Economic risks of climate change get bigger
The economic risks from unchecked climate change are bigger than previously estimated, according to a new paper by Professor Lord Stern, chair of the ESRC Centre for Climate Change Economics and Policy, and Simon Dietz, who is a co-director.
The study warns that the standard DICE model, used in a wide range of economic studies of the potential impacts of climate change, does not reflect the full extent of the risks because it “embodies a false assumption that the risks are known, with great confidence, to be small”.
Whereas a new version of the model suggests that the risks are bigger having taken into account that climate change can damage the underlying drivers of economic growth, such as productivity, and not just economic output year by year.
Professor Stern comments: “It is extremely important to understand the severe limitations of standard economic models … I hope our paper will prompt other economists to strive for much better models which will help policy-makers and the public to recognise the immensity the potential risks of unmanaged climate change.”