Climate Change: Science, Policy, and Impacts

This assignment delves into the multifaceted issue of climate change. It encompasses a review of scientific evidence supporting human-induced climate change, an analysis of proposed policy solutions aimed at mitigating its effects, and a discussion of the tangible impacts of climate change on various aspects of the planet and society.

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

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Table of Contents
Introduction:....................................................................................................................................2
Answer 1:.........................................................................................................................................2
Answer 2:.........................................................................................................................................3
Answer 3:.......................................................................................................................................10
Answer 4:.......................................................................................................................................12
Answer 5:.......................................................................................................................................14
References......................................................................................................................................16

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Introduction:
Global warming is considered to be one of the most pertinent and bothering issue which
has been a matter of primary concern among scientists, economists and global leaders. The term
refers to an overall increase in the average worldwide temperature, in an abnormal pace, which
has short term as well as long term implications on the conditions of the earth as a whole, the
implications being mostly negative. Global warming, if not checked, also poses deep threats on
the mere existence of life forms on this planet as the increase in the overall levels of temperature
may lead to wide changes in climate, demographic patterns and the life style of people all over
the world (Trenberth et al., 2014). One of the primary reasons of this phenomenon is likely to be
human influence on the global environment over the years, the dominant one being emission of
carbon dioxide and other greenhouse gases like nitrous oxide and methane, in huge amounts over
the years and especially over the last century. The report tries to study this issue and in details
and it tries to answer several related questions related to this issue of concern, based on an article
on Global Climate Change by Kenneth J. Arrow (Peter et al., 2013).
Answer 1:
The article tries to evaluate critically, the effects that are projected to occur on global
environment as a whole due to the inevitable global change in climate. It throws light on the
ongoing debate regarding the huge future costs to be borne by humanity due to global warming
and tries to recommend Carbon dioxide emission reducing measures to be implemented from
current period only to avoid catastrophic damages in near of far future. According to the author,

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increase in the global temperature is to considerable extent attributed to the presence of trace
gases, namely water vapor, CO2 and methane primarily (Arrow, 2007). The emission of CO2 has
increased drastically since the Industrial Revolution leading to greenhouse effects on earth,
which in turn is increasing the average global temperature in abnormal pace. This may have
severe implications on global environment, like rising sea level majorly, effects on vegetations
and agriculture (not all negative) and others. The article tries to calculate the costs and benefits
of inducing restrictive measures on CO2 emissions on the global economy (Proops, Faber &
Wagenhals, 2012).
Answer 2:
In his article, Arrow tries to suggest that it is better to take measures to reduce emission
of carbon dioxide and other greenhouse gases as much as possible from current period in order to
avoid the catastrophe that can occur because of uncontrolled greenhouse gases emission, in near
as well as not so near future (Arrow, 2007). There are several highly valid reasons behind his
suggestions, which are elaborated in the discussion below.
One of the dominant causes of global warming has been unanimously considered to be
the emission of the greenhouses, both naturally as well as manually, over the years. These
greenhouse gases are adding bulk in the share of trace gases present in the atmosphere of the
earth. The trace gases have the inherent and unique property of being transparent to radiations at
high frequencies but absorbing radiations if emitted in low frequencies, like that of infrared
(Seinfeld & Pandis, 2016). This absorbed radiations in the trace gases, contributes substantially
in increasing the global temperature levels. One of the primary components of these trace gases

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is carbon dioxide, much of whose emission is attributed to non-natural factors. Human beings
have been contributing to the emission of this gas since their origin. However, the emission of
carbon dioxide in the environment has drastically increased after the initiation if the Industrial
Revolution and it has been increasing then (Ballantyne et al., 2012).
Figure 1: Global Carbon Emissions
(Source: Scienceblogs.com, 2017)
It is evident from Figure 1 that the emission of carbon dioxide has drastically increased
from 1851 and the increase gained even more pace post 1951, with emissions being nearly of
amount 8000 million metric tons by 2001. Much of this increase in the emissions is due to the
stable and increasing growth of industries post Industrial Revolution (Hansen et al., 2013). This
in turn has created a greenhouse effect on the earth, thereby leading to an upward trend in the
global temperature in the recent decades, which can be shown in the following figure:

