The criticism of the Stern Review Disagree with some issue Hannu Vehniäinen Michael Schmidthaler The Economics of Climate Change

Economics of Climate Change Table of Contents Introduction Tol/Yohe article Agreement Disagreement Nordhaus article Other opinions Personal thoughts Conclusion Summer 2008 Economics of Climate Change

Agreement with the Review Tol/Yohe There is an economic case for climate policy The cost of any climate policy increases with delay The prospects of large costs in the future justify actions now Summer 2008 Economics of Climate Change

Disagreement with the Review Tol/Yohe No new estimates of impacts and costs Very low discount rate Low estimates for the cost of climate change policy The cost and benefit estimates do not match Stern’s policy conclusions. No need for suspect valuations Credibility problem We are henceforth going into detail on every single point Summer 2008 Economics of Climate Change

Economics of Climate Change No new estimates Tol/Yohe Stern Review reviews existing material. Why are numbers so far outside the range of the previous published literature? Range of benefit-cost estimates from 0,09 (0.3%of GDP/3,5%of GDP) to infinity (Zero abatement costs) Impacts are counted up to 2200, but cost estimates stop in 2050 Summer 2008 Economics of Climate Change

Economics of Climate Change No new estimates Tol/Yohe The figures of the Stern review rely on previous studies, yet yield different expectations on costs and benefits The Stern Review argues that “the overall costs and risks of climate change will be equivalent to losing at least 5% of global GDP1 each year, now and forever […] damage could rise to 20% of GDP or more.” These are “risks of major disruption to economic and social activity, on a scale similar to 1 On page 163 of the Review, 5% of GDP is in fact the mean for one particular scenario. The 5%ile may be as low as 0.3% of GDP. The 95%ile may be as high as 33%. WORLD ECONOMICS • Vol. 7 • No. 4 • October–December 2006 235 A Review of the Stern Review those associated with the great wars and the economic depression of the first half of the 20th century”. It concludes that “the costs of […] reducing greenhouse gas emissions [to stabilize concentrations at 500–550 ppm CO2eq] […] can be limited to around 1% of global GDP2 each year”. The authors of the Review hope that the implications of these estimates are intuitively clear: there is an overwhelming economic case outlined in the “Summary of Conclusions” for emission reduction because the reported benefit–cost ratio is between 5 and 20 Uncertainty is ubiquitous in our understanding of climate change, of course, so surprises should be expected; but the sources of surprise should be new science and/or new decision-analytic techniques. The Stern Review does not present new data, or even a new model. Source: TOL, R.,S.,J; YOHE, G.,W., 2006 Summer 2008 Economics of Climate Change

High valuation of climate change impacts is due to 3 factors Tol/Yohe Low discount rate Double counted risk Vulnerability constant over very long periods of time Summer 2008 Economics of Climate Change

Economics of Climate Change Low discount rate Tol/Yohe High valuation of climate change impacts Low discount rates produce high discounted damages In this case it is chosen so low that 40% to 50% of calculated damages come from the “residual”, i.e. costs that occur beyond the modeled timeframe of 200 years. Summer 2008 Economics of Climate Change

Low estimates for the cost of climate change policy Tol/Yohe Shortened time horizon over which they are calculated Omission of the economic repercussions of dearer energy, Ignoring the capital invested in the energy sector. The first assumption is simply wrong, especially since the very low discount rates puts enormou weight on the other side of the calculus on impacts that might be felt after the year 2050. The latter two are misleading. Summer 2008 Economics of Climate Change

Low estimates for the cost of climate change policy Tol/Yohe Stern underplays the uncertainty in emission reduction costs Stern also emphasizes uncertainties concerning the damages of climate change Using Dennis Anderson‘s result is far more optimistic than most of the other studies  1%GDP loss (Stern) vs. 2,2% (EMF21) In 2050 1% by stern 2,2% by the energy modeling forum. Period until 2050 too short. Summer 2008 Economics of Climate Change

