The Review on the Economics of Climate Change may not be universally accepted in every detail, but it is a key contribution to the great climate change debate.

Nicholas Stern’s report to the UK government on the likely economic impact of climate change has been a seminal contribution to the development of a policy response. It is not universally accepted, but the report and the positive and negative comments that followed its publication provide important insights into the debate on how to respond to changing climates.

The UK government commissioned the “Review on the Economics of Climate Change” in 2005 in order to get an impartial assessment of climatic trends and alternative ways of addressing them. The report was published in October 2006, and remains a much-quoted source not only in Britain but wherever climate change is discussed.

Conclusions of the Stern Review

The 700-page Review accepts the “consensus” view of climate change and its causes as set out by the Intergovernmental Panel on Climate Change (IPCC), and provides a comprehensive discussion and analysis of the costs of climate change itself, and of measures that could be taken either to mitigate or to adapt to its effects.

Stern’s main findings may be summarized as follows:

• If present trends continue, average global temperatures could rise by more than five degrees Centigrade from pre-industrial levels.

• Such a change would have profound consequences, drastically reducing overall global economic growth and destroying the homes and livelihoods of hundreds of millions of people, with particularly damaging outcomes in the poorest countries.

• The cost of measures to avoid the worst impacts of climate change by reducing greenhouse gas emissions can be limited to around one per cent of global GDP each year, provided that action is taken urgently.

• Among other actions, steps to establish “carbon markets” and a common global price of carbon is needed so that people and institutions learn to understand the full environmental costs of their decisions and lifestyles.

• Ultimately, steps taken to establish a “low-carbon” economy will be an enormous benefit to the world economy.

Climate Change Inequities

The report has much to say on the “inequity” of the climate change process. Its effects will strike first and hardest on the poorest countries, which are the least responsible for the problem and the least able to pay for its consequences.

Therefore Stern lays most of the responsibility for dealing with climate change at the door of the developed countries. In comments since the Review was published he has said the developed countries, especially the US, will need to cut emissions by 80 percent by 2050 if total global emissions are to stabilize quickly enough, at 50 percent below 1990 levels, to avoid a potential planetary catastrophe.

Positive and Negative Comments on the Stern Review

Many political and academic leaders have welcomed the Stern Review while others have sharply criticized both its methods and conclusions. Put simply, the skeptics believe there are so many uncertainties with the science of climate change that over-hasty actions and substantial expenditures to combat it are not justified and could result in an enormous waste of resources.

And some have attacked Stern’s analytical methods, especially concerning the rate at which the Review discounts costs associated with climate change that are expected to be incurred in the relatively distant future. Alternative methods of calculation suggest the massive expenditures envisaged would not be justified by any savings they are likely to bring later.

Significance of the Stern Review

The more considered positive comments suggest that even though there may be scientific uncertainties and questions over Stern’s analytical methods, the apparent dangers of continuing with “business as usual” are so great that doing nothing would be reckless.

The Stern Review’s final place in the history of the great climate change debate remains to be seen. But for the time being it is a key document. It has already had a massive influence on UK climate change policy and it will play a central role in on-going negotiations for a successor to the current Kyoto Protocol. The Review’s long-term significance will depend on how its findings are received in the wider world, and particularly in the US.