A Review of the Stern Review on the Economics of Climate Change

“See also Nordhaus (2007), Stern (2013) and Tol et al. (2006).”

“Instead, we are naturally led to the 1See Stern (2007), Nordhaus (2007), Weitzman (2007), Dasgupta (2008), and Heal and Millner (2013). space of convergent sequences, with the limit representing consumption in the indefinite future.”

“Suppose instead that the survey responses resulted from within a purely positivist framework, where experts were requested to ‘look carefully at the returns on alternative investments – at the real real interest rate–as the benchmarks for climatic investments’ (Nordhaus, 2007, p 692).”

“Manufacturing enterprises, as a high discharge and high pollution industry, also have high energy consumption, which occupies a larger proportion in the national energy consumption [1].”

“15 See Weitzman (2007).”

“The back-to-back reviews of the Review by William Nordhaus (2007) and Martin Weitzman (2007) display some potential confusion about the discount rate created by modern neoclassical economics.”

“For instance, critics attacked the Stern Review of the Economics of Climate Change (Stern 2007) for using too low a discount rate (Nordhaus 2007).”

“In a review of the Stern Review, 42 Weitzman did not challenge the balance of economic instruments suggested but stated that the defect of the Report was that the marginal costs of abatement were too optimistic and the social cost and damage from GHGE were too pessimistic.”

“…in this debate have variously accused each other of ignorance of basic scienti c knowledge (see Stern (2008)), "subconsciously" undertaking analysis to con rm the policy position of the UK Government (see Weitzman (2007)), or even trying to rekindle the British Empire (see Nordhaus (2007)).”

“In ihrer Auswertung extrahieren Parrique 2 An der Methode und den Ergebnissen des Stern Reviews äußerten u. a. die wachstumsorientierten Ökonomen Richard Tol (Tol 2006; Tol und Yohe 2006) und William Nordhaus (Nordhaus 2007) deutliche Kritik.”

“At a policy level, leading economists assert that "the biggest uncertainty of all in the economics of climate change is the uncertainty about which interest rate to use for discounting" (Weitzman, 2007).”

“Such examples have encouraged other nations to consider similar approaches, albeit with varying degrees of success and public acceptance [31].”

“Supóngase que el proyecto tiene una Life of Mine (LOM) de 10 años durante los cuales se ha previsto que se pagará de manera anual las siguientes cantidades de impuestos sobre sus utilidades (en dólares norteamericanos): 595307, 859195, 988553, 1006966, 763992, 713109, 1110283, 691854, 630741, 881528] Utilizando la tas…”

“This call is essential because the issues pertaining to climate change are generally complex because different people have differing views and opinions on whether climate change is real or not (Nordhaus, 2007)..”

“economy, great importance is given to innovations and trends of the development of innovative products.(28,29,30) Economics as a profession is undergoing a substantial change regarding the way we think about international trade, development, economic growth and economic geography.”

“…the discounting factors to be employed when considering future damages, with the prominent opposition between William Nordhaus and Nicholas Stern [Nordhaus, 2007, Stern, 2010] and its “non-decision” by a large expert panel led by Ken Arrow [Arrow et al., 2013], our account is not directly…”

“As a result, the discount factors for future costs of global climate change have been underestimated, not reflecting real risk premium, which is widely criticized (Nordhaus 2007; Nordhaus and Moffat, 2017).”

“Most of the literature, such as work by Nordhaus (2007) and Weitzman (2007), has instead argued for using rates of pure time preference that are greater than zero, consistent with observed savings and investment behavior (see also the discussion by Arrow 1995).”

“Unlike in the ongoing debate in the environmental economics community regarding the discounting factors to be employed when considering future damages, with the prominent opposition between William Nordhaus and Nicholas Stern [33, 38] and its “non-decision” by a large expert panel led by Ken Arrow [2], our account is…”

“Roughly, Scenario A is more in line with Nordhaus’ idea of climate policy ramp (Nordhaus, 2007) which promotes a progressive cut in emissions, hence larger cuts in the future, whereas Scenario C calls for more aggressive emissions reductions today as Stern puts forward in his review (Stern, 2006; Stern, 2008).”