Low estimates for the cost of climate change policy Tol/Yohe Anderson‘s Analysis lacks the possible effects of higher energy prices, which will reduce energy demand w/o climate policies. (overestimating the costs) Does not include the impacts on economic growth (underestimating) Not include impacts on capital stock turnover (major factor in emission reduction) In 2050 1% by stern 2,2% by the energy modeling forum. Period until 2050 too short. Summer 2008 Economics of Climate Change

Cost-benefit estimates do not match the review‘s policy conclusions Tol/Yohe Stern does not conduct a proper optimization exercise If the impacts of climate change are as dramatic and if the costs of emission reduction are as small as reported, then a more stringent concentration target should have been proposed. If the impacts of climate change are as dramatic as the Stern Review suggests, and if the costs of emission reduction are as small as reported, then a concentration target that is far more stringent than the one recommended in the Review should have been proposed. The Review, in fact, does not conduct a proper optimization exercise. Summer 2008 Economics of Climate Change

Cost-benefit estimates do not match the review‘s policy conclusions Tol/Yohe Stern overestimates the impacts of climate change real benefits of reduction are lower Stern sets reductions goals to low (550ppm CO2e) Previous studies/policies have higher standards UK has already set a 550ppm policy in 2000 Summer 2008 Economics of Climate Change

Cost-benefit estimates do not match the review‘s policy conclusions Tol/Yohe The review does not conduct a solid benefit-cost analysis, but comparse C-B only for one specific target (the all-present 550ppm level) Stern should compare MC to MB, rather than Total Costs to Total Benefits Anderson‘s falling MAC are contrary to most of the EMF21 findings (Stern: sub-optimal) MDC are very hight in comparison to other studies Ad1) All of these comparisons are evidence that the Stern Review does not, in fact, report the results of a benefit–cost analysis. Instead, it simply compares the magnitudes of the costs of abatement for one particular concentration target (around 1% of GDP) to the costs of climate change (5%–20% of per capita consumption) and concludes that the latter justifies the former Ad2) Firstly, the costs of climate change do not equal the benefits of emission reduction, because any abatement will only slow (rather than prevent) climate change. It follows that the benefits of emission reduction must be smaller than the estimated costs of climate change (Tol and Yohe, 2006). Secondly, marginal costs should be compared to marginal benefits, rather than total costs to total benefits. Summer 2008 Economics of Climate Change

Cost-benefit estimates do not match the review‘s policy conclusions Tol/Yohe MDC are very high in comparison to other studies STERN FUND 2.9 Tol meta-analysis The Stern Review does report marginal damage costs: “the current social cost of carbon […] might be around $85/tCO2”. This number is deemed preliminary and results from PAGE2002 (Hope, 2006).13 It is nonetheless important to note that $85/tCO2 equals $314/tC, and so it is an outlier in the marginal damage cost literature (Tol, 2005). Figure 3 clearly indicates that the Review’s estimate is high if all studies are considered, but it is very high if the attention is restricted to those studies that were published in peer-reviewed journals. Splitting the sample of peer-reviewed estimates according to the discount rate used, it is also clear that Stern’s estimate is even somewhat high compared to other studies that adopt a low discount rate. Recall that the Stern Review used a pure rate of time preference of 0.1%. Figure 3 shows results for a 0% PRTP. For comparison, Figure 3 also shows results for FUND2.9. This model is one of the few that has vulnerability changing with development. The contrast is stark, showing clearly that the high damage estimates cannot be explained entirely by the low discount rate. All of the estimation issues identified above play a role in locating the Stern Review damage estimates relative to earlier work, even if it is the discount rate that dominates explanations of why, in absolute terms, they are so high Source: TOL, R.,S.,J; YOHE, G.,W., 2006 Summer 2008 Economics of Climate Change

Cost-benefit estimates do not match the review‘s policy conclusions Tol/Yohe Reasons why Stern did not recommend a more stringend policy (inconsistency): sub-optimal benefit cost analysis questionable decline in MAC rising of MDC Stern‘s findings stem from the reliance on sub-optimal benefit cost analysis and questionable decline in MAC and rising of MDC Summer 2008 Economics of Climate Change

