Economics assignment essay on: Global warming

Global warming is most fundamentally an economic issue.Global warming refers to one of the most upcoming issues which have led to various concerns towards it. Global warming refers to a persist rise in the temperature of the oceans & the environment. Various surveys by the scientists states that global warming has been occurring due to the activities undertaken by humans. These human activities majorly consist of rise in the absorption of the gases known as the greenhouse gases in the environment. This happens due to an increase in deforestation, decomposition of the fossil fuels, etc. All the evidences mentioned above have been identified by the National Science Academics of all the major countries & have not been rejected by any other international academic body.

Due to an excessive rise in the temperature, the level of the sea rises & changes its pattern of precipitation, including the suburbs & the desert area. Humid temperature is majorly expected in the Arctic Zone & has been associated with the continuous withdrawal of the sea ice, glaciers, etc. Some other reasons of warming up of the climate refer to the heavy rain falls, droughts, heat waves, shift in the agricultural outcome or yield. Though, it must be noted that warming up of the climate depends upon the region & its surroundings across the globe. For example, in a 4 degree centigrade, humans are unable to survive & there is a limit towards the adaptation of the natural system as well. Therefore, the ecosystem amongst which the entire human lives would not be preserved.

There have been various responses towards global warming & it includes alleviation to decrease the emissions, alteration to global warming, geo engineering in order to eliminate the green house gases from the environment, etc. There have been various types of international alleviation efforts being made by Kyoto Protocol. This helps in stabilizing the greenhouse gas absorption so as to avoid or prevent “dangerous anthropogenic interference”. As of now, only 192 states have been registered with the protocol & are the members of the UNFCC. USA & Afghanistan are not the part of the treaty.

Some of the responses towards global warming have been discussed below in the essay. Firstly, mitigation of the change in the climate refers to one of the major responses towards global warming. A decrease in the change of the climate of the environment refers to the “mitigation of climate change”. Intergovernmental Panel on Climate Change (IPCC), has defined mitigation of climate as those activities which would help in the reduction of the emission of the greenhouse gases in the environment (GHG), increase the capability of carbon in order to absorb the GHG from the environment & make it healthy for the humans to survive for long.

There are various countries, developed as well as developing who are aiming to adopt a cleaner, safer, healthier, non polluting technology which would help in the reduction of the emissions in the environment directly. Adoption of such type of technologies would also help in the reduction of the carbon dioxide in the atmosphere directly. There have been studies, surveys which indicates that there would be reduction in the carbon dioxide emissions in the atmosphere in the years to come.

To limit warming to the lower range in the overall IPCC’s “Summary Report for Policymakers”[7] means adopting policies that will limit emissions to one of the significantly different scenarios described in the full report.[125] This will become more and more difficult, since each year of high emissions will require even more drastic measures in later years to stabilize at a desired atmospheric concentration of greenhouse gases, and energy-related carbon-dioxide (CO2) emissions in 2010 were the highest in history, breaking the prior record set in 2008.[126]

Since even in the most optimistic scenario, fossil fuels are going to be used for years to come, mitigation may also involve carbon capture and storage, a process that traps CO2 produced by factories and gas or coal power stations and then stores it, usually underground.[127]

Adaptation

Main article: Adaptation to global warming

Other policy responses include adaptation to climate change. Adaptation to climate change may be planned, e.g., by local or national government, or spontaneous, i.e., done privately without government intervention.[128] The ability to adapt is closely linked to social and economic development.[124] Even societies with high capacities to adapt are still vulnerable to climate change. Planned adaptation is already occurring on a limited basis. The barriers, limits, and costs of future adaptation are not fully understood.

Geoengineering

Another policy response is engineering of the climate (geoengineering). This policy response is sometimes grouped together with mitigation.[129] Geoengineering is largely unproven, and reliable cost estimates for it have not yet been published.[130] Geoengineering encompasses a range of techniques to remove CO2 from the atmosphere or to block incoming sunlight. As most geoengineering techniques would affect the entire globe, the use of effective techniques, if they can be developed, would require global public acceptance and an adequate global legal and regulatory framework.

Economic Threat:

The final issue involves the economic impacts of climate change, which is the thorniest issue in climate-change economics. These estimates are indispensable for making sensible decisions about the appropriate balance between costly emissions reductions and climate damages. However, providing reliable estimates of the damages from climate change over the long run has proven extremely difficult. The present study relies on estimates from earlier syntheses of the damages, with updates in light of more recent information. The basic assumption is that the damages from gradual and small climate changes are modest, but that the damages rise non-linearly with the extent of climate change. These estimates also assume that the damages are likely to be relatively larger for poor, small, and tropical countries than for rich, large and mid latitude countries.

