STERN REVIEW: The Economics of Climate Change

The scientific evidence is now overwhelming: climate change presents very serious
global risks, and it demands an urgent global response.
This independent Review was commissioned by the Chancellor of the Exchequer,
reporting to both the Chancellor and to the Prime Minister, as a contribution to
assessing the evidence and building understanding of the economics of climate
change.

The Review first examines the evidence on the economic impacts of climate change
itself, and explores the economics of stabilising greenhouse gases in the
atmosphere. The second half of the Review considers the complex policy challenges
involved in managing the transition to a low-carbon economy and in ensuring that
societies can adapt to the consequences of climate change that can no longer be
avoided.

The Review takes an international perspective. Climate change is global in its
causes and consequences, and international collective action will be critical in driving
an effective, efficient and equitable response on the scale required. This response
will require deeper international co-operation in many areas - most notably in creating
price signals and markets for carbon, spurring technology research, development
and deployment, and promoting adaptation, particularly for developing countries.
Climate change presents a unique challenge for economics: it is the greatest and
widest-ranging market failure ever seen. The economic analysis must therefore be
global, deal with long time horizons, have the economics of risk and uncertainty at
centre stage, and examine the possibility of major, non-marginal change. To meet
these requirements, the Review draws on ideas and techniques from most of the
important areas of economics, including many recent advances.