Economic Aspects of Global Warming and Climate Change

Economic Aspects of orbicular Warming and mode interchangeAbstractThe come out of the closet of globular melt and temper switch over has turn out to be one of the virtually controversial and tricky problems facing all the nations of the world. Assessing the impact of humour transfigure is ingrainedly complex as it is very difficult to project the future and assess the hypothetical impact it pull up stakes have on the world. Additionally, it is unknown how technological progress allow for respond and potentially variegate the puts of orbicular warming. This paper go out focus on some impacts of world(a) warming and climate changes on the world-wide miserliness and review come-at- satisfactory methods of mitigating the adverse effects.IntroductionClimate change is one of the most challenging problems facing the world community. According to NASA, global warming is a natural process. A layer of fleeceableho engage gases which include water vapor, carbon dioxide (CO2), methane and nitrous oxide acts as a thermal blanket for the Earth, absorbing heat and warming its surface to an fair(a) temperature of 59 degrees Fahrenheit which help sustain life (National Aeronautics and Space Administration, 2017). Without this natural cover, the Earths surface would be colder than it is today, making the planet freeze and mostly seeming uninhabitable.However, scientists ar concerned that increasing concentrations of greenhouse gases in theatmosphere be causing an unprecedented rise in global temperatures, withpotentially harmful consequences for the environment, human health and the economy. We ar adding to the natural greenhouseeffect with emissions from industry and agriculture, trapping more thrust andincreasing the temperature. The possible causes of global warming arenumerous. But according to EnvironmentalProtection Agency, the most concerning and alarming are manmade emissions of CO2caused by burning fossil fuels and cutting down carbon-ab sorbing trees. other(a) greenhouse gases much(prenominal)(prenominal) as methane andnitrous oxide are in addition released through human activities, but their presence isrelatively small when compared to carbon dioxide. According to a 2016 BBC article, the take andconcentration of CO2 in our atmosphere is significantly high than it was atthe beginning of the industrial revolution which began in 1750 (What IsClimate Change?, 2016).Climate change has a broader meaning as it not only refersto the increased temperature trends described by global warming, but alikechanges such as sea level rise ice throng acquittance in Greenland, Antarctica, theArctic and mountain glaciers worldwide shifts in f depress and plant bloomingand thoroughgoing persist events.Kenneth Green (2002) argues that humanprosperity in many parts of the world, especially developing countries, heavilydepends on climate. Agriculture, tourism, transportation, postcode use, and manyother activities that define o ur economies are largely influenced byclimate. Therefore, it is crucial tounderstand the effects of global warming in short and hanker run and perform thecost and benefit outline to determine what policies and measures should betaken to mitigate and prevent the climate change and its various impacts.Climate change is a global issue, but the impacts arelikely to differ in different continents, countries, and regions. Some nationswill likely experience more adverse effects than others. Other nations maybenefit from climate changes. The powerfulness to adapt to climate change caninfluence how climate change affects individuals, communities, countries, andthe global population.This paper will discuss the effects of global warming on the energy industry, agriculture and intellectual nourishment impart, fruit product and inflation. Next, it will focus on the cost benefit analysis of implementing the policies and procedures to mitigate and/or prevent global warming and climate chan ge. Lastly, the paper will review the possible methods of reducing the effects of global warming and climate change and the mitigation policies to be implemented.Global Warming and Climate Change Economic ImpactClimate Change Effect on EnergyIn my opinion, energy is the keyindustry that will be highly affected by global warming and climate change. Theworlds crossingion and use of energy is the primary cause of globalwarming. Climate will affect energyconsumption by changing consumers wants and needs in both the intensive(short) and extensive (long) terms.There are some(prenominal) ways in which climate may affect energyconsumption. In the residential, commercial and industrial sectors in a warmer worldhigher cooling system drive is expect, which would lead to increased electricityconsumption. On the other hand, fewer cold winter days would moment in falld heating demand, which would decrease natural gas, oil and electricitydemand. These are demand side effects. Onthe supply si de, one would expect increased use of natural gas on hot days, assome power plants become less efficient as well as higher natural gasconsumption for contemporaries due to higher electricity demand. During the winter, there might be a decrease in natural gas demand for generation due to lowerelectricity demand.According to a 2009 report on global climate change, the majority(87%) of the joined States greenhouse gas emissions are from the outputand use of energy production. The researchwas primarily on the energy usage in buildings concerning the various heatingand cooling demands. The findings stated that, the demand for cooling energyincreases from 5 to 20 percent per 1.8F of warming, and the demand for heatingenergy drops by 3 to 15 percent per 1.8F of warming (Global Climate ChangeImpacts in the United States Report, 2009).Additionally, the 2009 report projects that global warmings increasingtemperatures will increase the peak demand for electricity as it is the mainsource used for the cooling of buildings.This would result in a disproportionate increase in energy infrastructureinvestment and possible taint as most of the nations electricity iscurrently produced from coal. This wouldpotentially increase the nations CO2 emissions and slow the development ofalternative green energy sources (Global Climate Change