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A Sterner Review from RFF

August 20th, 2007

Via Joe Romm at Climate Progress this report by Thomas Sterner and Martin Persson from the leading US environmental thinktank, Resources for the Future*, endorsing the key conclusions of the Stern Review. (Given the apt surname of the first author, it’s called “An Even Sterner Review”).

As in my own assessment, Sterner and Persson argue that Stern underestimates nonmarket damages from climate change.

For a related comment on a piece by Ron Bailey, with lots of useful links, including an earlier version of this paper, here’s Tokyo Tom

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  1. Hermit
    August 21st, 2007 at 10:56 | #1

    A couple of quick observations. A goal such as ‘the next generation shouldn’t have to do it tough’ could be formulated as a curved weighting function using both a discount rate and a time limit (say 20 years) for a planning horizon. The RFF paper talks about relative prices but seems to assume gross real incomes will be maintained. Tourism operators know they are out of business if their product is unaffordable.

    From a quick reading neither paper seems to endorse Stern’s claim that emerging green industries can restore GDP to erstwhile glory. However I’m sure halving of coal use would kneecap the economy and I think tough times are ahead whatever we do.

  2. Peter Wood
    August 21st, 2007 at 18:45 | #2

    An good and interesting paper. I agree Stern underestimates nonmarket damages from climate change. There is one thing in the graph on p13 “Optimal CO2 Emission Paths in the Modified DICE Model” that doesn’t make sense to me. The three different emissions paths start in about 2005 with different values of CO2 emissions, ranging from about 5 GtC/yr to 7 GtC/yr. Shouldn’t all three paths start from the same emissions level – whatever emissions are today?

    There is something about discount rates that I have been wondering about lately. Different electricity generation technologies have different capital costs and different fuel/operating costs. Renewables generally have a higher capital costs and lower operating costs. When the cost of electricity is given for a particular technology, it is a combination of these costs. I am wondering what discount rate is used to calculate these costs. Presumably a high discount rate would favour technologies like coal and gas while a low discount rate would favour renewables. Nowhere yet have I seen what diiscount rates are used when these calculations are made.

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