Twenty years after the Stern Review the world looked away, and the economics got better

 Blog post, based on the LSE launch of The Growth Story of the 21st Century (5 November 2025).

In a nutshell. Twenty years on, Lord Stern's verdict is that the climate is changing faster and more severely than we thought in 2006, and that the Review's core argument has only grown stronger: preventing climate damage costs far less than living with its effects. His own summary at the launch was that the original conclusions were right, and are stronger today.

1. Background: how the world lost the thread

Climate change did not disappear from the news. It disappeared from the agenda. Those are different things.

Every few years a new shock takes the room. A financial crisis. A pandemic. A war in Europe. Artificial Intelligence. An election that changes who holds the budget. Each of these is serious, and none of them is an excuse that anyone should have to defend. 

But Nicola Ranger, speaking at the LSE launch, described the pattern plainly: when shocks hit, political capacity and fiscal space shrink, and the climate agenda rolls back. The transition she and her colleagues expected twenty years ago to be smooth has turned out to be a process of shocks.

Meanwhile the reporting goes on. Each year brings new records, new floods, new fires, and new assessments. Lord Stern put it simply: every time you look at the science, it looks worse. Tipping points once thought to sit at three, four or five degrees now look like risks at 1.5 or 2. What is new, much of the time, is the reporting. The warning itself is old. The plan to act on it has too often stood still.

“Every time you look at the science it looks worse.” (Lord Stern)

This matters because of how the problem works. Dimitri Zenghelis used a bathtub to explain it. Greenhouse gases stay in the atmosphere for tens or hundreds of years, so it is the stock, not the annual flow, that sets the temperature. To stabilise a stock, inflows must equal outflows, which means net zero. Every year of distraction is a year of water still running into the tub.

Why the Stern Review came about

By the mid-2000s the science was well established, but governments were stuck on one question: what would acting cost, and could the economy afford it? The UK government's answer was to commission an economist. The Stern Review on the Economics of Climate Change was commissioned by the then Chancellor, Gordon Brown, and published in 2006.

Why it was important

The Review changed the question. It made three arguments that Stern says still hold, and are now stronger:

1. The cost of action is much smaller than the cost of inaction.
2. The world does not have to choose between averting climate change and growth.
3. Climate change is the greatest market failure the world has seen.

It also insisted on an ethical position that many economists had avoided. Pure time discounting, giving less weight to someone simply because they are born later, is in Stern's words ethically indefensible. That argument became the most debated part of the Review. Stern now says the risks were always the bigger issue.

2. The impact of the Stern Review

The clearest evidence of impact, offered at the launch, is the size of the body of work it started. Ranger told the audience that thousands of papers have been written about the Review, and that it catalysed a whole new economics of thinking about these issues.

The shift in framing is the lasting result. Before 2006, climate was often treated as an environmental cost to be traded off against growth. After it, the debate moved to how much action is worth, how to manage risk, and what the right discount rate is. A policy argument became an economic argument, and finance ministries had to engage with it.

Two cautions are worth stating. First, the Review did not settle the politics. Stern himself says that the question of whether to act is something he hopes is now settled, and then spends the book on how to act. Second, the Review was strong on prices and markets. Ranger recalled long meetings with Stern and Zenghelis about prices versus quantities. The new book moves well beyond carbon pricing alone.

“Driving towards a cliff can’t be described as realism.” (Lord Stern)

3. What happened in the twenty years since

Clean technology got far cheaper, faster than anyone forecast. Zenghelis said that if he had predicted ten years ago that solar and battery costs would fall by 80 to 90 percent in a decade, he would have been escorted out by security. No authoritative body predicted it. Solar PV costs have fallen by 99.9 percent since the technology was first used on satellites in the 1950s, while the cost of burning coal or gas has not fallen at all.

Cost and deployment began to reinforce each other. Lower costs led to more deployment, which led to learning by doing, economies of scale in gigafactories, and further cost falls. Zenghelis compared it to a microphone held in front of a speaker: rapid, unexpected change.

Investment started to tip. Stern said investment in the new and the clean is now surpassing investment in the old. It was roughly one to one about five years ago and could be two to one within a year or two. More than half of the electric vehicles on the road are in China, and its next five-year plan, covering 2026 to 2030, may be the most important event for the climate.

“The clean is cheaper than the dirty.” (Lord Stern)

The goal moved from cutting emissions to net zero. The original target of an 80 percent cut by 2050 gave way to net zero, because stabilising temperature requires stabilising concentrations. Net zero is not increased ambition, it is simple science and logic.

