stern_050307 - The Stern Review on the Economics of Climate...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
The Stern Review on the Economics of Climate Change 1 William Nordhaus May 3, 2007 Abstract How much and how fast should we react to the threat of global warming? The Stern Review argues that the damages from climate change are large, and that nations should undertake sharp and immediate reductions in greenhouse-gas emissions. An examination of the Review’s radical revision of the economics of climate change finds, however, that it depends decisively on the assumption of a near-zero time discount rate combined with a specific utility function. The Review’s unambiguous conclusions about the need for extreme immediate action will not survive the substitution of assumptions that are consistent with today’s marketplace real interest rates and savings rates. 1 The author is grateful for helpful comments to early drafts by Scott Barrett, William Brainard, Partha Dasgupta, Peter Diamond, Gilbert Metcalf, Chris Hope, Jeff Shafer, Robert Stavins, T. N. Srinivasan, Nicholas Stern, Richard Tol, Martin Weitzman, John Weyant, Gary Yohe, and the Editor. 1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
I. Opposite ends of the globe It appears that no two places on earth are further apart on global warming policies than the White House and 10 Downing Street. In 2001, President G.W. Bush announced his opposition to binding constraints on greenhouse gas (GHG) emissions. In his letter of opposition, he stated, “I oppose the Kyoto Protocol because it exempts 80 percent of the world, including major population centers such as China and India, from compliance, and would cause serious harm to the U.S. economy.” This policy, much like the war in Iraq, was undertaken with no discernible economic analysis. 2 In stark contrast, the British government in November 2006 presented a comprehensive new study, the Stern Review on the Economics of Climate Change (hereafter the Review) . 3 Prime Minister Tony Blair painted a dark picture for 2 George Bush [2001]. There is no record of a fact sheet or other economic analysis accompanying the letter. The Bush Administration’s economic analysis was contained in the Economic Report of the President and the Council of Economic Advisers [2002], Chapter 6, published almost a year after President Bush’s letter to the Senators. The Economic Report’s analysis suggests that the Kyoto Protocol is costly, but its analysis does not show that binding action is economically unwarranted. 3 The printed version is Nicholas Stern [2007]. Also, see the electronic edition at that reference. It is assumed that the printed version is the report of record, and all citations are to the printed version. The printed version contains a “Postscript” which is in part a response to the early critics, including a response to the November 17, 2006 draft of this review. 2
Background image of page 2
the globe at its unveiling, “It is not in doubt that if the science is right, the consequences for our planet are literally disastrous…. [W]ithout radical international measures to reduce carbon emissions within the next 10 to 15 years, there is compelling evidence to suggest we might lose the chance to control temperature rises.”
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 40

stern_050307 - The Stern Review on the Economics of Climate...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online