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The Stern Review: an assessment of its methodology

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  • Rick Baker
  • Andrew Barker
  • Alan Johnston
  • Michael Kohlhaas

    (Productivity Commission)

Abstract

The Productivity Commission today released a staff working paper titled The Stern Review: an assessment of its methodology. This technical paper contains a detailed examination of key elements of the Review’s analytical approach. Originally prepared as an internal research memorandum following release of the Stern Review’s report, the paper is being made more widely available given its ongoing relevance in light of Australia’s Garnaut Review. The staff paper finds that the Stern Review made some important analytical advances. The Review sought to move beyond analysis based on the mean expected outcome to one that incorporates low probability, but potentially catastrophic, events at the tail of probability distributions. The Review also attempted a more comprehensive coverage of damage costs than most previous studies. The paper also finds that value judgements and ethical perspectives in key parts of the Stern Review’s analysis led to estimates of future economic damages being substantially higher, and abatement costs lower, than most previous studies. The paper notes that the report could usefully have included more sensitivity analysis to highlight to decision-makers the consequences of alternative assumptions or judgements. The views expressed in this paper are those of the staff involved and do not necessarily reflect those of the Productivity Commission.

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File URL: http://www.pc.gov.au/__data/assets/pdf_file/0005/74723/sternreview.pdf
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File URL: http://www.pc.gov.au/research/staffworkingpaper/sternreview
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Bibliographic Info

Paper provided by Productivity Commission, Government of Australia in its series Staff Working Papers with number 0801.

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Length: 125 pages.
Date of creation: Jan 2008
Date of revision:
Publication status: Published by the Productivity Commission, Australia.
Handle: RePEc:ris:prodsw:0801

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Keywords: climate change; greenhouse effect; global warming;

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References

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  1. Samuel Fankhauser, 1994. "The Social Costs of Greenhouse Gas Emissions: An Expected Value Approach," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 157-184.
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  7. Toman, Michael & Shogren, Jason, 2000. "Climate Change Policy," Discussion Papers dp-00-22, Resources For the Future.
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  9. Sheila M. Olmstead & Robert N. Stavins, 2006. "An International Policy Architecture for the Post-Kyoto Era," American Economic Review, American Economic Association, vol. 96(2), pages 35-38, May.
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  11. Claudia Kemfert, Truong P. Truong, and Thomas Bruckner, 2006. "Economic Impact Assessment of Climate Change - A Multi-gas Investigation with WIAGEM-GTAPEL-ICM," The Energy Journal, International Association for Energy Economics, vol. 0(Special I), pages 441-460.
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  15. Sir Ian Byatt & Bob Carter & Ian Castles & Chris de Freitas & Indur M. Goklany & David Henderson & David Holland & Lord Lawson of Blaby & Richard S. Lindzen & Ross McKitrick & Julian Morris & Sir Alan, 2006. "The Stern Review: A Dual Critique," World Economics, World Economics, Economic & Financial Publishing, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 7(4), pages 165-232, October.
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  18. repec:reg:rpubli:353 is not listed on IDEAS
  19. Richard Tol, 2002. "Estimates of the Damage Costs of Climate Change, Part II. Dynamic Estimates," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 21(2), pages 135-160, February.
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  21. William D. Nordhaus, 2006. "The "Stern Review" on the Economics of Climate Change," NBER Working Papers 12741, National Bureau of Economic Research, Inc.
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