A Critique of the Stern Report

Economists usually present a rather gloomy view of climate change. They argue that efficient policies should only slow climate change this century, not stop it. Aggressive near-term policies lead to abatement costs that outweigh the avoided future climate damages. Strict abatement policies should be delayed into the future as damages increase. Only modest control programs are warranted in the near term.

The recently released Stern Review on the Economics of Climate Change, better known as the Stern Report, provides a much more upbeat view of the economics of climate change. Looking far out into the future, the report argues that if society were to put some muscle into solving this problem now, we could not only avoid a looming environmental catastrophe,but do so at a relatively modest cost. Immediate aggressive regulation would stimulate rapid technological improvements that would lead to ever-increasing reductions in emissions at virtually no additional cost. The reductions would be enough to stabilize greenhouse gases at 550 parts per million of carbon dioxide equivalents, thereby limiting long-term warming to 2ºC–3ºC and effectively ending global warming as a problem as early as the year 2050. Best of all, it would only cost 1 percent of income.