Nicholas Stern, Baron Stern of Brentford

Nicholas Herbert Stern, Baron Stern of Brentford, (born 22 April 1946 in Hammersmith ) is a British economist, banker, and academic.

After attending Latymer Upper School, Stern studied the Mathematical Tripos and was awarded a Bachelor of Arts degree in maths at Peterhouse, Cambridge in 1967.

He was a lecturer at the University of Oxford from 1970 to 1977 and served as a professor of economics at the University of Warwick from 1978 to 1987.

In 1971, his doctorate in economics (DPhilEcon) at Nuffield College, Oxford, with thesis on the rate of economic development and the theory of optimum planning, was supervised by James Mirrlees, winner of the Nobel Prize in Economics in 1996.

From 1986 to 1993 he taught at the London School of Economics, becoming the Sir John Hicks Professor of Economics.

From 1994 until 1999 he was the Chief Economist and Special Counsellor to the President of the European Bank for Reconstruction and Development.

His research focused on economic development and growth, and he also wrote books on Kenya and the Green Revolution in India.

Using too low a discount rate wastes resources because it will result in too much investment in cutting emissions (Arrow et al., 1996, p. 130).

Too high a discount rate will have the opposite effect, and lead to under-investment in cutting emissions.

Most studies on the damages of climate change use a higher discount rate than that used in the Stern Review.

Since 1999, he has been a member of the International Advisory Council of the Center for Social and Economic Research (CASE).

From 1999 until 2000 Stern was Chairman of the consultancy London Economics founded by John Kay.

From 2000 to 2003 he was the Chief Economist and Senior Vice-president of the World Bank.

Stern was then recruited by Gordon Brown, then Chancellor of the Exchequer, to work for the British government where, in 2003, he became second permanent secretary at HM Treasury, initially with responsibility for public finances, and head of the Government Economic Service.

Having also been Director of Policy and Research for the Commission for Africa, in July 2005 he was appointed to conduct reviews on the economics of climate change and also of development, which led to the publication of the Stern Review.

The Stern Review Report on the Economics of Climate Change was produced by a team led by Stern at HM Treasury, and was released in October 2006.

In the review, climate change is described as an economic externality, which is a type of market failure.

Stern has subsequently referred to the climate change externality as the largest ever market failure:

"Climate change is a result of the greatest market failure the world has seen. The evidence on the seriousness of the risks from inaction or delayed action is now overwhelming ... The problem of climate change involves a fundamental failure of markets: those who damage others by emitting greenhouse gases generally do not pay"

Regulation, carbon taxes and carbon trading, along with pollution permits and property rights, are recommended to reduce greenhouse gas emissions.

It is argued that the world economy can lower its greenhouse gas emissions at a significant but manageable cost.

The review concludes that immediate reductions of greenhouse gas emissions are necessary to reduce the worst risks of climate change.

The review's conclusions were widely reported in the press.

Stern's relatively large cost estimates of 'business-as-usual' climate change damages received particular attention.

These are the estimated damages that might occur should no further effort be made to cut greenhouse gas emissions.

There has been a mixed reaction to the Stern Review from economists.

Several economists have been critical of the review, for example, a paper by Byatt et al. (2006) describes the review as "deeply flawed".

Some have supported the Review,

while others have argued that Stern's conclusions are reasonable, even if the method by which he reached them is incorrect.

The Stern Review team has responded to criticisms of the review in several papers.

Stern has also gone on to say that he underestimated the risks of climate change in the Stern Review.

Stern's approach to discounting has been debated amongst economists.

The discount rate allows economic effects occurring at different times to be compared.

Stern used a discount rate in his calculation of the effects of "business-as-usual" climate change damages.

A high discount rate reduces the calculated benefit of reducing greenhouse gas emissions.

At the time, he ceased to be a second permanent secretary at the Treasury, though he retained the rank until retirement in 2007; the review team he headed was based in the Cabinet Office.

It was reported that Stern's time at the Treasury was marked by tensions with his boss, Gordon Brown:

"... several Whitehall sources told The Times that Mr Brown did not like some of the advice he received from Sir Nicholas, including some 'home truths' about long-term trends in the economy and he never broke into the chancellor's tight-knit inner circle. ... He subsequently lacked a real role and spent most of his time working on major international reports on global warming and alleviating poverty in Africa. His doom-laden report on the risks of failing to address climate change, published in October, caused tensions within the Government by triggering a debate on environmental taxes and leading to calls for big policy changes."

He is the IG Patel Professor of Economics and Government and Chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics (LSE), and 2010 Professor of Collège de France.

He was President of the British Academy from 2013 to 2017, and was elected Fellow of the Royal Society in 2014.