Did the Stern Review underestimate U.S. and global climate damages?

This research paper by the Stockholm Environment Institute evaluates whether the Stern Review underestimated climate damages for the United States and the world. By revising parameters in the PAGE2002 model—specifically regarding adaptation, catastrophic risk, and the damage function—the authors argue that business-as-usual damages in 2100 could be significantly higher than the Stern Review's estimates, rising from 2.2 percent of global GDP to 10.8 percent.

• The authors conclude that the Stern Review's use of the PAGE2002 model likely underestimated climate damages. While Stern's estimates implied mean business-as-usual damages in 2100 of 0.4 percent of GDP for the United States and 2.2 percent of GDP for the world, the authors' revisions suggest these figures could reach 2.6 percent for the U.S. and 10.8 percent for the world.
• The Stern Review's damage estimates were significantly reduced by assumptions of nearly costless adaptation. In OECD countries, the model assumed 100 percent of economic damages from the first 2 degrees of warming and 90 percent of damages above 2 degrees were eliminated. The authors argue that events like the 2003 European heat wave and 2005 Hurricane Katrina in the U.S. challenge these assumptions.
• The authors identify the Stern Review's treatment of catastrophic risks as too conservative. The original model used a 'most likely' threshold temperature of 5°C before catastrophes became possible, and a probability increase of 10 percentage points per degree Celsius above that threshold. The authors revised these to a 'most likely' threshold of 3°C and a probability increase of 20 percentage points per degree.
• The research suggests the 'most likely' value for the damage function exponent (N) used in the Stern Review (1.3) was too low. The authors adjusted the minimum, most likely, and maximum values of the exponent to <1.5, 2.25, 3>, weighting the higher end of the range more heavily to align with other recent models.
• Incorporating the 83rd percentile outcome—representing the worst of what the IPCC considers 'likely' to occur—substantially increases damage estimates compared to mean outcomes. Under this scenario, total annual damages in 2100 are estimated at 2.6 percent of GDP for the USA, 6.2 percent for other OECD countries, and 13.5 percent for the Rest of the World.
• A separate sectoral study by the authors found that annual damages to the U.S. economy by 2100 from just four sectors (hurricane damages, residential real estate losses from sea-level rise, energy sector costs, and water supply costs) would equal 1.8 percent of GDP. This is three times the size of the comparable aggregate economic damage estimate (0.6 percent of GDP) produced by the revised PAGE2002 model at the 83rd percentile.

APA

Ackerman, F., Stanton, E. A., Hope, C., & Alberth, S. (2008). Did the Stern Review underestimate U.S. and global climate damages? Stockholm Environment Institute. https://www.sei.org/mediamanager/documents/Publications/Climate/stern-review-us-global-climate-damages.pdf

Chicago

Ackerman, Frank, Elizabeth A. Stanton, Chris Hope, and Stephane Alberth. Did the Stern Review underestimate U.S. and global climate damages? Stockholm Environment Institute, 2008. https://www.sei.org/mediamanager/documents/Publications/Climate/stern-review-us-global-climate-damages.pdf.

Wikipedia

{{cite report |last1=Ackerman |first1=Frank |last2=Stanton |first2=Elizabeth A. |last3=Hope |first3=Chris |last4=Alberth |first4=Stephane |title=Did the Stern Review underestimate U.S. and global climate damages? |publisher=Stockholm Environment Institute |date=October 2008 |url=https://www.sei.org/mediamanager/documents/Publications/Climate/stern-review-us-global-climate-damages.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ackerman2008did, author = {Ackerman, Frank and Stanton, Elizabeth A. and Hope, Chris and Alberth, Stephane}, title = {{Did the Stern Review underestimate U.S. and global climate damages?}}, institution = {Stockholm Environment Institute}, year = {2008}, month = oct, url = {https://www.sei.org/mediamanager/documents/Publications/Climate/stern-review-us-global-climate-damages.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }