Connecting Climate Science and Economics, Part 2

In this post I am going to give a summary of the second part of Climate Economics: The State of the Art by Frank Ackerman and Elizabeth Stanton of the Stockholm Environment Institute, which deals with recent advances in the economics of climate change. Part 1, with a discussion of newest results from the climate science, can be found here. A summary of the above report’s overview of research in the economics of mitigation and adaptation will follow.

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Bjørn Lomborg. A Critique

Zielona Grzybnia’s readers may have noticed that my opinion about Bjørn Lomborg, the famous Danish “skeptical environmentalist” (as he calls himself), is rather low. He is one of the most prominent voices in the public discussion on climate change. And, although he sometimes makes important points, in general his work in the field of economic and political analysis of climate change must be viewed with skepticism and criticism.

Discounting in the Economics of Climate Change

It was frequently argued that the discount rate is the most important single figure in the economics of climate change. Due to this figure we observe large differences in policy recommendation between different economists of climate change (most notably, the choice of the discount rate determines the difference in what William Nordhaus on the one hand, and Nicholas Stern, on the other, call for). There is no concrete recommendation in standard economics how to discount long run benefits and losses. But it is clear that, if you want to compare benefits from the future with costs today, you need a discount rate. So far agreement prevails. The problem is the definition (or: choice) of the “right” discount rate, which involves economic forecasts as well as ethical decisions. In the following I shall present an overview about the main arguments in the discussion.

Nicholas Stern on Climate Policy

Here’s a very interesting interview by Frank Ackerman with Nicholas Stern, who are talking about climate policy.

Leontief Prize 2011

I don’t have much time but I nevertheless would like to note the awarding of Nicholas Stern and Martin Weitzman, two distinguished climate economists, with the Leontief Prize of 2011. More below (it is the press release from the Global Development and Environment Institute):

The Inappropriateness of Mainstream Approaches to the Economics of Climate Change

What approach shall we choose in examining the economic impacts of global warming?

Today I found a highly interesting answer to this question – namely, a 2007 report by Frank Ackermann, in which he analyzed  the debate that arose after the publishing of the so called Stern Review on the Economics of Climate Change. Many economists, among them such names as William Nordhaus, Partha Dasgupta or Martin Weitzman (to call just these three), criticized different features of the approach chosen by Sir Nicholas Stern in building up his model that estimates the costs and benefits of fighting climate change.