Yesterday, September 21, over 300,000 demonstrators took to
the streets in NYC to protest rising global levels of Carbon Dioxide (an
increase of 2.5 percent in the past year), and the idleness of world
governments on environmental issues. This protest took place in other cities,
such as Paris and Papua, New Guinea, and was scheduled to display large environmental
concern prior to the United Nations Climate Summit that is to take place
September 23th, which India and China stated they would not be
attending. The protestors represented a diverse community of people concerned
for the future of their planet, including religious groups, politicians, grandmothers,
youths, scientists, and topless hippies. This demonstrates the wide concern for
the immediate and long-term consequences and costs of global inaction.
Global warming due to carbon dioxide emissions represents
one of the largest negative externalities in the world economy, yet is an
inevitable outcome in the production process and in a booming economy. The
question of how to lessen the negative externality to a quantity that is
allocatively efficient for the global society, which is what will be discussed
at the UN Climate Summit this Tuesday, is the main concern for politicians and
the demonstrators. However, countries like China and India have decided to
abstain from the summit meeting and have in the past said they would make an
effort to reduce emissions, but lately have been falling short of that promise.
China, the largest contributor of carbon dioxide emissions, has not recently
taken any steps to reduce emissions, thus increasing the costs of reducing the
externality to the allocatively efficient level for everyone else, while also free
riding on the benefits from other’s efforts in emissions reduction. The problem
the concerned global community faces is that China and India are independent
nations, and thus regulations and efforts to reduce emissions mandated from the
UN are ineffective if China and India do not want to take part in binding
international agreements. They are partly responsible for global warming, but
the international community cannot make them liable for damages if China and
India do not want to take part in global environmental policies. These nations
know that the rest of the world is internalizing externalities and increasing
production costs to decrease pollution, so why should they also increase
production costs when their growth rate is already slowed and they are still
behind the rest of the world in GDP per capita. We will just have to hope that
Chinese and Indian corporations feel the pressure from international trading
partners to reduce emissions and solve this free rider problem with a Coasian
solution, regardless of their governments’ obstinacy.
2 comments:
I dont think many people would disagree that climate change is a serious threat to all of us. However, I'm not sure its fair to place so much of the blame on China and India. While these countries are certainly aggravating our climate problem with their current levels of carbon dioxide emissions, historically the biggest culprits have been western countries like the US, Germany, and especially the UK, whose economies benefited most from the industrial revolution. It is easy to understand why the Chinese or Indian governments would be hesitant to cut down on their emissions given that the Western nations, who have already reaped most of the benefits of industrialization, would not have to suffer as high of a cost to their economies as developing nations would if there were to be some global agreement on CO2 reduction. Laura you mentioned that you hoped for a coasian solution to this problem-the only such solution that I could think of would need to involve some form compensation by the countries who, historically, are most at fault for the situation our planet finds itself in, to the countries who have had a comparatively much better track record of not polluting our atmosphere, yet are now being asked to bear a disproportionately high cost when it comes to using fossil fuels responsibly.
Hi Laura, very interesting post. Ultimately, to internalize this negative externality you propose a Coasian solution whereby “international trading partners” of Chinese corporations place pressure on these Chinese enterprises to reduce their carbon dioxide emissions. I stumbled upon an article explaining a recently launched program by the Chinese government to curb carbon dioxide emission levels. It says that, “Chongqing, a sprawling metropolis of 30 million people on the Yangtze river, follows the cities of Shenzhen, Shanghai and Beijing and the provinces of Guangdong and Hubei in launching a trading scheme that allows big local firms to buy and sell permits that cover their carbon emissions.” I guess my question for you is do you think that a Coasian solution is still best for internalizing this externality, or do you think that the government should maintain (or even expand) its current policy? I see potential difficulties with a Coasian solution because as the number of participants involved in the externality grows, the holdout problem and free-rider problem will magnify. And as you mentioned, limiting carbon dioxide emissions could slow China's economic growth because so many firms in China engage in it. Besides relying on social pressure from other corporations, how else do you think a Coasian solution could internalize this externality better than government intervention?
Sources: http://in.reuters.com/article/2014/06/19/china-carbon-idINL4N0P00KL20140619
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