20 years on, Stern's climate economics case holds — SkimNews
Get the Energy newsletter
Daily energy & climate — solar, EVs, oil, the policy fights and tech bets shaping the transition. Free.
- The Economics of Climate Change — the 700-page review Stern published 20 years ago this week — set out three then-radical conclusions: the costs of climate inaction exceeded the costs of action, the climate crisis was a market failure, and economic growth was compatible with cutting greenhouse gas emissions.
- Stern argued that future generations have as much right to be born as those alive, and rejected the discount rate that makes future lives and future losses look less valuable — the ethical point Harvey says eluded economists defending standard Treasury forecasting methods.
- Stern's analysis has been found sound over the two decades since; if anything, he underestimated the rapidity of heating and its economic consequences, and overestimated the cost of renewable energy.
- Nordhaus recommended in the early 1990s that countries budget for “moderate” global heating of about 3C to 4C above preindustrial levels, because below that the cost of cutting greenhouse gas emissions would outweigh the damage — work resting on the same discounting Stern challenged.
- Nordhaus's 2018 paper claimed 3C heating would reduce global GDP by just 2.1% and a 6C increase by just 8.5%, while climate scientists said 6C could bring widespread famine leaving billions of people dead.
- Nordhaus received the 2018 Nobel prize with his climate work prominent in the citation and prize lecture, and hundreds of universities still train economists in the traditional growth models he used.
- Stern said a re-do of the review would put more emphasis on nature, calling the collapse of biodiversity a key economic and national security threat that has been grossly underestimated and neglected.
Why it matters: Governments can now justify bold climate strategies to investors and bond markets, yet Nordhaus's 2018 estimate that 3C warming costs only 2.1% of global GDP remains in use among governments, businesses and international institutions, even though Stern says he underestimated warming's speed and its economic cost.
Ask SkimNews