Impacts in the UnitedStates Report, 2009).Climate Change Effect on Agricultureand Food SupplySince temperature andprecipitation are direct inputs in agricultural production, this sector willexperience significant effects as well. Recentdroughts worldwide have highlighted that the advances in modern farmingtechniques and technologies cannot insulate the worlds food production andsupply. In fact, rising CO2concentrations could increase production of some crops, such as rice, soybeanand wheat (Clark, 2012). However, Clark(2012) besides stated, the changing climate would affect the length and qualityof the growing season and farmers could experience increasing damage to theircrops, caused by a rising intensity of extreme weather events such as droughts, implosion therapy or fires. Furthermore, in manydeveloping regions, agriculture is of major importance for national economies, asit represents the large share in gross domestic product (GDP). Therefore, with prospects of continued globalwarming, the damages for poor regions could be substantial (Clark, 2012). Climate changes probable impact on agriculturalproduction patterns and prices in these regions lower the profitability ofagriculture industry and increase the share of consumers income spent on food.Thismay lead to food shortages or insufficient access to food in some countries or regions.In addition to agriculture, theworlds fisheries which provide an important source of food for at least halfthe worlds population are very susceptible to climate change. Fisheries are plagued by two problems,overexploitation and pollution. Additionally,the various marine fish species are en countering their own problems due toclimate change such warming surface waters, and rising sea levels due tomelting ice. Clark (2012) states, somemarine fish species are already adapting by migrating to the high latitudes,but others, such as Arctic and freshwater species, have nowhere to go. If we are unable to find sustainable solutionsto help the fisheries and fish, we may end up with shortages of toothsome fishwhich will cause prices to soar.According to Schierhorn (2016), over the last century, theglobal population has quadrupled. In 1915, there were 1.8 one million million million people in theworld. Today, according to the most recent estimate by the UN, there are 7.3billion people and we may r distributively 8.5 billion by 2030 (UNprojects world population to come about 8.5 billion by 2030, driven by growth indeveloping countries, 2015). Thispopulation growth, along with rising incomes in developing countries, is increasingglobal food demand. Schierhorns (2016)research sho ws that food demand is expected to increase anywhere between 59 to98 percent by 2050. Therefore, theworlds crop production will need to increase.That means there needs to be an expanse of farmable land to grow crops,and current productivity needs expanded through the use of modern farmingmethods (Schierhorn, 2016).A recent EPA (2016) study concludesthat climate change is very likely to affect food security at the global,regional, and local level and that climate change can disrupt foodavailability, visit access to food, and affect food quality. The study projects that changes intemperatures and precipitation patterns, along with extreme weather events may rationalize agricultural productivity (Climate Impacts on Agriculture and FoodSupply, 2016).The same study further suggests thatincreases in the frequency and severity of extreme weather events can alsointerrupt food delivery, and resulting spikes in food prices after extremeevents are expected to be more frequent in the future. I ncreasing temperatures can contribute to foodspoilage and contamination (Climate Impacts on Agriculture and FoodSupply, 2016).Furthermore, Clark (2012) argues that food productionitself is a significant emitter of greenhouse gases, as well as a cause ofenvironmental degradation in many parts of the world. Clark states agriculturecontributes about 15% of all emissions, on a par with transport. He concludes thatto limit the long impacts of climate change, food production must becomenot only more resilient to climate but also more sustainable and low-carbonitself (Clark, 2012).Climate Change Effect on Economy GrowthAccording to a recent study bywade (2017), climate change will most likely reduce the toughieital stock andproductivity in the world economy. Global warming is expected to increase thefrequency and severity of extreme weather events causing property andinfrastructure loss. While the initial scotch response to recover the damages maybe positive for GDP while it is possible , in the long run the world economy willface an extreme challenge. The harm to scotch output may become irreversible.Wade (2017) argues that it will not beworth for feares to replace their capital stock unless future damages couldbe prevented or the business could be relocated to the safer area. This could cause a short period of disruptionas businesses relocate, or in the worst case scenario, a permanent loss ofcapital stock and output. As thetemperatures continue to rise, the damages will increase and become permanent(Wade, 2017).Wade (2017) represents the likely effect of climate changeon output in production function in Figure 1 (See Appendices). If there is less capital stock available dueto the damage resulted from climate change, the productive capacity of theworld economy will fall. It isrepresented by the downward shift in the world production function as each unitof labor produces less output (Wade, 2017).However, lower labor productivity may occur not only due toa lower level of capital stock. Globalwarming may affect food safety, promote the spread of infections, cause social unrestand thus reduce availability of labor. Wade (2017) shows this effect as asupply shock in a supply and demand graph (Figure 2, Appendices). Global warming is likely to contract supplyat any given price and result in a backward shift of the supply curve (from S1to S2) (Wade, 2017). As the graph demonstrates, this will result in a lowerlevel of output (Y2) and a higher price (P2).This analysis is based on the assumption that the worldwill not respond to climate change and no prevention or mitigation measures aretaken. Climate Change Effect on Inflation Wade (2017) also proves