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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. Katrin Rehdanz & David Maddison, 2004. "The Amenity Value of Climate to German Households," Working Papers 2004.57, Fondazione Eni Enrico Mattei.
    2. 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.
    3. Thomas Heinzow & Richard S.J. Tol, 2003. "Prediction Of Crop Yields Across Four Climate Zones In Germany: An Artificial Neural Network Approach," Working Papers FNU-34, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2003.
    4. 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.
    5. Zhou Yuan & Richard S.J. Tol, 2005. "Valuing the health impacts from particulate air pollution in Tianjin," Working Papers FNU-89, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2005.
    6. Richard S.J. Tol, 2005. "The Benefits Of Greenhouse Gas Emission Reduction: An Application Of Fund," Working Papers FNU-64, Research unit Sustainability and Global Change, Hamburg University, revised Apr 2005.
    7. 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.
    8. 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.
    9. Hamilton, Jacqueline M., 2007. "Coastal landscape and the hedonic price of accommodation," Ecological Economics, Elsevier, vol. 62(3-4), pages 594-602, May.
    10. Richard S.J. Tol, 2003. "Adaptation And Mitigation: Trade-Offs In Substance And Methods," Working Papers FNU-33, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2003.
    11. Richard S.J. Tol & Samuel Fankhauser & Richard G. Richels & Joel B. Smith, 2000. "How Much Damage Will Climate Change Do? Recent Estimates," Working Papers FNU-2, Research unit Sustainability and Global Change, Hamburg University, revised Sep 2000.
    12. Richard S.J. Tol & Samuel Fankhauser & Richard G. Richels & Joel B. Smith, 2000. "How Much Damage Will Climate Change Do?," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 1(4), pages 179-206, October.
    13. Zhou Yuan & Richard S.J. Tol, 2004. "Evaluating the costs of desalination and water transport," Working Papers FNU-41, Research unit Sustainability and Global Change, Hamburg University, revised Dec 2004.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mason, Charles F. & Polasky, Stephen & Tarui, Nori, 2017. "Cooperation on climate-change mitigation," European Economic Review, Elsevier, vol. 99(C), pages 43-55.
    2. Zhang, Hong & Jin, Gui & Zhang, Zhengyu, 2021. "Coupling system of carbon emission and social economy: A review," Technological Forecasting and Social Change, Elsevier, vol. 167(C).
    3. Gary W. Yohe & Richard S.J. Tol, 2007. "Precaution And A Dismal Theorem: Implications For Climate Policy And Climate Research," Working Papers FNU-145, Research unit Sustainability and Global Change, Hamburg University, revised Aug 2007.
    4. David Anthoff & Richard Tol, 2009. "The Impact of Climate Change on the Balanced Growth Equivalent: An Application of FUND," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 43(3), pages 351-367, July.
    5. Patrick O Waeber & Lucienne Wilmé & Jean-Roger Mercier & Christian Camara & Porter P Lowry II, 2016. "How Effective Have Thirty Years of Internationally Driven Conservation and Development Efforts Been in Madagascar?," PLOS ONE, Public Library of Science, vol. 11(8), pages 1-13, August.
    6. S. Niggol Seo, 2009. "Designing a Climate Policy: A Carbon Tax Approach with Adaptation Funds," Energy & Environment, , vol. 20(6), pages 961-966, October.
    7. Tol, Richard S.J. & Yohe, Gary W., 2009. "The Stern Review: A deconstruction," Energy Policy, Elsevier, vol. 37(3), pages 1032-1040, March.
    8. 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.
    9. 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.

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    More about this item

    Keywords

    Stern Review; climate change; climate policy; social discount rate; risk and equity aversion;
    All these keywords.

    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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