“(Portney and Weyant 1999; Stern 2006; Dasgupta 2008; Nordhaus 2007).”

“Note that one critique of the Stern report [29] has been that it overemphasizes the cost of climate change by choosing a very low discount rate (Nordhaus [26] is the most vocal critic).”

“%) investing in climate protection seizes to be profitable in the narrow economic sense (see: Weitzman 2007; Popkiewicz 2012, p. 340).”

“[8] Weitzman ML (2007) A review of the Stern review on the economics of climate change.”

“Hepburn and Beckerman (2007), Nordhaus (2007) and Weitzman (2007) are notable critiques of Stern’s approach to pure time preference, while Dasgupta (2007), Gollier (2006) and Weitzman (2007), among others, took issue with his approach to risk aversion.”

“83 diversity and protecting endangered species, i.e. counter-acting the constantly ongoing depletion of ecological capital (Balmford, 2002; Tol, 2002a, 2002b; Nordhaus, 2007; Weitzman, 2007).”

“For a backstop price set at $1, 200 /tCO2 in 2005, Comments following the Stern (2006) Review (Dasgupta, 2007; Nordhaus, 2007; Weitzman, 2007; Yohe and Tol, 2007) have mainly emphazised the impact of the so-called unusually low rate of pure time preference of 0.”

“This low discount rate has already been criticized in [19-20] for being too low.”

“91 For instance, the report by Stern (2007) applies a discount rate of 1.4%, while in its critique Nordhaus (2007) opts for a rate of 4.3%.”

“However, we use the SCC estimate by Nordhaus as it is more conservative and because others, such as Weitzman (2007), have also proposed discount rate values incorporating uncertainty over long-term time frames in the range of 2–4 percent, which are closer to the value used by Nordhaus (2017).”

“Nordhaus (2007) mentions that he uses a rate of 6%, corresponding to the empirical rate of return on capital, or capital growth rate.”

“See references and discussion in, for example, Nordhaus (2007) and Weitzman (2007, 2009a).”

“16 η = 2 is advocated in, for example, Nordhaus (2008), Weitzman (2007).”

“This result emphasizes another feature of a small discounting rate that was not initially envisioned by the Stern review (Stern 2006; Nordhaus 2007), which is the fact that the monotonicity property of the optimal path to sustainable steady state is ensured by a small discounting rate.”

“(Weitzman 2007) Nordhaus (2007) argued that the estimates presented in The Stern Review were at odds with standard economic estimates, mainly because The Stern Review uses a discount rate and coefficient of relative risk aversion among generations that are too low and inconsistent with actual…”

“Thus, (a) the pure time preference (Stern 2007; Nordhaus and Yang 2007; Heal 2007; Sterner and Persson 2008; Hourcade et al. 2009) is no longer the sole determinant of the trade-off between present and future aggregate consumption, and (b) intra- and intergenerational equity cannot be treated separately, since assumpt…”

“Economists use the social discount rate, SDR, for this, which is a concept that has been hotly debated in climate economics (Stern 2007; Nordhaus 2007; Weitzman 2007).”

“However, discounting makes this criterion controversial for long-run issues such as climate change (see the Stern Review [Stern, 2006] and the ongoing debate [Philibert, 2006, Weitzman, 2007, Gollier, 2008, Sterner and Persson, 2008]).”

“These models use the Ramsey equation to determine the discount rate, which, as Jamieson (2014, pp. 118–122) and others have demonstrated, encodes discounted utilitarian value judgments about intertemporal and intratemporal inequality, as well as risk, a third important area of ethical concern and the focus of this pap…”

“…appropriate discount rate for future income streams when conducting an inter-temporal cost–benefit analysis (Stern et al. 2006; Tol and Yohe 2006; Nordhaus 2007; Weitzman 2007; Dasgupta 2007) as well as the practice of deriving policy recommendations from global cost–benefit analysis (Spash…”

“For a discussion, see the Stern Review (Stern, 2007) and the subsequent discussion in e.g., Nordhaus (2007), Weitzman (2007), and Dasgupta (2008).”