No need for suspect valuations Tol/Yohe A strong case for emission reduction even in the near term can be made without relying on suspect valuations and inappropriate summing across the multiple sources of climate risk. Doing nothing in the short term is not advisable even on economic grounds. Summer 2008 Economics of Climate Change

Economics of Climate Change Credibility problem Tol/Yohe Alarmism supported by dubious economics born of the Stern Review may further polarize the climate policy debate. Economic estimates are vulnerable to criticism, but climate risks are evident More chaos generated instead of focusing on the review‘s core messages It will certainly allow opponents of near-term climate policy to focus the world’s attention on the estimation errors and away from its more important messages: that climate risks are approaching more quickly that previously anticipated, that some sort of policy response will be required to diminish the likelihoods of the most serious of those risks, and that beginning now can be justified by economic arguments anchored on more reliable analysis. Summer 2008 Economics of Climate Change

Additional flaws of the report Tol/Yohe The impacts of climate change on agricultural productivity (esp. Africa) Economic development is estimated to high. E.g. Africa shows only minor signs of convergence. (Agriculture has to increase) Diseases as consequence of climate change are no problem in developed countries. (which Stern predicts) Summer 2008 Economics of Climate Change

Additional flaws of the report Estimates of catastrophic events are extrapolated from other studies without recognizing the outcomes of less pessimistic studies Poverty projections ignore differences in spatial and income classes Generally: Stern uses the most pessimistic study in the literature for water, agriculture and health Tol/Yohe Summer 2008 Economics of Climate Change

Criticism of the used methodology Tol/Yohe The PAGE2002 IAM model is not sufficient to provide robustness and diversity The model assumes no connection b/w vulnerability and economic development. Reproducibility of the underlying calculations and assumptions is not provided. (crucial for any scientific standard) Secondly, the model assumes that vulnerability to climate change is independent of development, but it is widely known that adaptive capacity, and thus net sensitivity and perhaps exposure to climate change, is very site specific and path dependent; see, for example, Yohe and Tol (2002). Both assumptions are at odds with the state of the art, but 5 The Stern Review does discuss adaptation, but this discussion is separated from its discussion on the impacts of climate change and from its discussion on optimal climate policy. 238 WORLD ECONOMICS • Vol. 7 • No. 4 • October–December 2006 Richard S. J. Tol & Gary W. Yohe no model is perfect. Our only point here is that both of these assumptions imply that the impact estimates are overly pessimistic. Summer 2008 Economics of Climate Change

Criticism of the used methodology Tol/Yohe Double counting of certain parameters leads to higher estimates of the impacts Model implies “no-learning” behavior (neither about the climate system itself nor about impacts of climate change) Secondly, the model assumes that vulnerability to climate change is independent of development, but it is widely known that adaptive capacity, and thus net sensitivity and perhaps exposure to climate change, is very site specific and path dependent; see, for example, Yohe and Tol (2002). Both assumptions are at odds with the state of the art, but 5 The Stern Review does discuss adaptation, but this discussion is separated from its discussion on the impacts of climate change and from its discussion on optimal climate policy. 238 WORLD ECONOMICS • Vol. 7 • No. 4 • October–December 2006 Richard S. J. Tol & Gary W. Yohe no model is perfect. Our only point here is that both of these assumptions imply that the impact estimates are overly pessimistic. Summer 2008 Economics of Climate Change

