by Cass Sunstein

The most comprehensive and sustained analysis of climate change, the Stern Review, has just been released. (It can be found here.) Full of information, and massive, it also contains an executive summary that touches on the highlights. The basic conclusion is that the costs of unchecked climate change will be between 5 percent and 10 percent of world GDP, and that the costs of sensible stabilization will be about 1 percent of world GDP. Among the costs of unchecked climate change are exceedingly serious threats to human health, especially in poor countries. There are many complexities in the relevant calculations. Some of the underlying judgments are controversial in terms of science, economics, and ethics. An obvious question is whether the costs of (what the review defines as) sensible stabilization outweigh the benefits. The problem is that such stabilization will not eliminate all of the anticipated 5-10 percent GDP loss; past greenhouse gas emissions, together with continuing emissions at the stabilized rate, will produce substantial warming in any case. But the review clearly suggests that significant, worldwide emissions reductions, starting in the near future, will deliver large benefits at an acceptable cost. An evident complication is that those reductions cannot be achieved by any nation on its own. The United States is the world's leading greenhouse gas emitter, responsible for roughly 20 percent of total emissions. But if the United States stabilized emissions at (say) the level of the 1990s, it would make at best a trivial dent in anticipated warming. One reason is that greenhouse gas emissions are increasing at a rapid rate from developing countries, above all China and India. In fact China is expected to pass the United States, as the world's largest emitter, within a few decades. But even if China stabilized its own emissions, not much would be done about anticipated warming; a global agreement, covering most of the world's significant emitters, is necessary. The Stern Review offers a number of suggestions about how to produce that agreement. It is absolutely indispensable reading for those interested in the problem of climate change. One problem, which the review does not appear adequately to address, involves national incentives. It is not clear that the United States and China can easily be persuaded to enter into the recommended agreement, because both nations are likely to anticipate high compliance costs. It is an understatement to say that for the next American president, this issue presents a serious challenge.