On Setting Near-term Climate Policy while the Dust Begins to Settle: The Legacy of the Stern Review
AbstractWe review the explosion of commentary that has followed the release of the Stern Review: The Economics of Climate Change, and agree with most of what has been written. The Review is right when it argues on economic grounds for immediate intervention to reduce emissions of greenhouse gases, but we feel that it is right for the wrong reasons. A persuasive case can be made that climate risks are real and increasingly threatening. If follows that some sort of policy will be required, and the least cost approach necessarily involves starting now. Since policy implemented in 2007 will not “solve” the climate problem, near term interventions can be designed to begin the process by working to avoid locking in high carbon investments and providing adequate incentives for carbon sequestration. We argue that both objectives can be achieved without undue economic harm in the near term by pricing carbon at something on the order of $15 per ton as long as it is understood that the price will increase persistently and predictably at something like the rate of interest; and we express support for a tax alternative to the usual cap-and-trade approach.
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Bibliographic InfoPaper provided by Research unit Sustainability and Global Change, Hamburg University in its series Working Papers with number FNU-129.
Length: 20 pages
Date of creation: Mar 2007
Date of revision: Mar 2007
Publication status: Published, Energy & Environment, 18 (5), 621-633
Stern Review; climate change; climate policy; social discount rate; risk and equity aversion;
Find related papers by JEL classification:
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
- NEP-ENE-2007-03-24 (Energy Economics)
- NEP-ENV-2007-03-24 (Environmental Economics)
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