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Figure 2: CO2 and Temperature Changes over Twentieth Century
(Source: Scienceblogs.com, 2017)
The above figure shows a direct positive correlation between the emission of carbon
dioxide and increase in the global temperature as both has almost proportionately increased with
time. This shows that the concern as put forward by Arrow has significant relevance and it needs
to be addressed with priority (Hansen, Sato & Ruedy, 2012).
Research shows that the level of carbon dioxide emissions has currently increased from
280 parts per million before Industrial Revolution, to almost 430 parts per million post the
Revolution and if the current pace is not slowed down, carbon emissions are expected to increase
up to 550 parts per million by 2035, which is scarily high (Arrow, 2007). The projected level of
carbon dioxide emission is almost two times as high as that was during the times prior to

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Industrial Revolution and if reached, it will be a level that has never been received in the last few
millions of years.
According to this article and most of the studies conducted regarding this issue, the
emission of carbon dioxide in such high amounts has direct effects on the global mean
temperature levels. Studies show that if the projected increase in the concerned emissions do
occur, it will in all probabilities lead to an elevation of the global temperatures by at least 2o
Centigrade. If the same patterns are maintained then there is almost fifty per cent chance of a
massive hike in the average temperature of the earth by almost 5oC by the beginning of 2100
(Ballantyne et al., 2012).
These statistics of future hikes in the global temperature has direct and mostly negative
implications on the overall environmental conditions of the world. One of the primary and most
dangerous consequences of increase in temperature of the earth is the possible rise in the sea
level (Ainsworth et al., 2012).

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Figure 3: Rise in Sea-level by Century
(Source: Climatecentral.org, 2017)
It can be concluded from the above figure that the sea levels have alarmingly increased in
the time span between fifteenth century to twentieth century. In absence of any precautions or
controlling measures to reduce the level of carbon emission, there will be further increase in the
global sea levels, which in its turn will lead to wiping out of many island countries and will also
drown substantial land areas of many countries at low sea levels, like that of Bangladesh
(Trenberth et al., 2014). Many highly populated places like Manhattan and others will be
completely wiped off the world map permanently. The losses will be even more huge and
catastrophic if two of the major ice sheets of those of West Antarctica and Greenland melt
(Climatecentral.org, 2017).

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One of the other significant consequences of this unfavorable phenomenon, is the
projected changes in the global climatic patterns. With the current trends continuing, there are
high chances of countries in Europe to experience climatic conditions of that of Greenland.
There will be changes in the nature and intensities of the tropical storms too, leading to greater
destructions of lives and properties (Goulder, 2013). Other consequences of global warming
include decrease in the glacial reserves of the world, which can lead to a tremendous shortage in
the water supplies. Much of the vegetations on earth and the current agricultural patterns will
also be significantly affected by these changes, which are expected to have direct impacts on
human lifestyles almost in all parts of the world (Hansen, Sato & Ruedy, 2012).
Collectively, these pose serious threats to the existence of life forms and the quality of
life in the future, creating confusions and questions regarding the future of the world. To avoid
these massive negative consequences in the coming periods, immediate and appropriate
measures are indeed required as been rightly suggested by the author.
Sources of Market Failure:
In economics, market failure is said to have occurred if the market fails to maximize the
welfare of the society as a whole. This concept is highly relevant in the concerned issue. It is
highly evident from almost all the research conducted on this field that the emission of CO2 has
significantly increased with the advent of the Industrial Revolution. The fruits of this Industrial
Revolution, however, have been mainly enjoyed by the current developed countries as it fuelled
their economic growth and prosperity significantly (Keohane & Olmstead, 2016). Due to absence
of proper awareness of the future long term threats of carbon emission on the world, these
countries have in general contributed significantly in the global levels of carbon emission, the

