There are few business school professors that can say their research has had a real impact on the way ordinary people live their lives. Potentially, Chris Hope is one of them.
A senior lecturer in environmental policy at the Judge Business School at the University of Cambridge in the UK, Prof Hope is the unsung hero who has finally devised a way of calculating the financial cost of global warming.
When the Stern report on global warming was published in the UK at the end of October, it was Prof Hope’s economic modelling skills that had enabled Sir Nicholas Stern, the report’s author, to bring home the seriousness of the situation by combining economics and science.
Prof Hope is disarmingly modest about it all. “At the moment it is nice to know that it has had some impact on the policy,” he says.
It certainly has. At the United Nations Climate Change Conference in Nairobi last November, the Stern report was the topic of the moment – as it has also been at Davos this month. The report, says Prof Hope, was the “crossover – where the research got into the political arena”.
Prof Hope admits his fame has been a long time in coming. He has been working on the economics of climate change and renewable energy sources since he did his PhD at Cambridge in the late 1970s.
“Yes, it has taken a long time to get there,” he acknowledges. “But now it’s there at the right time.”
His work throughout the years has been funded by organisations such as the European Union and Ofgen, the UK’s electricity regulator.
Indeed, it was work funded by Ofgen that led Prof Hope to develop Page 2002 (Policy Analysis of the Greenhouse Effect 2002), which has been the basis for much of the work he has done since and which attracted the Stern researchers.
In particular, the people from the Stern team were interested in the flexibility of the model, which allowed them to input their own data and assumptions and run “what if” scenarios.
“All the work I do is to build in the ability to put in all these ranges,” says Prof Hope. “I think its the only honest way to do it.”
The Stern report estimates that the damage caused by a tonne of carbon dioxide emitted today is $85, using a 0.1 per cent discount rate.
But some hard-line economists prefer to use a higher discount rate that would put a lower price tag today on the cost of the damage.
According to Prof Hope, his model can be used to further this “good academic debate”.
What gives extra weight to the findings of the Stern report, says Prof Hope, is that Sir Nicholas has always been viewed as one of these hard-liners himself.
“He is someone who is viewed as authoritative and part of the establishment but he has taken these numbers [a 0.1 per cent discount rate] on board.”
The question now is what governments will do.
In the UK, the Labour government seems to be heading towards adopting a system of permits – car drivers, for example, would have a carbon credit card which they would have to produce every time they bought petrol. This is in line with much of what is proposed in the European Union.
Prof Hope believes there are easier options. “Because of its simplicity and elegance, I would like to see a carbon tax,” he says. This means, for example, that electricity generated by traditional power stations would attract high levels of tax, so increasing the costs to consumers.
If consumers switched to “green” suppliers because their electricity was less expensive, traditional power suppliers would consider renewable resources in order to survive, he says. “You get rewarded for better behaviour.”
The trick of dealing with global warming, he says, is not to force consumers to worry about their behaviour all the time, but to get taxes to work as part of the everyday economy. He believes individual governments can act independently in selecting the tax option, though he concedes: “It’s good if you can persuade other governments as well”.
The revenues from carbon taxes could be used to reduce other forms of taxation, notably income tax or national insurance contributions in the UK.
By reducing employers’ national insurance contributions – effectively a tax on employing people – he believes the government could increase employment and so develop the economy. “You can save the planet while keeping the economy healthy,” he says.
The bottom line is to have lots of different ways of dealing with global warming: a halt to deforestation; capture of the offending gases; and reduction of emissions through renewable energy sources or even nuclear power. “Climate change is likely to be severe enough that we would not want to rule it [nuclear power] out. We’ve got to work pretty hard to get carbon emissions down.” A true academic, Prof Hope points out that his is not the only tool for pricing carbon dioxide emissions.
Two other models have been developed, one at Yale and the other at the University of Hamburg, with each having different strengths. “We are working in an area which is hugely uncertain,” he says.
“This will carry on being an issue for years to come. We won’t know the cost of carbon dioxide in my lifetime.”
The fact that the dangers of carbon dioxide emissions are now recognised is not the end of the problem, though.
The appropriately named Prof Hope says he can now move on to explore economic modelling for the other greenhouses gases, such as methane.
Disturbingly, these gases account for nearly half the problem of greenhouse gas emissions.
