Abstract

In one of the most influential reports on climate change published to date, economist Nicholas Stern (2007, p. viii), described it as the ‘greatest market failure the world has ever seen’. The report estimated that the costs of climate change would be equivalent to at least 5 per cent of global GDP each year unless action was taken. However, these costs were not directly factored into the practices that cause the problem. Stern made three broad policy recommendations to overcome the failure: price carbon, promote energy efficiency measures and support innovation in low-carbon technologies. This seemingly simple prescription is actually incredibly complex as it entails enormous shifts in our political, legal, economic and social practices, all within an extremely limited time frame. However, amongst the complexities and challenges of climate change, there are economic opportunities for those governments and businesses that respond to these changes and provide innovative solutions.