Economics of Climate Change Action now? Stern (as well as others): proves the need for action in order to limit the likelihood of crossing a certain temperature threshold Policy problem: applying a scarcity rent to the current emissions Delay CANNOT BE a least cost approach Tol/Yohe None of our concerns undermines the fundamental conclusion of the Stern Review that immediate action can be justified on economic grounds. To see this, we note simply that Figure 2 in the Executive Summary of the Review, for which the underlying detail is provided by Warren et al. (2006), provides ample evidence of serious risk from climate change that may have grown since the last global assessment of the literature (Smith et al., 2001). We acknowledge that Article 2 of the United Nations Framework Convention on Climate Change legitimizes looking at those risks to decide what is dangerous. As soon as someone does that, then we know that he or she can identify a temperature threshold of intolerable risk. When he or she looks at the top of Stern’s Figure 2, however, it becomes clear that no concentration limit, and therefore no emissions limit, can guarantee that the planet will not experience temperatures beyond that All studies –200 –100 100 200 300 400 0% PRTP 1% PRTP 3% PRTP Dollar per tonne of carbon Peer-reviewed Figure 3: Estimates of the marginal damage costs of CO2 The figure shows the estimate of the marginal damage costs of carbon dioxide according to the Stern Review (tinted line) and according to the meta-analysis of Tol (2005) (diamonds: mean; range: 67% confidence interval) for all studies and various subsamples; also shown are the marginal damage cost estimates according to FUND2.9 (tinted square). 244 WORLD ECONOMICS • Vol. 7 • No. 4 • October–December 2006 Richard S. J. Tol & Gary W. Yohe threshold. Indeed, we know that the best that can be achieved by any intervention is a reduction in the likelihood of crossing that threshold. In any case, we argue that Stern’s Figure 2 makes it clear to nearly every reader that some sort of climate policy designed to reduce the emissions of greenhouse gases will be required. As soon as that happens, the case for immediate action is made because we know that the economics of exhaustible resources kicks into play. Moving concentration maxima around to manipulate the likelihood of crossing temperature thresholds depends, at least to a first approximation, on cumulative emissions from today until the limit is sustained (and beyond, actually). The policy problem is, therefore, one of computing a scarcity rent for emissions and applying it to the cost of current emissions.14 Put another way, the economics of dynamics resource management show irrefutably that delay cannot be a least cost approach to achieving any climate policy target. Period. There is no need to stuff exaggerated estimates of damages into inappropriate benefit–cost calculations to justify near-term policy. Economic analysis supports immediate action as soon as climate change is recognized as a threat; and Yohe et al. (2004) show that this conclusion holds even if the ultimate climate policy target is, at the moment, unknown. We are not aware of any serious study that casts doubt on the above reasoning. In order to do that, it has to be certain (a) that future greenhouse gas emissions will fall rapidly without climate policy; (b) that higher greenhouse gas concentrations do not lead to warming; or (c) that climate change will not have net negative impacts. Such certainty is unwarranted. There is, of course, vigorous debate on the required intensity of immediate action—but recommendations range upwards from a little (rather than no) abatement today (Wigley et al., 1996; Tol, 2005). There is also debate on the appropriate mix of immediate action. Different studies advocate different emphases on immediate emission reduction versus research on carbon-neutral technology versus institutional development to enable future emission reduction—but no study advocates that any of the three is set to zero. Summer 2008 Economics of Climate Change

Economics of Climate Change Action now? Little debate on the necessity of action, but on the way of conducting emission reductions Various studies propose different actions Immediate emission reductions R&D on carbon-neutral technology Institutional development Tol/Yohe Summer 2008 Economics of Climate Change

Policy implication of the Review Stern‘s problem of rather confusing, instead of convincing arguments Should focus on the schematic portrait of climate risks instead of economic estimates Credibility problem is caused by contradictory messages accross the review Tol/Yohe The policy implications of the Stern Review are, we fear, bleak. The damage estimates are, themselves, enough to undermine its ability to galvanize support for near-term intervention. Climate change skeptics and climate policy opponents long adopted a strategy that is best summarized by what is reputed to be their mantra: “If you can’t convince them, confuse them.” Skeptics and opponents will welcome an open discussion of the Review as long as it focuses on the economic estimates and not the schematic portrait of climate risks. Why? Because those estimates are vulnerable to valid criticism of the sort described above. Because debate about the credibility of damages estimates will evoke the memory of Benjamin Disraeli and his thoughts about lying with statistics. And because the resulting chaos will keep people from focusing on the real messages of the Review. They are three in number. First of all, climate risks may be approaching more quickly that previously anticipated; i.e., the canaries in the mineshaft may have started to die. Secondly, it follows that some sort of policy response will be required at some point in time if only to diminish the likelihoods of the most serious of those risks; i.e., we buy insurance against all sorts of threats, so why not climate? Finally, intervening now can be justified by solid economic argument based on economic efficiency and anchored analysis that cannot be attacked; i.e., it does not take incredible damage estimates to conclude that the least cost approach to reducing climate risks necessarily includes doing something tomorrow if not today. Summer 2008 Economics of Climate Change

