Global Environmental Issues

The world economy is a very complex system; in the system harmful externalities disrupt capital flows and determine economic productivity. Most notable of these externalities is inadvertent global warming. Spending towards research and regulation of climate change at both the national and international level are very important in determining current and future business trends. Economists and scientists worldwide continuously debate the pros and cons of emissions reduction and what consequences can quickly follow. Though many have different views on the issue, all can agree that the immediate and long term effects of climate change have become an economic matter of paramount importance. The sweeping impact from climate change will have important fiscal, financial, and macroeconomic ramifications that influence global commerce standards.

The argument about man’s role in climate change and the role of government, the role of industry and the role of citizens is a significant challenge that crosses all levels of government, crosses all geopolitical boundaries and crosses all sectors of business. National governments across the globe are dealing with the issue in different ways, but one overarching aspect of control and mitigation can be seen in the oversight and regulation of the electric energy industry. One significant challenge facing each nation is the cost to lower carbon emissions and the question of who will pay the additional cost for compliance. Though the cost issue is significant, a much more difficult question is whether any decision on lowering emissions can make

The issue of carbon emissions is an important one not only from an environmental perspective but also an economic one. While reducing carbon emissions is an important one for the health of human beings as well as that of the environment, the larger question is what type of policy strategy is best for both reducing such emissions which might have an impact on efforts to mitigate the effects of pollution on climate change. While ther are options to consider which does not rely on economics-- technological or output standards achieved by command and control regulations--they are often fraught with political resistance by industry because they do not allow industry to make any choices or play a role in solving the problem of

Carbon taxing coal-based products, in a revenue-neutral way, will help discourage overuse of fossil fuels. The United States needs to reduce carbon emissions in order to avoid the costs that pollution and climate change inflict on the general economy and individuals. Carbon, unlike other commodities exchanged and consumed in the free market, bears unique costs to the general economy that its market price does not encompass. The pollution we create when we consume carbon contaminates our air, raises temperatures, and makes severe weather events more frequent. A carbon tax is an economic mechanism that forces actors in a free market to come face-to-face with the social cost of

A cap-and-trade program sets a maximum level of pollution, and distributes emission permits among firms that produce emissions (Carbon Tax, 2013). The purpose of which is regulation of specific emissions by stationary and mobile sources, and setting a specific level which all emitters are re-quired to meet. Cap-and-trade possibly has less of a direct economic component to it than the other alternatives to reducing emissions described due to the ability to trade permits versus the expendi-ture of resources improving technology, with some arguing it is to the detriment of the environment. As stated in the article found in Reclaiming the Environmental Agenda, by Ashford, N. et al., 2008, “being a market-based instrument, ‘the cap-and-trade option suggests that at least this form of MBI may be more environmentally effective than the usual command-and-control alternatives, in addition to being more economically efficient.” (Ashford, N. and Caldart, C., 2008, p. 908).

The cap on the market is set on carbon emissions, creating scarcity within the market. At the end of each year businesses within the scheme are required to ensure they have enough allowances to account for their installation’s actual emissions. Those firms that do not comply and pollute without sufficient permits are hit with heavy fines. (Euro 100 per ton). The aim of carbon trading is to create a market in pollution permits and put a price on carbon. In this way, policy can help internalise external costs of firms’ production and encourage lower emissions to tackle climate change. In a cap and trade system, the volume permits would gradually decline and total emissions, in theory, will diminish. The model of such can be shown as

Another very crucial environmental issue, besides global warming, involves the finite nature of natural re, which are being depleted faster than their replenishment rates. The development model of the 20th century, which promoted the continuous consumption of products, has resulted in the reduction of agriculture land, food, water re as also fossil fuels. If humanity continues to consume fossil fuels at the same rate as today, oil re will run out by 2030, gas by 2040 and coal by 2200. By 2025, the number of people suffering due to water stress will rise to approximately 3.5 billion and almost half the world’s population is expected to experience high water stress by

Cap-and-trade is a program which uses a market-based mechanism to control greenhouse gas emissions, the primary driver of global warming. The “cap” sets a limit on emissions, which is lowered over time to reduce the amount of pollutants released into the atmosphere. It limits emissions in electric power generation, natural gas, transportation, and large manufacturers. The “trade” creates a market for carbon allowances, leading to more cost-effective pollution cuts, and incentive to invest in cleaner technology. The less they emit, the less they pay, so it is in their economic incentive to pollute less. Each allowance (typically equivalent to one metric ton of carbon dioxide) are auctioned or allocated to regulated emitters on a regular basis.

