The Stern Review on climate change, 20 years on

It is 20 years since we both stood with Tony Blair and Gordon Brown, then UK Prime Minister and Chancellor respectively, at the Royal Society in London to launch the Stern Review on the Economics of Climate Change. Its central conclusion was that cutting greenhouse gas emissions would be far less expensive than living with rising emissions. Two decades of evidence have only strengthened this finding.

Cheaper renewable energy hasn’t slowed down emissions

Since 2006, clean technology has advanced remarkably, with great gains in battery capacity, and remarkable falls in the price of solar and wind power. The International Energy Agency reports that nuclear and renewables met 60 per cent of the rise in global energy demand in 2025. Solar and onshore wind now provide the cheapest new source of electricity in many parts of the world, and renewables are set to overtake coal-fired power generation in 2026. Meanwhile the costs of global warming are rising – impacting life and livelihood on every continent.

Yet with rising energy demand, fossil fuel use has kept growing (coal is making something of a comeback in Asia), and so have emissions. Fossil fuels still provide around 80 per cent of global energy supply, spurred in part by enormous subsidies: the IMF puts explicit subsidies at US$725 billion every year, and when implicit subsidies are included (where taxes on fossil fuels are lower than the costs they cause to society), the figure is US$6.7 trillion per year.

Fossil fuels still provide around 80 per cent of global energy supply, spurred in part by enormous subsidies.

The net result is that temperatures (and extreme weather events) keep rising. The target of limiting the rise in global average temperatures to 1.5-degrees Centigrade above pre-industrial levels will not be met. We are already at 1.4 degrees. In fact, every IPCC Assessment Report looks more worrying. Temperature is rising faster than anticipated, at 0.3 degrees Celsius per decade, and so are the risks of crossing major thresholds, such as destabilisation of Greenland and West Antarctica ice sheets or the collapse of the Amazon forest system.

Ironically, many politicians most concerned about migration ignore climate change’s potential to drive even greater numbers of desperate people fleeing more extreme weather, sea level rise, and circumstances that destroy their lives and livelihoods. Of the IRC’s list of countries facing greatest humanitarian risk, three quarters are in the top quartile for climate vulnerability.

Politics is still battling the science on climate change

Despite the growing evidence of changing climate and its impact, the science and politics are in tension. The physics says that we will only stop temperatures rising and the impacts of climate change increasing when we stabilise concentrations of greenhouse gases in the atmosphere, in other words, reach net zero globally. The earlier we get there, the lower the temperature at which we stabilise.

However, climate action faces new barriers. The US Administration has renewed its assault on the science. Financial pressures have fuelled a backlash against the perceived costs of climate action in the West, even where action constitutes sound investment that saves resources in the medium term. China’s lead in electrification and its dominance of critical mineral supplies create further friction around a transition to low carbon. With the science clear, politics that is contested, and technology more positive, there are lessons from the last two decades for the next two. It is vital they are learnt.

Five lessons from the last two decades

First, twenty years ago, investing in adaptation and resilience sounded like giving up on mitigation. But as risks have grown, adaptation has become an imperative. It should no longer be the poor cousin in climate action. According to the Global Commission on Adaptation, every $1 invested in adaptation can generate up to $10 in net economic benefits.

Second, energy security has become more urgent. Chokepoints, from Russian gas pipelines to the Strait of Hormuz, are a new focus of geopolitics. The weaponisation of fossil-fuel supply is a strong long-term reason for decarbonization.

Third, China’s remarkable technical progress could and should be a great boon in the drive for low-carbon growth, but China’s industrial dominance in these technologies creates real problems, as concentrated industrial capacity can create dependency, difficulties of resilience in supply chains, and reduce competition. Building capacity for low-carbon technologies such as solar panels and batteries elsewhere, and rapidly, should be a global priority. And trade and industrial policy will be a crucial element of that task.

Fourth, for European countries, which lack the energy independence of the US, a new imperative is greater cross-border energy system interconnectedness alongside a faster shift away from fossil fuels. Mario Draghi has argued persuasively that this is also key to their competitiveness in world markets.

Fifth, AI was only a gleam in the eye twenty years ago. Today, while it is a rising source of energy demand, it promises more efficient grids, better functioning cities, emissions monitoring, materials discovery, and better climate forecasting to support adaptation. Into the 2030s, AI can make the transition faster, smarter, and cheaper.

Twenty years ago, investing in adaptation and resilience sounded like giving up on mitigation. But as risks have grown, adaptation has become an imperative.

The politics of 2026 are very different from those of 2006, and the next two decades will be turbulent. As Jason Bordoff and Meghan O’Sullivan have written: “Moving to a net-zero global economy will require an unprecedented level of global cooperation but will also lead to conflict along the way and ultimately produce winners and losers.”

The difficulty of the politics is no excuse to abandon the rigour, idealism and imagination of the earlier period; we need more of each. In a world that is interconnected but fragmented, and short of unifying leadership, the countries that want to act should support international action more strongly and build new coalitions of the willing, for example, to expand IFI support for the investment that is sorely needed and to build dependable supply chains for processing critical minerals.

Climate action can drive a new growth story. This is the essential insight of the Stern Review that needs to be revived. Green growth is not a contradiction in terms. It is a necessity.

Source : https://blogs.lse.ac.uk/politicsandpolicy/the-stern-review-on-climate-change-20-years-on/