Climate change analysis 'one-sided'

Treasury assessments of the costs of climate change policies fail to take account of the economic and health benefits of cutting emissions, it has been claimed.

Academics have said the current analysis model of the economic benefits of climate change are 'one-sided'
Academics have said the current analysis model of the economic benefits of climate change are 'one-sided'

Economic modelling carried out for the Treasury by HM Revenue and Customs (HMRC) ignores the financial impacts of climate change, such as the flooding that damaged the UK earlier this year.

It also fails to include the potential for creating new jobs in industries such as offshore wind, and the economic and health benefits of tackling emissions, including reduced illness from air pollution, according to analysis by Harvard economist Dr Frank Ackerman.

Campaigners warned the "one-sided" modelling was influencing ministers to water down targets for cutting emissions in the 2020s.

The model from HMRC finds the targets in the fourth carbon budget, which limits the UK's emissions between 2023-27, would reduce economic output compared to weaker goals, a ccording to the report by Dr Ackerman and Joseph Daniel of US-based Synapse Energy Economics.

But simply including conservative figures for the benefits of reducing air pollution wipes out the apparent loss, the analysis claims.

The "computable general equilibrium" (CGE) model, developed for analysing changes to tax policy and recently applied to climate change policies, is not designed to calculate potential employment benefits of public policies, but assumes that everyone already has a job, the report said.

It is also not designed to evaluate health and environmental benefits, calculating only the costs of the policy.

And it focuses only on the UK economy, as if the country is acting alone to cut carbon, the report said.

Dr Ackerman said: "Rapid reduction in carbon emissions will improve public health, create new jobs, and help launch promising new industries and technologies.

"An approach that ignores all these benefits - as the HMRC CGE model does - is sure to misunderstand the real economics of climate policy.

"A person who chooses to wear a blindfold will often report that there is nothing to see, but this tells us more about the viewer than his surroundings.

"The same is true for economic approaches that are blindfolded by their own assumptions, unable to see that they are surrounded by multiple good reasons for a proactive response to the threat of climate change."

Friends of the Earth Economics Campaigner David Powell said: "This report lifts the lid on the Treasury's secretive economic modelling on climate change and shows that it's riddled with flaws and worrying omissions.

"The one-sided model focuses disproportionately on the costs of developing a low-carbon future, while downplaying or overlooking key benefits - and completely ignores the damaging impacts of climate change on our economy.

"That's like moaning about the cost of building a new hospital without considering the benefit of saving lives.

"David Cameron mustn't allow his Chancellor to point to skewed economic models to help torpedo crucial efforts to put the UK in the forefront of tackling climate change."

WWF Head of Energy and Climate Policy Nick Molho added: "Tackling climate change means less risk of the kind of devastating floods that hit the UK earlier this year as well as reducing dangerous air pollution from burning fossil fuels.

"A model which purports to say anything about the economic impacts of tackling climate change and yet ignores the benefits of protecting our environment and our health is quite clearly very problematic."

An HM Treasury spokesman said: " The Government uses the best modelling available, and the impact assessment for the fourth carbon budget uses a range of approaches, clearly setting out the limitations of each.

"Under the fourth carbon budget, government will aim to reduce emissions domestically as far as practical and affordable."