November 5, 2006

Stern review: a comment by S. Fred Singer

"The Business" presents a trenchant critique of the Stern Report. http://www.thebusinessonline.com/Document.aspx?id=DCCB406A-C15C-4F53-91FB-2F666535DFCD

I comment on two significant points:

1. The use of a "below-market" discount rate has a powerful effect on the cost-benefit ratio when large costs are incurred up front and hypothetical benefits appear only decades later. I called attention to this unrealistic dodge, used by Wm R Cline in his "The Economics of Global Warming" (1992), an early precursor of the Stern Review http://bookstore.petersoninstitute.org/merchant.mvc?Screen=PROD&Product_Code=39

2. The Stern Report (p.131) predicts steeply rising losses from extreme weather events, rising to several percent(!) of world GDP in the latter part of the century. However, he makes the common statistical error of calculating a "trend" by choosing a time interval with an end point that has an extreme value: in this case, the $200 bn loss in 2005.

S. Fred Singer, President
Science & Environmental Policy Project
1600 S. Eads St, #712-S
Arlington, VA 22202-2907
http://www.sepp.org