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On Setting Near-term Climate Policy while the Dust Begins to Settle: The Legacy of the Stern Review

Author

Listed:
  • Gary W. Yohe
  • Richard S.J. Tol

    () (Economic and Social Research Institute, Dublin)

  • Dean Murphy

Abstract

We 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.

Suggested Citation

  • Gary W. Yohe & Richard S.J. Tol & Dean Murphy, 2007. "On Setting Near-term Climate Policy while the Dust Begins to Settle: The Legacy of the Stern Review," Working Papers FNU-129, Research unit Sustainability and Global Change, Hamburg University, revised Mar 2007.
  • Handle: RePEc:sgc:wpaper:129
    as

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    File URL: http://www.fnu.zmaw.de/fileadmin/fnu-files/publication/working-papers/sternenergyenvironment2.pdf
    File Function: First version, 2007
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    References listed on IDEAS

    as
    1. repec:spr:portec:v:3:y:2004:i:2:d:10.1007_s10258-004-0033-z is not listed on IDEAS
    2. Kerstin Ronneberger & Maria Berrittella & Francesco Bosello & Richard S.J. Tol, 2006. "Klum@Gtap: Introducing Biophysical Aspects of Land-Use Decisions Into a General Equilibrium Model A Coupling Experiment," Working Papers 2006.102, Fondazione Eni Enrico Mattei.
    3. Kerstin Ronneberger & Uwe A. Schneider & Richard S.J. Tol, 2005. "Klum: A Simple Model Of Global Agricultural Land Use As A Coupling Tool Of Economy And Vegetation," Working Papers FNU-65, Research unit Sustainability and Global Change, Hamburg University, revised May 2005.
    4. Jacqueline M. Hamilton & David J. Maddison & Richard S.J. Tol, 2005. "Climate preferences and destination choice: a segmentation approach," Working Papers FNU-90, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2005.
    5. P. Michael Link & Richard S. J. Tol, 2004. "Possible economic impacts of a shutdown of the thermohaline circulation: an application of FUND," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 3(2), pages 99-114, September.
    6. Hamilton, Jacqueline M., 2007. "Coastal landscape and the hedonic price of accommodation," Ecological Economics, Elsevier, vol. 62(3-4), pages 594-602, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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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. Mason, Charles F. & Polasky, Stephen & Tarui, Nori, 2017. "Cooperation on climate-change mitigation," European Economic Review, Elsevier, vol. 99(C), pages 43-55.
    3. Christine Schleupner & P. Michael Link, 2008. "Eiderstedt im Spannungsfeld zwischen Naturschutz- und Agrarpolitik - Entwicklung eines methodischen Ansatzes für ein nachhaltiges Ressourcenmanagement," Working Papers FNU-168, Research unit Sustainability and Global Change, Hamburg University, revised Aug 2008.
    4. P. Michael Link & C. Ivie Ramos & Uwe A. Schneider & Erwin Schmid & J. Balkovic & R. Skalsky, 2008. "The interdependencies between food and biofuel production in European agriculture - an application of EUFASOM," Working Papers FNU-165, Research unit Sustainability and Global Change, Hamburg University, revised Jul 2008.

    More about this item

    Keywords

    Stern Review; climate change; climate policy; social discount rate; risk and equity aversion;

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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