The Stern Review on the Economics of Climate Change: contents, insights and assessment of the critical debate
20 Feb 2008
Centre National de la Recherche Scientifique and Département Humanités et Sciences Sociales, Ecole Polytechnique, PREG-X Econométrie, UMR 7176, 1 Rue Descartes, 75005 Paris, France
Abstract. Sir Nicholas Stern, former Chief economist of the World Bank, was asked by the British government to lead a review on the economics of global climate change. The Stern Review was published in October 2006 and attracted a great deal of attention from various circles, from academic to NGOs and the media in Europe, but also worldwide. This article aims first to highlight the Review's main points and to single out a selection of the most significant factual data and quantitative evaluations that make up the Review's rich contribution to the subject, going beyond the well-publicised striking results in which the possible damages of climate change are compared to the impact of the two world wars of the 20th century, but lasting forever. The survey concludes with reflections on criticism of the Stern Review made by several economists, mostly in the US, regarding the integrated assessment modelling exercise included in the Review. The most consequential criticisms are related to the low discount rate used to tackle this very long-term issue and the treatment of adaptation of future generations to a new global climate. Paradoxically, the much-attacked choice of a low discount rate chosen to ensure an equal treatment of the utility of all generations is the best-grounded in the utilitarian philosophy that underpins the type of economics that both the Stern Review and most of its critics share.