Stern Review of Climate Change Economics

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John Thackara:

"The first major initiatve was the publication late in 2006 of the Stern Review of Climate Change Economics by Sir Nicholas Stern, a former World Bank chief economist.

This long, dry but remarkable document marked a step change in government perceptions of climate change. It was not just that Stern’s conclusions correspond broadly to what environmentalists had been saying for 35 years. The fact that the report was commissioned by The Treasury, which control’s Britain’s taxation and money – was also key. Money is at stake: Something must be done!

Stern paves the way for so-called “external” costs to be counted properly in national acounts for the first time. Notoriously, economists describe as”external” costs resources – such as water, minerals, and the biosphere as a whole – that, until now, have not been properly counted. Traditional economics count some of the energy used to exploit resources – but do not pay the full price of the energy or the resources.

Governments can use fiscal regulations and taxation to make these so-called “external” costs internal costs, payable by the producer. Matter and energy flowing through the economic system would then have to be paid for at full price – rather than taken for granted as a freebie.

These profound structural changes have not yet been implemented, but the Stern review provides an economic framework for dramatic changes to be introduced." (

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