Q&A: climate change review
Updated on 29 October 2006
Sir Nicholas Stern's Review on the Economics of Climate Change is published.
What is the Stern review?
The chancellor, Gordon Brown, announced on 19 July 2005 that he had asked Sir Nicholas Stern, an eminent economist with the UK Treasury, to lead a major review of the economics of climate change.
The result, the 700-page Stern Review on the Economics of Climate Change, is published on Monday 30 October.
The review aims (a) to provide a comprehensive understanding of the economic challenges of climate change and (b) to suggest how those challenges can be met in the UK and the rest of the world.
What does the Stern review say?
Articles and leaks ahead of publication suggest that it uses economic modelling to anticipate what the long-term effects will be if the planet ignores the threat of climate change.
It concludes that unchecked climate change will lead to economic catastrophe on a scale comparable to the great depression of the 1930s.
The review says that if climate change is not addressed seriously, and quickly, it will cost the global economy up to £3.68 trillion.
To this end, Stern proposes that 1% of global GDP, some £184 billion, should be spent immediately on tackling climate change. If that money is not spent now, the eventual bill could be up to 20 times higher.
However, while conceding that the chance of avoiding some of the worst effects of climate change "is already almost out of reach", the review is thought to stress the benefits of determined worldwide steps to tackle climate change, which would greatly outweigh the costs.
What are the consequences of failing to act?
The review warns that inaction on climate change will have severe consequences for us all, but that poor countries will be hit most.
- Melting glaciers will increase the flood risk and then reduce water supplies. This will threaten one-sixth of the world's population, mainly in India, China and the South American Andes.
- Declining crop yields could leave hundreds of millions unable to produce or buy enough food, especially in Africa.
- Rising sea levels will mean hundreds of millions affected by flooding each year.
The report will be the first major contribution to the debate on climate change by an economist, rather than a scientist.
Significantly, it is thought the report will contradict the assertions of US president George W Bush and others, that the world has to choose between climate change and economic growth.
The review concedes that different countries may use different instruments to reduce emissions, from more green taxes to carbon trading. And it is thought Stern will also urge a doubling of investment in energy research.
How influential will the Stern review be?
The main political parties are trying to articulate the need for significant movement on climate change policy, while not alienating voters with the prospect of a higher tax burden or apparent curbs on people's freedoms.
In this context, the Stern review could permit greater freedom of discussion on issues such as green taxes.
However, the main thrust of the report is the need for multilateral action on climate change. That means the involvement of major energy consumers such as China, India and United States. And the latter, by far the largest consumer of oil in the world, has hitherto failed to ratify the 1997 Kyoto protocol, the last major international agreement on climate change.
Related links
Climate change
HM Treasury/Stern review
