being reckless with the climate. It would actually destroy what he's trying to do. So when you think of the Sustainable Development Goals, which are quite rightly about health and education and gender issues and how we collaborate and what our cities look like and so on, when you look at those development goals, we're not saying that the environmental development goals are in some moral sense more important than the others. I tried very hard to say that these climate actions are nested in the Sustainable Development Goals. But what we are saying is that if you look at the logic of the physics and the biology of our earth as a system, if we destroy now or we don't move fast enough now, we will undermine everything else. So there's a temporal scientific sense in which that priority is critical. And I think that Bill underestimated that. Not fast enough. Well, I think we've been trying for the last hour or so on the policies to speed things up, but perhaps Dmitry or Nikola.
- [76:08]
E
I mean, yes, the Bill Gates reminiscent, a little bit of the old Beyond Lomborg argument that you either go for development or you go for climate. Of course, course the two are hugely, I mean, more than hugely interlinked. One is a necessary condition for the other. On investment, we talked about the potential policies to bring it about. We talked about its importance. We know that investment right now at a time when governments worldwide in particular are facing fiscal constraints. But we need strategic thinking and strategic, strategic leadership from government for all the reasons that Nick gave that we need to be very kind of creative and think about how we do that. And there are some recommendations in Nick's book on how you do that. And we have examples from China about how strategic decisions and public funds were put into certain sectors that are now generating huge returns. Sure. China maybe doesn't have to kind of deal with the sort of piffling inconveniences of democracy to the same extent that we do. And also there's a lot of wasted investment in China. We know that as well. But I suspect that almost all that wasted investment is more than matched by the massive returns made in China from leading both the clean transition and also the digital transition. Because as Sam Altman said the other week, the cost of AI is going to converge on the cost of energy because of all the compute, because of all the data storage. Who's going to have the cheapest energy? It's going to be China, because they're investing in renewables and they're investing in electricity. So there are already examples of how that investment.
- [77:45]
C
Africa. Right?
- [77:45]
E
It could be Africa. They could leapfrog us altogether. It's less and less likely to be America for all the reasons that we know about. So, you know, investment can happen. It doesn't have to be, you know, it doesn't have to come primarily. It won't come primarily from government. And I think one of the things we can look at when I talk, when we talk about how these costs of these key technologies have come down is the degree to which we've got so far on so little policy action. Just imagine what we could have got if we'd really sunk serious resources into making this transition. We should be doing this whether you give two hoots about the climate or not. It tells us something about the inertia and the legacy and the political economy in the system. Ultimately, this is not a technological problem, it's not an economic problem. It's a cultural, political and institutional problem.
- [78:38]
B
Okay, I just have one more question and it has to be very quick. Two more questions, but quick answers and quick questions. Gentleman here at the front with yellow shirt.
- [78:50]
C
Excuse me.
- [78:50]
J
Hi, my name's Ken Penton. I'm a Labour Party environment, a climate campaigner. So I focus on the one issue. What's the role, do you see in policy and regulation on the supply side of fossil fuels? What's the balance and the trade off? Because if you've got countries and companies with what they think is an asset and they want to sell them, then they'll maintain and create markets for them versus what we know we need to do on the energy transition. What do you see that for the UK, but also at the global level in next 5, 10 years as the priorities?
- [79:36]
B
The woman over there, just in black. Yeah.
- [79:40]
G
Inspiring discussion. Thank you very much, Fatima. I graduated from the Department of Geography and Environment at the LSE two years ago and I've been working in sustainability consulting since so 2015. What we saw is climate gained center stage and rightly so. But what that did was us taking this approach that is a very tunnel visioned approach where we pursue decarbonization at the cost of nature and social consideration. Sometimes you saw that through, for example, carbon forestry projects having negative impacts on nature, dispossession of livelihoods and people. And that's because the right incentive structures are not in place. Right. So I know this a very, the question, a very unfair one, is what are the minimum essentials for ensuring the right incentive structures are in place so the triple planetary crisis is treated as such and we don't pursue fragmented solutions. Thank you.
- [80:43]
B
So, questions on policy. Policy for fossil fuels, for nature.
- [80:48]
C
Let me try the first one. Nicola, you want to try second the. I mean carbon pricing really does matter. I mean it was top of my list of market failures and of course that, that helps. I think I use the language where I can. I use the language standards rather than regulation. Nobody wants to be a regulation. But do you really want low standards? No, of course not. We want high standards. So the, it's a much better, it's a much better word and it means a lot. I mean standards on emissions. We're now in a city which thankfully has the Ulez, the low ultra low emission zone. So standards I think matter enormously as well. So it's partly policy, partly regulation and standards. And that's both on the supply side and the demand side. Emissions from vehicles are in the sort of the use side. But of course there's also the question of licenses for extraction and so on. And there's much more labor and employment opportunities in the new ways of doing things than in the old. And we've discovered far more fossil fuels already than we could possibly burn for any serious climate and biodiversity targets. So I think it's a combination of the prices, the standards and regulation on both sides of the market and crucially investment. I mean we have to invest big time in the grid and fortunately we have long sighted people running our grids who are doing exactly that. And they're borrowing tens of billions and doing that very long term, over 30 or 40 years, at quite low interest rates in charging the customer the cost of capital spread out over that long distance, whereas other parts of the energy pricing system don't do that. So investment and sensible pricing, I think are a big part of the public policy story as well. I think Ed Miliband gets all this.
- [83:06]
D
Actually, to respond briefly on the nature question and carbon markets I think you were particularly asking about. So one of the things that comes across really strongly in the book is actually the mentions of climate versus sustainability changes as well. So it's very much a reframing to we need to think about sustainability in a much more holistic way. And if you look at the planetary boundaries approach, nine planetary boundaries, only one of them is actually climate change. And actually from my perspective, as someone that comes from a scientific background, some of those other eight are really scary, actually. I think the fact that we've set up a number of policies that at the moment are only accounting for one of those challenges, but could be having trade offs of the others, I think is something that we're only really realizing in the last last five, 10 years. And certainly on the carbon market side specifically, what I would really love to see is that actually what we did on carbon going back 20 years ago, we start now to do on nature. So Nick's book also talks about the important roles of the MDBs, the development banks. They did a lot to set up early carbon markets back 20 years ago. What we need to see now is them doing much more in these areas that are not priced where we don't have markets, we have carbon markets now. So really focusing on these other areas of public goods market failures where the development banks need to do more. So that's just one example of what I think needs to happen.
- [84:37]
E
Can I add very quickly on natural capital? One of the things that I was tasked with doing when I joined the Bennett Institute was a small team on measuring natural and indeed social capital. We worked with the World bank, we worked with the UN system of natural account to try and bring those kinds of assets into the wealth accounts. And of course it's not easy, that's why they're not there. But you have to start somewhere and some numbers are better than others. Statistics, to an extent, are the lens through which we see things. So unless we have an inkling of the quantities and the magnitudes, it's very difficult to manage the problem. In particular, if you've got something which is prone to irreversible tipping points like forests or fisheries, you really ought to know whether the stock is going up, up or down in order to make an assessment of whether you're managing that capital effectively. So I think a lot more investment, a lot more energy could be put into better measurements and monitoring of natural capital.
- [85:33]
B
Thank you so much and unfortunately we've run out of time. Thank you so much, Nick for the most inspiring talk and sharing the book with us. Thank you, Nicola. Thank you Dmitry for the fantastic comments. Thank you all of us for being here and for the questions that you ask and for all our online audience as well. The book is outside. For those of you who would like to have a copy, please have a look. And thank you very much. Let's thank our panelists.
- [86:23]
A
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