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The Stern Review and its critics: implications for the theory and practice of costs-benefits analysis

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  • Daniel H. Cole

Abstract

The “Stern Review: The Economics of Climate Change” reached conclusions and policy recommendations dramatically different from most of the earlier economic analyses of climate change. It found that the costs of climate change, as well as the potential net benefits of greenhouse gas reductions, were much higher than previously estimated, and consequently recommended more rapid and extensive cuts in emissions than had many other economist analysts. A number of prominent economists have criticized the Stern Review on various grounds, including its damage estimates and the selection of parameter values, which affect the interest rate at which future costs and benefits are discounted to present value. This paper summarizes the Stern Review and its critiques, and assesses them from a process-oriented perspective to determine what they can teach us, positively and negatively, about how benefit-cost analyses should (or should not) be carried out.

Suggested Citation

  • Daniel H. Cole, 2007. "The Stern Review and its critics: implications for the theory and practice of costs-benefits analysis," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 4, November.
    • Handle: RePEc:rar:journl:0063
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    Cited by:

    1. Tol, Richard S.J. & Yohe, Gary W., 2009. "The Stern Review: A deconstruction," Energy Policy, Elsevier, vol. 37(3), pages 1032-1040, March.
    2. Kristine Belesova & Ilan Kelman & Roger Boyd, 2016. "Governance through Economic Paradigms: Addressing Climate Change by Accounting for Health," Politics and Governance, Cogitatio Press, vol. 4(4), pages 87-96.
    3. Simon Dietz & Alec Morton, 2009. "Strategic appraisal of environmental risks: a contrast between the UK�s Stern Review on the Economics of Climate Change and its Committee on Radioactive Waste Management," GRI Working Papers 5, Grantham Research Institute on Climate Change and the Environment.
    4. Lohmann, Larry, 2009. "Toward a different debate in environmental accounting: The cases of carbon and cost-benefit," Accounting, Organizations and Society, Elsevier, vol. 34(3-4), pages 499-534, April.

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    More about this item

    Keywords

    Cost-Benefit Analysis; Discounting; Discount Rate; Climate Change;
    All these keywords.

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • H40 - Public Economics - - Publicly Provided Goods - - - General
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General

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