Tol‘s integrated approach Costless mitigation with a global welfare function This Figure shows the benefits of going from a business as usual policy to a costless mitigation policy in terms of change of CBGE for various pure rates of time preference, risk aversion and socio-economic scenario choices. Figure 1 shows the mean change in BGE over all socio-economic scenarios, with the minimum and maximum shown on the error bars. The numbers in this figure form the model sensitivity analysis to the results of the Stern Review. The result from Figure 1 show that the first effect strongly dominates the second in the kind of uncertainty analysis employed for this paper, i.e. that the increase in the discount rate offsets the increase in risk aversion. The Stern Review itself pointed out that a global welfare function cannot take into account how damages are distributed with respect to high/low income regions, and that a regional disaggregated welfare function would be a more appropriate choice. Figure 2 shows results using a social welfare function that is disaggregated into 16 world regions, again with the mean (and minimum and maximum) of the socio-economic scenarios for a costless mitigation policy. There are three key insights: First, using a disaggregated regional social welfare function always increases total damage estimates; second, the role of η is reversed; and third, high η values lead to estimates that are very large. Source: David Anthoff1, Richard S.J. Tol Summer 2008 Economics of Climate Change

Tol‘s integrated approach Costless mitigation with a regional welfare function This Figure shows results using a social welfare function that is disaggregated into 16 world regions, again with the mean (and minimum and maximum) of the socio-economic scenarios for a costless mitigation policy. There are three key insights: First, using a disaggregated regional social welfare function always increases total damage estimates; second, the role of η is reversed; and third, high η values lead to estimates that are very large. Source: David Anthoff1, Richard S.J. Tol Summer 2008 Economics of Climate Change

Economics of Climate Change Conclusions TOL/YOHE Tol/Yohe Stopping or slowing climate change require deep emission cuts everywhere Time horizon: 50-100+ years Stern‘s review misses an opportunity of having greater impact in order to mitigate climate change Summer 2008 Economics of Climate Change

Economics of Climate Change Nordhaus article The author of the article, William Nordhaus, is the Sterling Professor of Economics at Yale University This article is the most well-known criticism against Stern review How much and how fast should we react to the threat of global warming? Summer 2008 Economics of Climate Change

Economics of Climate Change Background Stern Review is ordered by British Government Stern Review is above all political document results of Stern Review are dramatically different comparing to earlier economic models that use the same basic data and analytical structure Nordhaus article Summer 2008 Economics of Climate Change

Economics of Climate Change Agreement Nordhaus admits that climate change is a major issue Something have to be done Stern review links both economic and environmental issues Nordhaus article Summer 2008 Economics of Climate Change

Economics of Climate Change Disagreement Discount rate Uncertainity of future political of scientific report? Summer 2008 Economics of Climate Change

Economics of Climate Change Discount rate Stern assumes the economic growth rate of 1,3 % discount rate of 0,1 % the real interest rate is 1,4 % Consumption elasticity γ = 1 discount rate have a large impact when counting net present values Nordhaus uses term ”near-zero discount rate” Summer 2008 Economics of Climate Change

Economics of Climate Change Discount rate the social reasoning for discount rate is largely irrelevant are the generations equivalent with each other? Review does not consider alternative approaches to critical reasoning of discount rate Summer 2008 Economics of Climate Change

Example of discount rate present value of €1000 after 100 years with variable interest rates Summer 2008 Economics of Climate Change

