I have argued previously that the landmark Stern Report got the big picture right -- strong action now to reduce greenhouse-gas emissions is economically justified, since the cost of action (i.e., mitigation), perhaps 1 percent of GDP, is far less than the cost of inaction (i.e., climate change impacts), which Stern estimates as at least 5 percent of GDP and possibly as high as 20 percent.
In particular, I (and others) argued that Stern's much-criticized choice of a low discount rate, 1.4 percent, was in fact justified -- see here and here for a good discussion.
Now perhaps the most mainstream economic policy think tank in the country -- Resources for the Future (RFF) -- has written a major report, "An Even Sterner Review" (PDF), with two key conclusions.
First, "we find no strong objections to the discounting assumptions adopted in the Stern Review."
Second:
[T]he conclusions reached in the review can be justified on other grounds than by using a low discount rate. We argue that nonmarket damages from climate change are probably underestimated and that future scarcities that will be induced by the changing composition of the economy and climate change should lead to rising relative prices for certain goods and services, raising the estimated damage of climate change and counteracting the effect of discounting.
What does RFF mean by "rising relative prices"?
