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Stern Review: The Economics of Climate Change Part 4


A reading from the ‘Stern Review: The Economics of Climate Change’ by economist Nicholas Stern for the Government of the United Kingdom which looks at policy response to climate change. Some of the main policies discussed in this reading are carbon pricing, technology advancement, and policies related to availability of information and consumer behaviour.

The reading is subdivided into three chapters, as follows:

  1. Harnessing markets to reduce emissions: This section looks at the types of carbon pricing and policy designs focusing on taxation and trading. It also discusses the difference between the two and how taxation and trading impacts regional and global policy makers differently. [pp 309 – 323 (as per table of contents) or pp 354 – 368 (as per scrolling)]
  2. Carbon pricing and emission markets in practice: This section looks at the practicality of carbon pricing and its application in various sectors. It mainly focuses on the credibility, flexibility and predictability in policy design for carbon pricing. [pp 324 – 346 (as per table of contents) or pp 369 – 391 (as per scrolling)]
  3. Accelerating technological innovation: This section focuses on the motivation behind technology policies specifically focusing on sectors such as power generation, transportation and energy use. It also states the need to invest in R&D for improving existing technologies. [pp 347 – 376 (as per table of contents) or pp 392 – 421 (as per scrolling)]
  4. Beyond carbon markets and technology: This section looks at consumer behaviour and policies that remove barriers that stop individuals from taking action. It also looks at how policies can be used to influence preferences and behaviours – focusing mainly on the energy sector. [pp 377 – 402 (as per table of contents) or pp 422 – 447 (as per scrolling)]

Students will learn about economic policies that focus on reduction of carbon such as carbon pricing, cap and trade, energy production, usage and distribution policies and policies that can change consumer behaviour. They will get a holistic view of how economic policies are designed and how they impact individuals and key economic sectors.

Use this tool to help your students find answers to:

  1. What is ‘Carbon Pricing’?What is the difference between carbon taxation and carbon trading?
  2. Is carbon pricing a practical solution to climate change?
  3. What are some examples of efficient policy making in the energy sector?
About Tool
Tool NamePart IV: Policy responses for mitigation from Stern Review: The Economics of Climate Change 
Topic(s) in DisciplineEconomics of Climate Change, Stern Review, Macroeconomics, Microeconomics, International Economics, Economic Policy, Competitive Market Policies, Economics of Energy, Carbon Pricing, Cap and Trade
Climate TopicClimate Economics 
Type of toolReading (pp 308 to 402) – as per table of content; (pp 353 to 447 ) – as per scrolling
Grade LevelHigh School, Undergraduate
Translation     –
Developed byNicholas Stern 
Hosted atGrupo de Pesquisa em Mudancas Climaticas (GPMC), Brazil
Computer SkillsBasic


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