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burden of which has to be borne by the future generations. In this case, the cost of global
warming, primarily created by the developed countries are not borne by them in general. Much
of the costs are to be borne by the developing and poor countries as much of the restrictive
policies are implemented now on them, thereby making them face a tradeoff between their own
economic growth and long term global welfare. These are the primary sources of market failure
in this scenario (Goulder, 2013).
Possible Solutions to Problems for Global Warming:
Several measures can be undertaken globally, to reduce the levels of current carbon
emission or to at least restrict it to current levels. Few of such measures are discussed as follows:
a) Replacing energy resources used currently, like coal and fossil fuels, by those whose carbon
emission rates are comparatively lower, like natural gases, can help in reducing the emission
rates significantly (Williams et al., 2012).
b) Innovations are highly necessary to create technologies which tend to lower the intensity of
energy input for production purposes. If created, fast and effective implementations of such
technologies by developed as well as developing countries can help in reducing the credible
threat if global warming to considerable extent (Proops, Faber & Wagenhals, 2012).
c) Manual deforestations has been one of the factors contributing to the current threats of global
warming. Therefore, rapid initiatives of planting trees worldwide can lead to reduction in the
threats of global warming as plants absorb carbon dioxide, which is one of the primary
components of greenhouse gases (Williams et al., 2012).

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d) The developed countries being technologically privileged and having enjoying the fruits of
technological renaissance at the cost of growth of the developing countries, it will be judicious
on their part to take initiatives to control carbon emission and to lead others in achieving the
collective targets of averting global warming (Keohane & Olmstead, 2016).
Answer 3:
In this article, to see the preferences of people in general, between current and future
outcomes, especially consumption, the following formula has been used:
δ = ρ+gη
Here, δ shows the consumption discount rate, which indicates the rate at which an
individual tend to discount losses that will occur in future consumption given that the individual
wants to consume in the present period. In other words, it shows the individuals preference of
current consumption over future consumption. Higher δ implies higher consumption discount
rate, which means the individuals prefer current consumption more to future consumptions
(Goulder & WILLIAMS III, 2012).
Here, ρ signifies the time preference rate, which shows the preference between current
and future well being. Higher the value of this symbol indicates higher preference of current
welfare over future welfare. In this equation, g shows the expected rate of growth of mean
consumption whereas η shows the social weight elasticity due to change in the level of
consumption. η basically resembles the concept of diminishing marginal utility from
consumption as consumption increases (Pindyck, 2013).

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The intuition behind this equation is that there are two contributing factors to the value of
the consumption discount rate in a generalized framework. On one hand, the time preference has
a positive relation with the discount rate, that is, with the increase in the time preference of
consumption, people tend to assign more weight to current consumption over future consumption
thereby increasing the value of δ. On the other hand, gη together shows the addition to the
discount rate with increase in average consumption rates, given that more g will tend to decrease
the value of η (Ackerman & Stanton, 2012).
According to a critique uncertainty in g can lead to low values of δ. However, this in
general may not be the case because with higher uncertainties in expected consumption growth
rate, people will try to emphasize more on current consumption, thereby increasing the
consumption discount rate. In other words, the two variables tend to have a different relation
than what the critique suggests (Ackerman & Stanton, 2012).
In the present scenario, with significant evidences of manmade global warming, a country
with low value of δ signifies that the consumption discount rate in that country is low. This
means, the residents generally have a low preference of current consumption if it is at the cost of
future consumption. In other words, future welfare is also important for the country. This implies
that the economy is expected to actively participate in reduction of carbon emission as that can
hamper their future consumption to great extent. The country will be expected to be in favor of
implementing changes to work towards restricting global warming, even at the cost of sacrifice
of their current consumption (Pindyck, 2013).

