The "Stern Review" on the Economics of Climate Change
How much and how fast should the globe reduce greenhouse-gas emissions? How should nations balance the costs of the reductions against the damages and dangers of climate change? This question has been addressed by the recent "Stern Review on the Economics of Climate Change," which answers these questions clearly and unambiguously. We need urgent, sharp, and immediate reductions in greenhouse-gas emissions. An analysis of the "Stern Review" finds that these recommendations depend decisively on the assumption of a near-zero social discount rate. The Review's unambiguous conclusions about the need for extreme immediate action will not survive the substitution of discounting assumptions that are consistent with today's market place.
The author is grateful for helpful comments by Scott Barrett, William Brainard, Partha Dasgupta, Robert Stavins, Nicholas Stern, and John Weyant. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
William D. Nordhaus, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 686-702, September.