LAUNCHED ON 30 OCTOBER 2006, the Stern Review on the Economics of Climate Change has received attention in academic, political, and popular circles worldwide, possibly unprecedented for a government report of its kind.1 The Review was set up to provide the U.K. prime minister and chancellor with a wide-ranging and comprehensive economic assessment of climate change, and was led by Sir Nicholas Stern, adviser to the U.K. government on the economics of climate change and development, head of the U.K. Government Economic Service, and, among other things, a former chief economist for the World Bank. Now nearly 700 pages long, the Review contains a tremendous volume of analysis on all aspects of climate change economics and policy, including the consequences of business-as-usual greenhouse gas (GHG) emissions, as well as the costs, benefits, and design of policies to reduce these emissions and adapt to climate change that cannot be avoided. It has become best known for the conclusion that, unabated, climate change could eventually have impacts on global economic growth and human development on a scale comparable to the great wars and economic depression of the twentieth century. The Report also found that these impacts can still largely be avoided by a decisive shift away from production of GHGs, a shift which can be achieved with far less cost than we will incur if nothing is done.
While this will come as no surprise to many, the Review sounds a different note to most previous economic analyses despite using the same models as these previous studies. The Review's prescriptions are based on two foundations. One is a strong ethical commitment to safeguarding opportunities for future generations. This commitment is made in the way the Review discounts the future, that is, in the way it calculates the value in todays money of the impacts of climate change in the future. Economists are familiar with the concept that money is worth more today than it is in the future, so a high "discount rate" can make the future costs of climate change seem very small indeed. The second foundation is an acknowledgement of the uncertainties associated with climate change. We must entertain the prospect of huge changes in physical and human geography, even if they make the practices of economic analysis and policy making more difficult. Such changes could have tremendous impacts on the international economy, in particular as a result of the distribution of impacts between North and South and the potential for global security threats through migration and violent conflict. While it is difficult to quantitatively determine the harm that each of these individual problems might cause, there is certainly basis for acting to prevent or minimize climate change. While such pursuits may be costly, they must be viewed as a form of global insurance-taking costs upon ourselves in the present to avoid a potentially disastrous future.
PREDICTIONS OF GLOBAL WARMING
The current stock of GHGs in the atmosphere is equivalent to about 430 parts per million (ppm) carbon dioxide, as compared to a stock of about 280 ppm prior to the industrial revolution (around 1750).2 This stock is rising at around 2.3 ppm every year and is likely to reach 550 ppm some time between 2030 and 2060. Global mean temperature is our index of climate change, though climate change is experienced through temperature, rainfall, wind, sea-level rise, and how all of these vary in day-today weather patterns. The earth has warmed 0.7 degrees Celsius since 1900 and is now warming rapidly even by twentieth century standards: all ten of the warmest years in recorded history have occurred since 1990. If atmospheric GHGs reach 550, global mean temperature may further increase by two to five degrees Celsius above pre-industrial levels. Although temperatures will take time to reach these record highs, warming over the coming decades would be comparable to the difference between global mean temperatures during the last ice age and those of today. …