Economics of Climate Change Discount rate Stern motivates the discount rate of 0,1 %, cause there are no reason for set different generations to different situation How willing we are to make sacrifices for future’s generations? Summer 2008 Economics of Climate Change

Economics of Climate Change Discount rate consumption per capita is now approximately $10 000 in the year 2200 the amount is $130 000 (by 1,3 % growth of output) how much we should reduce your consumption? Summer 2008 Economics of Climate Change

Economics of Climate Change Example Summer 2008 Economics of Climate Change

Economics of Climate Change Discount rate Stern says that with the 1 % sacrifice from GDP we will avoid the 5 % damage in GDP In that example with Stern’s numbers it’s cool but if the interest rate is bigger? that’s the main point in criticism of Stern review Summer 2008 Economics of Climate Change

Economics of Climate Change Discount rate this is a cost-benefit issue the criticism does not critize the policy against climate change but the the timeline of the acts Summer 2008 Economics of Climate Change

Economics of Climate Change Discount rate Nordhaus suggest different policy against climate change first we should invest in technology and human capital later deeper emission cuts ”Stern review’s approach is inefficient, because it invests too much in low yield abatement strategies too early.” Summer 2008 Economics of Climate Change

Uncertainity of future Nordhaus does not recommend sharp sacrifices now, cause the future is uncertain think about the world 200 years ago as said he emphasize investing in technology Summer 2008 Economics of Climate Change

Economics of Climate Change Nordhaus’ DICE-model Dynamic Integrated model of Climate and Economy Nordhaus try to find optimal climate policy DICE calculate capital investment and GHG-reductions that maximize a social welfare function discount rate 1,5 % consumption elasticity 2 Summer 2008 Economics of Climate Change

Economics of Climate Change DICE-model analytical structure is similar to that in the Stern Review Nordhaus makes three runs to find the optimal policy DICE-2007 model Stern review (near-zero discount rate) near-zero discount and recalibrated consumption elasticity Summer 2008 Economics of Climate Change

Economics of Climate Change Results Run 1 optimal carbon price in the year 2015 $35 per ton C in 2050 $85 per ton C in 2100 $206 per ton C social cost of carbon in 2015 also $35 per ton C optimal rate of emission cuts 14 % in the year 2015 25 % in 2050 43 % in 2100 this leads to 2.3 degrees temperature increase from 1900 to 2100 Summer 2008 Economics of Climate Change

Economics of Climate Change Results Nordhaus counted run 2 with the same assumptions, but different discount rate Review estimates that the current social cost of carbon is $350 per ton C optimal carbon price in the year 2015 $360 per ton C optimal rate of emission cuts 53 % in the year 2015 real returns are too low and savings rates too high compared to market data Summer 2008 Economics of Climate Change

Economics of Climate Change Results Run 3 optimal carbon price in the year 2015 $36 per ton C why it looks so similar even though discount rate is so small? Ramsey’s rule Summer 2008 Economics of Climate Change

Economics of Climate Change Results Summer 2008 Economics of Climate Change

Conclusion about the results there are many perspectives to view the future costs and benefits policies to slow global warming these figures illustrate that it is not only the discount rate which determines the carbon tax but the combination of the discount rate and consumtion elasticity work through the rate of return on capital Summer 2008 Economics of Climate Change

Political of scientific report? Gordon Brown ”ordered” the report about the economical effects of climate change there are no rules about government reports produced by scientists review is not a standard academic analysis it was published without peer review written pretty rapidly Summer 2008 Economics of Climate Change

Economics of Climate Change Conclusion Harry Truman: ”Economists would always say, on the one hand this and on the other hand that.” Stern review really gives clear answers Nordhaus find that the conclusions of the Stern review will not survive with more consistent assumptions Summer 2008 Economics of Climate Change

Economics of Climate Change Other Opinions Most economists (Solow, Stiglitz, Wolfowitz, et.al) support the conduct and findings of the Stern Review Especially after the 4th Assessment report of the IPCC was published, scientific evidence is clearly favoring Stern‘s conclusions Some methodological drawbacks are challenged by various economists Summer 2008 Economics of Climate Change

