Stern’s 2006 review warned climate inaction would cost more than cutting emissions
Nicholas Stern’s 2006 review argued that the economic damage from climate inaction would exceed the cost of cutting emissions, challenging the view that global heating was a manageable economic problem. Its case that a low-carbon economy could still grow helped governments justify climate policies and gave voters and courts grounds to challenge delay.
The review’s 700 pages also described climate change as a market failure and challenged the use of discount rates that make future harms and lives count for less in today’s calculations. It opposed earlier arguments for accepting 3C to 4C of warming; the author says Stern underestimated how quickly temperatures would rise and the economic damage, while overestimating the cost of renewable energy.
In short
- Stern’s review made the economic case for climate action.
- It challenged discounting the costs faced by future generations.
- The author says its warnings have proved conservative.
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The strongest fair case each way — we don't pick a winner.
The case for
Stern’s review made a strong case that emissions impose costs on others that markets do not adequately price, and that delaying cuts risks larger economic damage later. On this view, acting early is prudent: it can limit harm, encourage low-carbon growth and avoid discounting future people’s welfare simply because they live later.
The case against
A careful critic could argue that climate policy should be judged against realistic estimates of both future damage and the present cost of reducing emissions, rather than relying on contested assumptions about discounting or growth. If Stern underestimated the pace and economic effects of warming while overestimating the cost of renewable energy, his analysis may not settle which policies are proportionate or how quickly they should be pursued.
Explained simply
Climate change is driven largely by greenhouse gases released when fossil fuels such as coal, oil and gas are burned. Governments can try to limit warming by cutting those emissions, but doing so has economic costs, while rising temperatures can damage homes, health, farming and infrastructure.
Nicholas Stern is a British economist who led a major review for the UK government, published in 2006. It compared the costs of reducing emissions with the likely economic harm from allowing climate change to continue, and argued that action could be compatible with economic growth.
The review also treated climate change as a market failure: those who produce emissions do not bear all the costs they impose on others. Its arguments became part of debates over climate policy, including how much weight to give future harms when making decisions today.
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Originally published by The Guardian as “The climate crisis will destroy our economies – we learned this 20 years ago. When will we act? | Fiona Harvey”.