We have all probably heard about the devastating physical effects that global warming is projected to cause in the coming years. The basic effects enumerated by most scientists include the warming of the earth, which will cause various regional climate changes as well as a rise in sea level. Indeed, it is projected that global warming will cause a number of devastating weather changes, including an increase in floods, drought, hurricanes, earthquakes, tsunamis, and various other severe weather pattern. But did you know that global warming, if left unheeded and unchecked, may also cause several devastating economic effects? If the pattern of development of global warming continues as it has been, it seems doubtless that global warming will not only be a major physical event, but also a major economic event in which several regions are devastated financially. Here is a brief analysis of the potential economic effects that global warming may cause in several regions of the world.

By far, the economic sector most affected by global warming will be the agricultural sector. This is because global warming is projected to cause serious disruptions in the weather, which will have a domino effect on other factors. More specifically, it is predicted that global warming will seriously affect the number of rainfall that certain agricultural regions receive yearly. Without rainfall, agriculture is simply impossible. Several areas are posed to be devastated by the onset of global warming. In the United States, it is projected that the American Southwest as well as the entire arid Western United States will receive little rainfall. The drought will grow longer and more severe until agriculture is no longer viable. Longer and more intense wildfire seasons are also predicted for this area of the United States, which will further compromise the ability to do agriculture in that area. Furthermore, a drought will lead to the loss of land, resulting in a scenario resembling the dustbowl of 1930s Depression-era America.

In other areas, the opposite scenario may prove true: too much rainfall, leading to flooding. This will also make agriculture a challenge, if not impossible. Moreover, other areas with agriculture may also suffer from the extreme weather wrought by global warming, this will devastate the agricultural sectors of many regions around the world.

What is the root cause for these severe shifts in climate that will affect many economic sectors in many regions around the world? As greater heating takes place, the poles to the equator are also projected to heat up which will cause a shift in atmospheric circulation patterns. This will in turn cause severe disruptions in rainfall patterns. It is projected that as global warming continues to develop, some regions will experience much wetter seasons, while other climates will experience much drier seasons. The overall frequency of droughts will become longer and more intense. Many oceanographers and other researchers also fear that this could cause shifts in the ocean’s conveyor, which in turn will cause sudden shifts in land temperatures.

As is obvious, the predictions of global warming are dire. They project a world in which the droughts become longer and more intense, where dramatic whether becomes more extreme, where the wet seasons become wetter, and where there can be sudden shifts in the land temperature. Keeping these things in mind, it becomes clear that without some kind that a world dominated by the effects of global warming lacks the ability to sustain an organized and constantly flowing supply of agriculture, making the economic costs of global warming too great to predict. However, it is clear that if no immediate steps are taken by world leaders, global warming could prove much more than just an economic threat.

The economic approach to climate-change policy The present study uses an economic approach to weighing alternative  options for dealing with climate change. The essence of an economic analysis is  to convert or translate all relevant stocks and flows into a common unit of  account, and then to compare different approaches by their impact on the total  amount. The units are generally the value of goods in constant prices (such as 2005 U.S. dollars). However, this should not be viewed literally as money but as a standard bundle of goods and services (such as $1000 worth of food, $3000 of housing, $900 of medical services, and so forth). So we are really translating all the flows and stocks into the number of such standardized bundles.

To illustrate the economic approach, suppose that an economy produces only corn. We might decide to reduce corn consumption today and store it for the future to offset the damages from climate change on future corn production. In weighing this policy, we consider the economic value of corn today and in the future to decide how much corn to store and how much to consume today. In a complete economic account, “corn” would be all economic consumption. It would include all market goods and services as well as the value of non-market and environmental goods and services. That is, economic welfare should include everything that is of value to people, even if those things are not included in the market place.

The central questions posed by economic approaches to climate change are the following: How sharply should countries reduce CO2  and other GHG emissions? What should be the time profile of emissions reductions? How should the reductions be distributed across industries and countries? There are as well important and politically divisive issues about the instruments that should be used to impose cuts on consumers and business. Should there be a system of emissions limits imposed on firms, industries, and nations? Or should emissions reductions be primarily imposed through taxes on GHG? What should be the relative contributions of rich and poor households or nations?In practice, an economic analysis of climate change weighs the costs of slowing climate change against the damages of more rapid climate change. On the side of costs of slowing climate change, this means that countries must consider whether, and how much, to reduce their greenhouse-gas emissions.

