Stern Review on the Economics of Climate Change

This November 2006 report, considered by many to be the most comprehensive review ever carried out on the economics of climate change, has been both cheered and jeered. The Review, which reports to the Prime Minister and Chancellor, focuses on the impacts and risks arising from uncontrolled climate change, and on the costs and opportunities associated with action to tackle it. It emphasizes that economic models over timescales of centuries do not offer precise forecasts – but they are an important way to illustrate the scale of effects we might see.

The Review finds that all countries will be affected by climate change, but it is the poorest countries that will suffer earliest and most. Unabated climate change risks raising average temperatures by over 5°C from pre-industrial levels. Such changes would transform the physical geography of our planet, as well as the human geography – how and where we live our lives.? ?Adding up the costs of a narrow range of the effects, based on the assessment of the science carried out by the Intergovernmental Panel on Climate Change in 2001, the Review calculates that the dangers of unabated climate change would be equivalent to at least 5% of GDP each year.

In contrast, the costs of action to reduce greenhouse gas emissions to avoid the worst impacts of climate change can be limited to around 1% of global GDP each year. People would pay a little more for carbon-intensive goods, but our economies could continue to grow strongly.