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Review of Environmental Economics and Policy Advance Access published online on April 23, 2008
Review of Environmental Economics and Policy, doi:10.1093/reep/rem024
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© The Author 2008. Published by Oxford University Press on behalf of the Association of Environmental and Resource Economists. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org

An Even Sterner Review: Introducing Relative Prices into the Discounting Debate

Thomas Sterner* and U. Martin Persson**

* Department of Economics, Göteborg University, Sweden
** Physical Resource Theory, Chalmers University of Technology, Sweden

The first 150 words of the full text of this article appear below.


   Introduction
 
The Stern Review (2006) has come to symbolize something of a dividing line in the evolution of the common appreciation of the climate problem. It is fair to say that during the last decade, there has been a gradual but uneven increase in the perceived gravity of anthropogenic climate change, among scientists and, with some time lag, the general public. However, save the United Nations’ Intergovernmental Panel on Climate Change (IPCC) assessments (see for example, IPCC, 2001, 2007a, b), the Stern Review is the first major, official economic report to give climate change a really prominent place among global problems. The political backing of the Stern Review in the UK—at its first presentation, Sir Nicholas Stern was flanked by both Prime Minister Tony Blair and Chancellor Gordon Brown—has been impressive and one of the factors commanding attention.

Still, the Stern Review has been criticized on a number . . . [Full Text of this Article]


   The Stern Review's Presentation of Damage Estimates
 

   Discussion of the Discount Rate
 
The Discount Rate Used in the Stern Review
The Size of {delta}–-How Much Should We Care about Future Generations?
The Size of {eta}–-How Curved Is the Utility Function?
The Rate of Growth

   Substitutability, the Content of Growth, and the Role of Relative Prices
 

   Discount Rates and Relative Prices—A Numerical Illustration
 
The Impact of the Discount Rate
The Impact of Changing Relative Prices
Sensitivity Analysis

   Underestimating Nonmarket Impacts
 

   Summary and Conclusion
 

   Appendix A: Incorporating Relative Prices into DICE
 

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