Reducing GHGs, particularly deep reductions, will require primarily taking costly steps to reduce CO2. Some steps involve reducing the use of fossil fuels. Others involve using different production techniques or different fuels or energy sources. Societies have considerable experience in employing different approaches to changing energy production and use patterns. Economic history and analysis indicate that it will be most effective to use market signals, primarily higher prices of carbon fuels, to give signals and provide incentives for consumers and firms to change their energy use and reduce their carbon emissions. In the longer run, higher carbon prices will provide incentives for firms to develop new technologies to ease the transition to a low-carbon future.On the side of climate damages, our knowledge is very meager. For most of the time span of human civilizations, global climatic patterns have stayed within a very narrow range, varying at most a few tenths of a degree Centigrade (°C) from century to century. Human settlements, along with their ecosystems and pests, have generally adapted to the climates and geophysical features they have grown up with. Economic studies suggest that those parts of the economy that are insulated from climate, such as air-conditioned houses or most manufacturing operations, will be little affected directly by climatic change over the next century or so.  However, those human and natural systems that are “unmanaged,” such as rain-fed agriculture, seasonal snow packs and river runoffs, and most natural ecosystems, may be significantly affected. While economic studies in this area are subject to large uncertainties, the best guess in this study is that economic.

damages from climate change with no interventions will be in the order of 2½ percent of world output per year by the end of the 21^st  century. The damages are likely to be most heavily concentrated in low-income and tropical regions such as tropical Africa and India. While some countries may benefit from climate change, there is likely to be significant disruption in any area that is closely tied to climate-sensitive physical systems, whether through rivers, ports, hurricanes, monsoons, permafrost, pests, diseases, frosts, or droughts.The discount rate

One economic concept that plays an important role in the analysis is the discount rate. In choosing among alternative trajectories for emissions reductions we need to translate future costs into present values. We put present and future goods into a common currency by applying a discount rate on future goods. The discount rate is generally positive, but in situations of decline or depression it might be negative. Note also that the discount rate is calculated as a real discount rate on a bundle of goods, or net of inflation. In general, we can think of the discount rate as the rate of return on capital investments. We can describe this concept by changing our one-commodity economy from corn to trees. Trees tomorrow (or more generally consumption (tomorrow) have a different “price” than trees or consumption today because through production we can transform trees today into trees tomorrow. For example, if trees grow costlessly at a rate of 5 percent a year, then from a valuation point of view 105 trees a year from now is the economic equivalent of 100 trees today. That is, 100 trees today equal 105 trees tomorrow discounted by (1+.05). Therefore, to compare different policies, we take the consumption flows for each policy and apply the appropriate discount rate to the flows. We then 19 sum the discounted values for each period to get the total present value. Under the economic approach, if a stream of consumption has a higher present value under policy A than under policy B, then A is a preferred policy.

The choice of an appropriate discount rate is particularly important for climate change policies because the impacts are so far in the future. The approach in the DICE model is to use the estimated market return on capital as the discount rate. The estimated discount rate in the model averages 4 percent per year over the next century. This means that $1000 of climate damages to corn or trees or other goods in a century are valued as worth $20 of present goods. This looks like a very small number, but it reflects the observation that capital is productive. Put differently, the discount rate is high to reflect the fact that investments in reducing future climate damages to corn and trees and other areas should compete with investments in better seeds, improved rotation, and many other high-yield investments.

The prices of carbon emissions and carbon taxes One of the key concepts in the economics of climate change is the “carbon price,” or more precisely, the price that is attached to emissions of carbon dioxide. One version of a carbon price is the “social cost of carbon.” This measures the present value of additional economic damages now and in the 20 future caused by an additional ton of carbon emissions. We estimate that the social cost of carbon with no emissions limitations is approximately $30 per ton of carbon for our standard set of assumptions. Therefore, in the automobile case discussed above, the total social cost or discounted damages from driving the 10,000 miles would be $30, while the total social cost from the coal-generated electricity would be $90 per year. The social cost per capita of all CO2 emissions for the United States would be about $150 per person (5 tons of carbon x $30 per ton). From an economic point of view, this is an “externality,” meaning that the driver or household is imposing these costs on the rest of the world today and in the future without paying the costs of those emissions.

Conclusion:

Global warming is a serious problem that will not solve itself. Countries should take cooperative steps to slow global warming. There is no case for delay. The most fruitful and effective approach is for countries to put a harmonized price, perhaps a steep price, on greenhouse gas emissions, primarily those of carbon dioxide resulting from the combustion of fossil fuels. While other measures might usefully buttress this policy, placing a near-universal and harmonized price or tax on carbon is a necessary, and perhaps a sufficient condition, for reducing the future threat of global warming.

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