The government sets an industry-wide limit to carbon production. Corporations that produce more than the set carbon limit are able to buy allowances from corporations who produce below the allowed amount. This creates a market for carbon so that companies can actually make money by reducing their carbon output. As time progresses, the government will incrementally lower the cap, which will reduce the number of allowances issued and increase their price. Ontario's Climate Change Mitigation and Low-carbon Economy Act, 2016 (the "Climate Act"), creates a cap-and-trade system that covers 82 percent of Ontario's direct emissions. This system covers all fossil fuels (e.g., gasoline, diesel and natural gas) used in Ontario by individuals,

Government enacted solutions are probably the most effective ways to reduce carbon emissions and to control pollution since unfortunately the majority of individuals mainly act to their own self-interest and are not concerned with the future of the planet. This is a prime example of the tragedy of the commons, which is the exploitation of a common resource. In this case the common resource is the atmosphere. The first method proposed is the carbon cap trade system. The term cap means the limit or the maximum of the amount of pollutant to be emitted. A trade refers to the transfer of permits that have to be bought by firms that need to increase their volume of emissions from firms that require fewer permits 1. The carbon tax method is a tax on the carbon content of fuels — effectively a tax on the carbon dioxide emissions from burning fossil fuels 2. So, which system would be best for the government to enact to reduce carbon emissions in the atmosphere?

In Australia, there is an emerging consensus that the government should take further actions to help mitigate and combat climate change. The current most accepted policy by government is the introduction of a carbon tax followed by an ETS in 2015. However we are focusing on the carbon tax in this essay and not the ETS. Here is a brief explanation of the dynamics of a carbon tax. A carbon tax is a tax on energy sources, which emit carbon dioxide (Co2). Therefore, carbon taxes address the problem of negative externality. Externalities are the subsequent effects when individual production or consumption of a particular good or service imposes costs or benefits on others. Therefore negative externalities are effects, which pose harm to others without their direct interaction (Basic Economics 2011). However, usual market practices and transactions do not reflect these cost and benefits in the prices involved in the transaction, or take into account in their transaction decision. Therefore this is a form of market failure. By imposing a cost on these negative externalities, the hidden cost can be addressed. Ultimately the purpose of a carbon tax is to reduce emissions of carbon dioxide and therefore reduce

In managing the emissions of GHGs(Green House Gases), carbon taxes will be imposed mid 2012. "Economic theory anticipates that with the increased costs of emitting GHGs, drives emitters to downsize their activities." Salem Press (2009)

Countries’ past and future contributions to the accumulation of GHGs in the atmosphere are different, Comprehensive strategies in response to climate change that are consistent with sustainable development take into account the co-benefits, adverse side effects and risks that may arise from both adaptation and mitigation options. {3.1, 3.5, Box 3.4} The design of climate policy is influenced by how individuals and organizations perceive risks and uncertainties and take them into account. Methods of valuation from economic, social and ethical analysis are available to assist decision-making. These methods can take account of a wide range of possible impacts, including low-probability outcomes with large consequences. But they cannot identify a single best balance between mitigation, adaptation and residual climate impacts. {3.1} Climate change has the characteristics of a collective action problem at the global scale, because most GHGs accumulate over time and mix globally, and emissions by any agent (e.g., individual, community, company, country) affect other agents. Effective mitigation will not be achieved if individual agents advance their own interests independently. Cooperative responses, including international cooperation, are therefore required to effectively mitigate GHG emissions and address other climate change issues. The effectiveness of adaptation can be enhanced through complementary actions across levels, including international cooperation. The evidence suggests that outcomes seen as equitable can lead to more effective

When issues arise, governments are the ones that intervene into the market to correct market failures; these include issues such as climate change. In order to correct these issues government use methods such as inequality, externalities and public goods. This restores efficiency as well as increasing the economic well being of society. The environment is accessible by every individual as it is non-excludable. Thus, meaning that no one can be prohibited from using it and one person’s use diminishes another person’s use of it. Since it is a common resource accessible to everyone, it can easily be overused, this is when a government should intervene in order to restore the balance. There are many ways in which governments can help aid the climate issue, one being by controlling prices in the markets (directly) or by taxing and subsidising demand and supply (indirectly). But, obviously climate change could not be aided through something as simple as changing the price, so that means that the intervention would be seen as indirect because there is no market for climate change. It will be difficult for the government to measure social costs (externality) of climate change. These exist when the production or consumption of a good has a positive or negative side effect on third parties that are not accounted for in the price of the good. Manufacturing companies emit carbon pollution during the production process that increases the contamination in the environment. In order to

Pollution, specifically global warming, is of growing concern to people and governments. It is a controversial issue whose validity is still being debated by scientists. The Kyoto Protocol is an international attempt to address global warming through emissions controls. Traditional neoclassical economic models do not incorporate pollution in rudimentary theories of supply, demand, or pricing, as a result, firms do not consider pollution as a cost of production, which leaves government regulation as the primary method for controlling these externalities. The goal of emissions trading is to allow one business, which can make greenhouse gas emission reductions for a relatively low cost, to sell