The Economics of Climate Change
The Stern Review The Review, which reports to the Prime Minister and Chancellor, was commissioned by the Chancellor in July 2005 It has been carried out by Sir Nicholas Stern, Head of the Government Economic Service and former World Bank Chief Economist. Sir Nicholas said: “The conclusion of the Review is essentially optimistic. There is still time to avoid the worst impacts of climate change, if we act now and act internationally. Governments, businesses and individuals all need to work together to respond to the challenge. Strong, deliberate policy choices by governments are essential to motivate change. But the task is urgent. Delaying action, even by a decade or two, will take us into dangerous territory. We must not let this window of opportunity close.” The first half of the Review focuses on the impacts and risks arising from uncontrolled climate change, and on the costs and opportunities associated with action to tackle it. A sound understanding of the economics of risk is critical here. The Review emphasises that economic models over timescales of centuries do not offer precise forecasts – but they are an important way to illustrate the scale of effects we might see. The second half of the Review examines the national and international policy challenges of moving to a low-carbon global economy. Climate change is the greatest market failure the world has seen. Three elements of policy are required for an effective response.
Effective action requires a global policy response, guided by a common international understanding of the long-term goals for climate policy and strong frameworks for co-operation. Key elements of future international frameworks should include:
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The Stern Review
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