The economics of climate change

This review of the economic effects of climate change was carried out by Sir Nicholas Stern, Head of the Government Economic Service and former World Bank Chief Economist.The first half focuses on the impacts and risks arising from uncontrolled climate change, and on the costs and opportunities associated with action to tackle it. It finds that unabated climate change risks raising average temperatures by over 5êC from pre-industrial levels, which would transform the physical geography of our planet. Adding up the costs of a narrow range of the effects the Review calculates an equivalent to at least 5 per cent of GDP each year.Considering more recent scientific evidence (for example, of the risks that greenhouse gases will be released naturally as the permafrost melts), the economic effects on human life and the environment, and approaches to modelling that ensure the impacts that affect poor people are weighted appropriately, it estimates that dangers could be equivalent to 20 per cent of GDP or more. In contrast, the costs of action to reduce greenhouse gas emissions to avoid the worst impacts of climate change can be limited to around one per cent of global GDP each year. The second half of the Review examines the national and international policy challenges of moving to a low-carbon global economy. Measures include: carbon pricing; technological shift; and a strong international framework for emissions trading, technology co-operation and action to reduce de-forestation.