A time for action on climate change and a time for change in economics

In this paper, Nicholas Stern argues that the COVID-19 and climate crises, and the weaknesses that produced them, should be tackled together and that the response must be a new sustainable, resilient and inclusive approach to growth and development. The paper explores relevant policies and actions and then turns to the changes to economics necessary to pursue these ideas and imperatives. The core finding of The Economics of Climate Change: The Stern Review – that the costs of inaction on climate change are much greater than the costs of action – was compelling when the Review was published in 2006; 15 years on it is even stronger. While greenhouse gas emissions have continued to rise and the impacts of climate change have manifested faster and with greater intensity than expected, the costs of clean energy technologies have been falling further and more quickly than anticipated. Any reasonable estimate of the costs of inaction would be still higher now, and the costs of action lower, than in 2006. The deeper understanding of the problem that we now have, the paper argues, implies that we must shift the focus of our economic analyses towards the dynamics of change, the fostering of investment and innovation necessary, the management of disruption, and the great opportunities that lie in a new form of development