“You don’t get to net zero with zero consumption.” (Lord Stern)

Nature and development moved to the centre. Ranger noted, from an informal text analysis, that mentions of mitigation in the new book are down 44 percent compared with the original, while nature, biodiversity and natural capital are up 2,700 percent. Developing countries are now seen less as aid recipients and more as engines of growth, rich in natural capital, critical minerals and people.

Shocks and trust took a toll. A global financial crisis, a pandemic and wars slowed the agenda. Stern added that trust was fractured, largely by the rich world: vaccine apartheid in COVID, demands on poor nations after the invasion of Ukraine, and slow delivery on climate finance promises.

4. Now what? A call to action

Stern describes himself as enormously optimistic about what we can do and not very optimistic about what we will do. The gap between those two is the job. Here is where the launch said to start.

“Am I optimistic about what we will do? Not really. But that’s our job.” (Lord Stern)

1. Treat it as an investment story. For emerging markets and developing countries, other than China, the estimate presented was about 2.4 trillion dollars a year by 2030, with roughly 60 percent financed domestically and about 1 trillion from outside. Scaled by 30 percent for 2035, that is the 1.3 trillion embodied in the roadmap from Baku to Belém. The number is not mysterious, and the task is to mobilise it.

“Investment, investment, investment is at the heart of all this.” (Lord Stern)

2. Build an active state. Carbon pricing is necessary and not sufficient. Public policy has to correct the other market failures too: research and development, risk in capital markets, networks, information, and development bank support. Most investment will be private. The state creates the signals and conditions.

“Public policy as if time matters.” (Lord Stern)

3. Bring down the cost of electricity. Stern's practical message to the UK government was to lower electricity prices before the next election, so that people see for themselves that clean is cheaper than dirty. He asked for standards rather than the word regulation, since nobody wants low standards.

4. Measure and invest in nature. Natural capital is infrastructure, and in Ranger's phrase too big to fail. Zenghelis added that you cannot manage a forest or a fishery if you do not know whether the stock is rising or falling. Better measurement and monitoring is a cheap place to start.

5. Communicate positively. Ranger argued against a war framing, since surveys suggest the public wants clean energy and investment in nature. Zenghelis suggested reducing the case to two points: the risks are real and growing, and there is opportunity and self-interest within reach in a short time. Stern added that the messenger matters, and that misinformation should be exposed by naming who it comes from and what they gain.

“People sometimes forgive and nature never forgives.” (Lord Stern, quoting Pope Francis)

6. Step forward when others step back. If a major country retreats, others have an opportunity and an obligation to lead. Stern pointed to China, the European Union if it can act together, India, and an Africa-led investment agenda.

The last word belongs to the framing of the book. This is not growth forever, and not the dirty growth of the past. It is growth that breaks the link between economic activity and destruction of the environment. The Stern Review asked the world to consider the cost. Twenty years on, the more useful question is who will build the new before the old runs down.

The short version

The science has come through faster and more severely than we expected twenty years ago, and tipping points once placed at three or four degrees now look like risks at 1.5 or 2. The Review's three propositions still stand, and Lord Stern says they are stronger now: acting costs much less than not acting, and investing in prevention today is cheaper than paying for the damage later. On that central point, we were right. What is left is the harder question of how fast we will act.

“Success will be if I don’t have to write another book.” (Lord Stern)

Source

London School of Economics and Political Science. (2025, November 5). The growth story of the 21st century: The economics and opportunity of climate action [Public event: Lecture and panel with N. Stern, N. Ranger, and D. Zenghelis, chaired by S. Mourato]. Grantham Research Institute on Climate Change and the Environment and Global School of Sustainability. https://www.lse.ac.uk/granthaminstitute/events/the-21st-century-growth-story-economics-and-opportunities-of-climate-action/

Stern, N. (2025). The growth story of the 21st century: The economics and opportunity of climate action. LSE Press. https://doi.org/10.31389/lsepress.tgs

Hailstone, J. (2026, October 30). Lord Nicholas Stern On The Economics Of Climate Change, 20 Years On. Retrieved from Forbes website: https://www.forbes.com/sites/jamiehailstone/2026/10/30/lord-nicholas-stern-on-the-economics-of-climate-change-20-years-on/

A Personal Note

Although I do not know him well personally, I consider him one of my great teachers. I was lucky to audit Prof. Stern's course on development economics in 1993 when I spent 3 months at the London School of Economics. I was particularly impressed by how he started establishing some basic facts and principles and then very quickly went into high level, complicated matters. Never missed a class. His comments on methodology were crucial for my doctoral thesis. If you have time, listen to this lecture.