Economics of Climate Change Other Opinions “When the history of the world's response to climate change is written, the Stern Review will be recognized as a turning point. Sir Nicholas and his team have provided important intellectual leadership as humanity engages with its greatest challenge. While the details will be debated, the main thrust of the report is clear and compelling — the expected benefits of tackling climate change far outweigh the expected costs.” Cameron Hepburn Oxford University Summer 2008 Economics of Climate Change

Economics of Climate Change Personal Opinion Stern provides a well-written state-of-the-art review on the most pressing issues Disagreement of means of approach, ethics and conduct, rather than methodological flaws The global distribution of temperature increase which is not considered appropriately (“equity weight”) Ethic concerns: distant from real-world-consequences and sterile (political, social and human consequences) Personal points of critique After having dealt with various kinds of climate change related articles and understanding at least parts of this complex causality, I have had a great deal of pleasure plunging into the reviews chapters. This – in my personal interpretation – was due to a bundle of approaches that have been used throughout the review that are scientifically sound, but not to complex to follow. Nevertheless I am inclined to mention at least some parts that I can not entirely agree with. These are mainly issues of approach, ethics and conduct, rather than methodological flaws, which I can not judge upon because of lack of background information. One of these points concerns the global distribution of temperature increase which is not considered appropriately and is therefore missing in many modelling approaches. The fact that these are sometimes mentioned as “equity weight” approach that – as should be clear to the reader anyways – yields higher values of impacts overall does not suffice for a report of that scale. I mentioning the importance of further research, the review points into the right direction, yet fails to provide more useful information. Having studied some system analysis, this approach seems pretty obvious to easily depict qualitative as well as quantitative models of unevenly distributed impacts of temperature increase around the globe. On of the ways how this can be conducted is using some basic system models by including at least the most important global aspects. Even when omitting hard facts, it still represents a guideline of possible outcomes of climate change. This leads to the next issue which concerns ethics. When reading through the article I felt distant from real-world-consequences and sterile in the sense of not appropriately valuing human pain and welfare consequences even for Westerners. The political, social and human consequences that are likely to accompany climate change are – at most – briefly mentioned. They have nonetheless the capacity of disrupting social patterns as we know them today and impose new problems to poor countries which may also spread out to become a global issue (i.e. increase emigration pressure, war and the like). Summer 2008 Economics of Climate Change

Economics of Climate Change Questions 1. Which are the main flaws of the Stern review that Nordhaus mentions? Summer 2008 Economics of Climate Change

Economics of Climate Change Questions 2. How does Nordhaus argue in favour of his opinion of the optimal GHG emission cut policy? Summer 2008 Economics of Climate Change

Economics of Climate Change Questions 3. What's the politic/science dilemma of the Stern Review? Summer 2008 Economics of Climate Change

Economics of Climate Change Questions 4. Does the critic diminish the conclusions of Stern Review? (your personal opinion?) Summer 2008 Economics of Climate Change

Economics of Climate Change Questions 5. What kind of other critic have you heard from the media? Is that critic valid? (Not only concerning the Stern Review but the entire Climate Change debate) Summer 2008 Economics of Climate Change

Economics of Climate Change Questions 6. Tol and Yohe mention the credibility problem that is caused by using biased parameters in Stern’s calculations of impacts and costs. What are these? Can you propose other possibilities? Summer 2008 Economics of Climate Change

Economics of Climate Change Questions 7. How is it possible that Stern apparently suggests a less stringent policy mix than other studies using some of the same research results? Is there an advantage to that (i.e. not having too ambiguous goals that are possible to reach)? Summer 2008 Economics of Climate Change

Economics of Climate Change Questions 8. What do you think about the review in general? Is the critique appropriate? Do you have any thoughts about that issue? - meant to be a question for all of you who have a) strong arguments PRO or CON b) not been heard sufficiently throughout the class c) not been awarded enough grade points during this class…. and who want some! Summer 2008 Economics of Climate Change