Question

1. Describe the issues of global warming in economic terms. What economists call this issue and why it is so hard to solve.

2. What are some possible solutions to global warming?

3. Discuss the strengths and weaknesses or each possible solution.

4. What is cap and trade?

5. Discuss whether anyone (country) has ever tried cap and trade or similar market based plans.

6. Why do economists think cap and trade is likely our best solution to the issue of man-made global warming?

Answer 1

1. Global warming initially affects the geography of the planet which has an immediate effect on the produce of land.

The rise or fall of temperature either shifts the production of crop species or they disappear and eventually die out due to arid and harsh weather patterns. This will promote migration of humans and their activities adding to the cost of construction and deconstruction of dwellings, roads etc.

Rising sea levels again will lead to either migration or spending by govt to build barriers along the shorelines.

Warming levels surely will raise the demand for conditioning leading to usage of more energy hence usage of more resources like fossil fuel to meet the demand

All the above issues lead to migration hence political conflicts too along with increased travelling which equals again more usage of fuel (for transportation via roads,air etc)

Economists call this issue a market failure, which becomes hard to solve because of the following reasons

1. The impact of emissions is more on future generation rather than on the present one as the effects of such activities are visible after a gap. So for the emitters it becomes more of an ethical issues rather than an economical one

2. Lack of innovative methods

3. Availability of expensive incentives

4 lack of awareness in how to reduce emissions.

2. Possible solutions can be the one which does not require drastic changes but efficient ones

Infrastructure- power demand continue to rise to regulate the temperature inside the building and are a massive 1/3 contributor to warming. Therefor investing in infrastructure with thicker insulation can be a long term cost saving act.

Weakness- not very cost efficient method as planning and and thicker insulation requires huge resources.

Cutting down on travelling by moving near to work along with cutting on airplane flights for work which can be done from home (as the ongoing corona pandemic has shown)

Weakness- Moving near to work can again be an additional cost on the individual earners against which traveling might seem cheaper

Discouraging the cutting of trees along with massive planting drive. Especially bamboo plantation

Replacing fossil fuel with a cleaner alternative.

Weakness- manufacturing other sources of energy are environment degrading for example wind mills

Cap and trade refers to the govt programe to limit the level of emissions as a result of an industrial activity. basically govt limits the amount of carbon dioxide a particular industry can emit. Otherwise taxes are imposed.

More than 40 governments worldwide have adopted and implemented in one or other way cap and trade. Mostly developed nations For example Canada, Britain.

Most economists believe cap and trade because because it sets a limit on emissions, and the trading encourages companies to innovate in order to emit less.