NCPA - National Center for Policy Analysis


November 2, 2006

The report on climate change by Nicholas Stern and the U.K. government argues that the price of inaction would be extraordinary and the cost of action modest.  Unfortunately, this claim falls apart when one actually reads the 700-page tome.  Despite using many good references, the Stern Review on the Economics of Climate Change is selective and its conclusion flawed.  Its fear-mongering arguments have been sensationalized, which is ultimately only likely to make the world worse off, says economist Bjørn Lomborg.

The Stern review almost surely understates the real costs of combating climate change:

  • The International Energy Agency has estimated that the world must spend $16 trillion on infrastructure from 2001 to 2030 just to meet growing energy demand; that by itself would be 1 percent of gross domestic product (GDP) over that period.
  • And that doesn't include the cost of moving to carbon-free power from fossil fuels, or the financial "incentives" -- i.e., global subsidies from Western taxpayers -- that China and India would need if the Stern report's policies were to have any chance of being implemented.
  • The Stern review also calls for substantially increasing taxes, which we know from experience would also reduce global GDP and thus leave fewer resources to fight the consequences of any warming.

The Stern report barely mentions the potential benefits from warming in the world's cold-weather regions.

  • Al Gore and others warn about the damage from coastal flooding and changing weather patterns, among other horror scenarios, but the world is large and its climate diverse, and a longer growing season in Siberia or Canada is at least one possible benefit of warming.
  • The Stern report also dismisses any chance of moderate warming (meaning temperatures in 2100 only two to three degrees Celsius higher than in 1900) even though many climate models say this is in fact the most likely outcome.

Source: Editorial, "Climate Non-Conformity," Wall Street Journal, November 2, 2006; and Bjorn Lomborg, "Stern Review," Wall Street Journal, November 2, 2006; and Sir Nicholas Stern, "Stern Review on the Economics of Climate Change," October 30, 2006.

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