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Disentangling the Stern/Nordhaus Controversy: Beyond the Discounting Clash


  • Etienne Espagne

    (Centre International de Recherche sur l’Environnement et le Développement (CIRED))

  • Baptiste Perrissin Fabert


  • Antonin Pottier


  • Franck Nadaud


  • Patrice Dumas

    (Centre International de Recherche Agronomique pour le Développement)


The Stern/Nordhaus controversy has polarized the widely disparate beliefs about what to do in order to tackle the climate challenge. To explain differences in results and policy recommendations, comments following the publication of the Stern Review have mainly focused on the role played by the discount rate. A closer look at the actual drivers of the controversy reveals however that Stern and Nordhaus also disagree on two other parameters: technical progress on abatement costs and the climate sensitivity. This paper aims at appraising the relative impacts of such key drivers of the controversy on the social cost of carbon and climate policy recommendations. To this end, we use the flexible integrated assessment model RESPONSE which allows us to compare very diverse worldviews, including Stern and Nordhaus’ ones within the same modelling framework and map the relative impacts of beliefs on the three key drivers of the controversy. Furthermore we appraise quantitatively, by means of a linear statistical model, the impacts on results of an extended set of core parameters of RESPONSE. We show that beliefs on long term economic growth, technical progress, the form of the climate damage function and the climate sensitivity have an impact as important as beliefs on pure time preference. Hence, we can qualify the role played by the discount rate in the Stern/Nordhaus controversy and more broadly in the definition of climate policies.

Suggested Citation

  • Etienne Espagne & Baptiste Perrissin Fabert & Antonin Pottier & Franck Nadaud & Patrice Dumas, 2012. "Disentangling the Stern/Nordhaus Controversy: Beyond the Discounting Clash," Working Papers 2012.61, Fondazione Eni Enrico Mattei.
  • Handle: RePEc:fem:femwpa:2012.61

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    References listed on IDEAS

    1. David Pearce, 2003. "The Social Cost of Carbon and its Policy Implications," Oxford Review of Economic Policy, Oxford University Press, vol. 19(3), pages 362-384.
    2. Ha-Duong, Minh, 1998. "Quasi-option value and climate policy choices," Energy Economics, Elsevier, vol. 20(5-6), pages 599-620, December.
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    6. Patrice Dumas & Etienne Espagne & Baptiste Perrissin-Fabert & Antonin Pottier, 2012. "Comprehensive Description of RESPONSE," CIRED Working Papers hal-00866414, HAL.
    7. Kolstad, Charles D., 1996. "Fundamental irreversibilities in stock externalities," Journal of Public Economics, Elsevier, vol. 60(2), pages 221-233, May.
    8. Minh Ha-Duong & Michael Grubb & Jean Charles Hourcade, 1997. "Influence of socioeconomic inertia and uncertainty on optimal CO2-emission abatement," Post-Print halshs-00002452, HAL.
    9. Goulder, Lawrence H. & Mathai, Koshy, 2000. "Optimal CO2 Abatement in the Presence of Induced Technological Change," Journal of Environmental Economics and Management, Elsevier, vol. 39(1), pages 1-38, January.
    10. Jean Charles Hourcade & Philippe Ambrosi & Stéphane Hallegatte & Franck Lecocq & Patrice Dumas & Minh Ha-Duong, 2003. "Optimal control models and elicitation of attitudes towards climate damages," Post-Print halshs-00000966, HAL.
    11. Baptiste Perrissin Fabert & Patrice Dumas & Jean-Charles Hourcade, 2012. "What Social Cost of Carbon? A Mapping of the Climate Debate," Working Papers 2012.34, Fondazione Eni Enrico Mattei.
    12. Martin L. Weitzman, 2007. "A Review of the Stern Review on the Economics of Climate Change," Journal of Economic Literature, American Economic Association, vol. 45(3), pages 703-724, September.
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    Blog mentions

    As found by, the blog aggregator for Economics research:
    1. What to do about climate change: looking beyond the discount rate controversy
      by Economic Logician in Economic Logic on 2012-11-29 20:53:00


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    Cited by:

    1. Havranek, Tomas & Irsova, Zuzana & Janda, Karel & Zilberman, David, 2015. "Selective reporting and the social cost of carbon," Energy Economics, Elsevier, vol. 51(C), pages 394-406.
    2. Baptiste Perrissin Fabert & Etienne Espagne & Antonin Pottier & Patrice Dumas, 2012. "The “Doomsday” Effect in Climate Policies. Why is the Present Decade so Crucial to Tackling the Climate Challenge?," Working Papers 2012.62, Fondazione Eni Enrico Mattei.
    3. Baptiste Perrissin Fabert & Etienne Espagne & Antonin Pottier & Patrice Dumas, 2014. "The Comparative Impact of Integrated Assessment Models' Structures on Optimal Mitigation Policies," Working Papers 2014.58, Fondazione Eni Enrico Mattei.
    4. Edilio Valentini & Paolo Vitale, 2014. "Optimal Climate Policy for a Pessimistic Social Planner," Working Papers 2014.33, Fondazione Eni Enrico Mattei.
    5. Michel Aglietta & Etienne Espagne, 2016. "Climate and finance systemic risks, more than an analogy? The climate fragility hypothesis," Working Papers 2016-10, CEPII research center.

    More about this item


    Integrated Assessment Model; Discount Rate; Social Cost of Carbon; Abatement Policy; Worldview;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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