The inability of the market to reflect the full cost of carbon is known as a market failure. The importance of accounting for the full cost of carbon in investment decisions was highlighted by the influential Stern Review of the Economics of Climate Change which found that the cost of taking action to reduce emissions now is much less than the cost to the economy if no action is taken and adaptation is required at a later date.Stern, N., Peters, S., Bakhshi, V., Bowen, A., Cameron, C., Catovsky, S., Crane, D., Cruickshank, S., Dietz, S. and Edmonson, N. (2006) Stern Review: The Economics of Climate Change, London: HM Treasury.
