There is no single issue today nearly so critical to our future and that of all generations to come, as that of global warming. The Stern Report, commissioned by HM Government is reproduced here for the benefit of Journal readers. Despite its twenty-two pages, I appeal to you to peruse it for the facts.
STERN REVIEW: The Economics of Climate Change
The scientific evidence is now overwhelming: climate change presents very serious global risks, and it demands an urgent global response. This independent Review was commissioned by the Chancellor of the Exchequer, reporting to both the Chancellor and to the Prime Minister, as a contribution to assessing the evidence and building understanding of the economics of climate change.
The Review first examines the evidence on the economic impacts of climate change itself, and explores the economics of stabilising greenhouse gases in the atmosphere. The second half of the Review considers the complex policy challenges involved in managing the transition to a low-carbon economy and in ensuring that societies can adapt to the consequences of climate change that can no longer be avoided.
The Review takes an international perspective. Climate change is global in its causes and consequences, and international collective action will be critical in driving an effective, efficient and equitable response on the scale required. This response will require deeper international co-operation in many areas – most notably in creating price signals and markets for carbon, spurring technology research, development and deployment, and promoting adaptation, particularly for developing countries.
Climate change presents a unique challenge for economics: it is the greatest andwidest-ranging market failure ever seen. The economic analysis must therefore be
global, deal with long time horizons, have the economics of risk and uncertainty at
centre stage, and examine the possibility of major, non-marginal change. To meet these requirements, the Review draws on ideas and techniques from most of the important areas of economics, including many recent advances. The benefits of strong, early action on climate change outweigh the costs. The effects of our actions now on future changes in the climate have long lead times.
What we do now can have only a limited effect on the climate over the next 40 or 50 years. On the other hand what we do in the next 10 or 20 years can have a profound effect on the climate in the second half of this century and in the next.
No-one can predict the consequences of climate change with complete certainty; but we now know enough to understand the risks. Mitigation – taking strong action to reduce emissions – must be viewed as an investment, a cost incurred now and in the coming few decades to avoid the risks of very severe consequences in the future. If these investments are made wisely, the costs will be manageable, and there will be awide range of opportunities for growth and development along the way. For this to work well, policy must promote sound market signals, overcome market failures and have equity and risk mitigation at its core. That essentially is the conceptual framework of this Review.
The Review considers the economic costs of the impacts of climate change, and the costs and benefits of action to reduce the emissions of greenhouse gases (GHGs) that cause it, in three different ways: