Deck 17: Global Climate Change

Question 1

If two (or more) countries are shown to have the same (total) quantity of emissions, does this mean that they are equally close to the efficient level of emissions for each one?

Answer 1

Efficient level of emissions:
Efficient level of emissions of a country is achieved at the point of intersection between its marginal abatement cost schedule and marginal damage schedule. In other words, efficient level of emission of a country would be achieved at the level of emission, where the respective marginal abatement costs are equal to their marginal damages.Similarly, efficient level of emissions across countries would be achieved, if their respective marginal abatement costs are equal to their marginal damages.Role of total quantity of emissions in efficient levels of emissions across countries:
Total quantity of emissions gives roughly any information about the efficient level of emissions across countries.For example, total quantity of emissions may be same across countries, but it does not mean that each country operates at its efficient level of emission, unless their respective marginal abatement costs are equal to their marginal damages.
Efficient level of emission can vary across countries, on the basis of their marginal abatement cost schedule and marginal damage schedule. Hence, same total quantity of emissions would neither imply economic operation at efficient level of emission of each country, nor relative difference in efficiency level of emissions across countries.

Question 2

Explain the polluter pays principle. How would this apply to the control of nonpoint-source emissions?

Answer 2

Polluter pays principle:
The polluter pays principle states that whoever causes pollution should bear the costs of pollution control. In other words, polluter pays principle states those who produce any byproducts while engaged in production or consumption activity, which in turn harms others in the society or otherwise violates the property rights of others and degrades the environment quality should pay equal to the damage caused it.For example, a firm that emits greenhouse gas into the air should bear the carbon price. In this case, carbon price is the cost incurred by the polluter for damaging air ambient quality.Another example of polluter pays principle is that a firm who produce poisonous substance as a byproduct from its production process should be held responsible for its safe disposal.Polluter pays principle and nonpoint-source emission:
Nonpoint-source emission refers to emission from diffuse sources. For, example pollution caused by rainfall moving over the ground, which picks solid waste and dumps them into river, lake, and sea etc.Polluter pays principle works directly in case of nonpoint source emission, where polluter has to pay emission charges for solid waste disposals. Emission charges provide incentive to polluters for emission reduction.

Question 3

Consider the "European" approach to emission charges. For a single source is it possible that a low emissions charge could produce enough revenues to pay for all of the abatement costs required to reduce this source's emissions to an efficient level? What factors affect this? (Hint: You will want to explore this with the help of our standard emission-control model.)

Answer 3

Low emission charge and covering up the abatement costs of reduction in emission:
Possibility of covering up of the abatement costs of reduction in emission by low emission charge is conditional upon the quantity or amount of total emission. Often, it is argued that low emission charge or tax can cover up the abatement costs associated with the reduction in emission, if efficient level of emission is too high.
In simple words, current efficient level of emission should be high enough to be able to generate enough revenue through low emission taxes to offset the abatement costs of reduction in emission.Factors affecting covering up of the abatement costs of reduction in emission:
Several factors affecting the covering up of the abatement costs of reduction in emission by low emission charge are given as follows:
•Total emission level:
Total emission level plays a very important role in the covering up of the abatement costs of reduction in emission through low emission charge. Low emission charge would be able to cover up all the abatement costs associated with the reduction in emission level, if total emissions are too high.
•Sources of emission:
Another factor that helps low emission charge to cover up the abatement costs associated with the reduction in emission level is the number of sources of emission. If number of sources of pollution is too high, then low emission tax can easily cover up all the abatement costs associated with the reduction in emission level.
•High growth rate :
High growth rate means high growth of conventional output. Growth of conventional output and total emission level are positively related, which mean that growth of conventional output would increase the total emission level. Increase in total emission means increase in revenue through emission charges. Low emission charges on individual sources can cover of the abatement costs of reduction in emission, if growth rate is high.

Question 4

What factors determine whether it would be more effective to proceed against polluters by hammering them in court or by sitting down with them to try to work things out on a "reasonable" basis?

Question 5

Explain what is meant by "greening the national income accounts."