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Answer 4:
According to the article by Adam Morton, Australia has experienced significant upward
growth of prices of power which has almost doubled following axing of carbon taxes in the
country.
Figure 4: Changes in Wholesale Electricity Prices
(Source: Smh.com.au, 2017)
It is evident from the above figure that due to the hike in the wholesale prices of power,
the cost of electricity consumption has drastically gone up in the present years. Main reasons
behind this huge hike are the constantly rising gas prices and the uncertainty in investments that
the power sector is currently facing. The uncertainty is highly attributed to the doubts regarding

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the future production and prospects of the power plants that are supposed to replace the
traditional coal factories. This has led to return of carbon trading in order to restrict the current
and near future hike in the power prices (Smh.com.au, 2017).
This shows that in face of the current energy prices crisis, thought the country does not
completely give up on their measures to restrict carbon emission by using renewable resources,
they are skeptic towards taking up highly restrictive policy of pursuing a target of using
renewable energy quantifying to half of their total energy resources. This change in behavioral
pattern of the policy makers has a direct implication on the value of δ in the country. With more
and more surge in the prices of renewable power resources, using these types of energy is
becoming increasingly difficult for the country (Roozbehani, Dahleh & Mitter, 2012). However,
that would have been a judicious step towards the increment of welfare of their future
generations, as these resources, especially natural gases, tends to emit almost half the amount of
carbon dioxide than that of coal and other fossil fuels. This implies that the country is expected
to see a rise in their consumption discount rate. This means, if the soaring prices of gases are not
brought in check as soon as possible, the residents will prefer to go back to the usages of the
traditional fuels for their current sustenance (Smh.com.au, 2017).
This expected change in the consumption discount rate can be explained by the inherent
human behavior. Human beings, in general, are said to attach more importance to current sure
consumptions than to future consumption levels. This is mainly because future consumptions and
benefits are subjected to some levels of uncertainty and people do not surely know whether they
are going to get the benefits at all (Roozbehani, Dahleh & Mitter, 2012). In this case, such
behavior may occur as there are high uncertainties in investments on the power plants that are
expected to replace the coal generators. The uncertainties are mainly arising because there are

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doubts regarding whether these plants will be able to show prospects and profitability. Thus, all
these factors cumulatively may induce people to attach more importance on their current
consumption level. People may tend to force the authorities to enable usage of traditional energy
resources such that the prices come down and they can be able to consume their desired
quantities even if it comes at a cost of future consumption of power by the succeeding
generations (Peters et al., 2012).
Answer 5:
In the equation used in the article,
δ = ρ+gη
ρ denotes the time preference, that is, the preference of individuals between current well being
and well being in future. This means higher the time preference, the more the individual is
expected to prefer his current well being than his welfare in the coming years (Sen, 2013). In this
context, a high value of this indicator will lead to a high value of the consumption discount rate
too which in implies that the concerned individual or country will be less bothered of the welfare
of the future generations. They will not be not very much in favor of restrictive carbon emission
policies if that implies a decrease in the current level of consumption to keep the welfare of the
future generations at least same or increasing (Egan & Mullin, 2012).
In this context, the withdrawal of the USA, under its President, Donald Trump, from the
Climate Accord of Paris, can have significant global implications on the environmental
conditions, present and future (Goldenberg et al., 2015).

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The USA is one of the highest carbon emitting nations across the world, contributing
around almost 25 per cent of the global emission of carbon dioxide. This implies that its own
policies regarding carbon emission have considerable impact on the global carbon emission rates
and conditions. Keeping that in account, the exit of the country form the Climatic Accord will
led to nullification of the restrictive policy imposition on the activities of the country. This can
have a direct impact on the time preference of the country as a whole. Given a chance to choose,
the residents will choose to maximize their current consumptions, as they are uncertain about the
future benefits that they can get by sacrificing their current well-being (Egan & Mullin, 2012).
This indicates towards increase in ρ, which in turn will increase their consumption discount rate.
USA being one of the major contributors in the global scenario, a drastic increase in their
consumption discount rate will directly affect the value of global consumption discount rate. This
implies that under this scenario, the global value of δ is subjected to increase, thereby increasing
the possible threats of global warming more in the coming years (McCright, Dunlap & Xiao,
2013).

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References
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