that as global production output isreduced, an increase in the general price level will occur as a result ofglobal warming.As discussed earlier, higher food prices will affect consumersincome and overall food price inflation will rise. Furthermore, reduced land availability mayalso contribute to risi ng inflation. Per Wade (2017) the surge in globaltemperatures may eventually cause some areas of the world to become uninhabitableand cause mass migration. Along with the political and socioeconomicimplications of the migration there will be higher demand for decreasing amountof land. Higher energy be are also likely to boost inflation. Asdiscussed earlier, as our climate becomes more extreme the demand for energyused for cooling will likely to rise. Asthe energy demand will rise, the supply will shrink as the efficiency ofexisting power stations is compromised due to higher temperatures (Wade, 2017). Policy actions by governments to mutationto green energy may further contribute to inflation in the short-run when taxesare placed on fossil fuel electricity. Since energy is the nates of most of theworlds production, the effects of higher energy prices on inflation will impactthe global economy (Wade, K. 2017).Cost-BenefitAnalysisAccording to Mendelsohn (2013), the biggest panic c limatechange poses to economic growth is from immediate, aggressive and inefficientmitigation policies.Thomas C. Shellingbelieves that climate change is the global public good, because each estatesemissions of greenhouse gases contribute cumulatively to the increase of theoverall concentration, and each countrys abatements entail higher cost thanbenefit, unless effective concerted corporate actions take place (Stiglitz & Shelling, 2012). Therefore, benefit-cost analysis isa principal tool for deciding if this public good should be altered throughmitigation policy. There are many conflicting views regarding the truedimensions of climate change problem and a lot of various policy assessment mystifys. The most famous are dice model created by William Nordhaus and theStern Review prepared by Sir Nicholas Stern for the British government in2006. The modelingapproach by Nordhaus views climate change as a matter of investment efficiencyand assumes that climate change policies will compet e with other investmentssuch as public health and education. This model provides estimates of theappropriate price path on carbon emissions, with prices starting relatively lowand gradually rising as a result of discounting. (William D. Nordhaus and Joseph Boyer, 2000)TheStern Review, in contrast to Nordhaus model, recommended strong and immediateaction on climate change. Stern (2006) found that the beassociated with uncontrolled global warming would be up to a 20 percent dropper year in the worlds GDP by 2050. The Stern Review incorporated newscientific establish suggesting that the climate system may be more sensitivethan previously thought. Also, it supported the application of much lowerdiscount rates. (Stern, 2006). Therefore,two formulas of the benefit-cost calculation are critical. One is allowance foruncertainty as the possible outcomes of global warming in the absence ofmitigation are very unclear. The other critical aspect is thechoice of discount rate as most of the cl imate-related benefits from currentpolicy efforts would take the form of stave offed damages in the long run with manyof the costs incurred in the short run. Stiglitz & Shelling (2012)suggest a number of behavioral changes to mitigate the problem of globalwarming such as shifting to fuels with higher ratio of useful energy to CO2emissions (from coal to oil, from oil to natural gas) developing technologiesthat use less energy per unit output shifting demand to products with lowerenergy intensity planting trees and reducing deforestation pursuing policy ofsequestering the CO2 by pumping it directly into underground reservoirs. The process of mitigation will require a temporary economictransition from consumption to investment, provided that the transitional costsare small relative to the cost of inaction (Wade, 2017). However, as the costs of mitigation rise,budget limitations will become increasingly important.Possible Mitigation MeasuresDespite the disagreementsbetween nations, in recent years we have witnessed the gradual outcome of arange of external and domestic climate change policies, includingemissions trading programs, emissions taxes, performance standards, andtechnology-promoting programs (Goulder & Pizer, 2006). At the Paris climate conference (COP21) inDecember 2015, 195 countries take the first-ever universal, legally bindingglobal climate agreement that outlined a global action plan to put the world ontrack to avoid dangerous climate change by limiting global warming to wellbelow 2C.Therefore, there is now an agreement among climateeconomists to claim climate change as a global externality that must becompensated for to recover economic optimality. Hence, basic public economics experience requires some mitigation eorts (IPCC, 2007). The issue getscontroversial however when we try to answer the when and how muchquestions. One approach that has becomewidely used is cap and trade. The U.S. Clean Air Act of 1990 establishedemission levels (caps) a nd permitted companies with emissions below the cap tosell (trade) their rights to remaining permissible amount to firms that haveexceeded the cap. Over time, the government would reduce the cap, thus overallemissions would be gradually reduced. This approach gives companiesflexibility. It increases the pool of available capital to make reductions,encourages companies to cut pollution faster and rewards innovation. But thecritics pointed out that it allows richer companies to spoil more as they areable to buy those rights. Another type of emissionscontrol is establishment of emissions charges or fees. Each business would becharged thence for the amount of emissions produced. It would become veryexpensive for the companies to pollute and will create incentive for them toclean up. In recent years governments also experimented with various greentaxes and eco-taxes that levy a fee on environmentally damaging behavior.Beside the punishment, governments also offer positive incentives fo r thecompanies that improve their environmental behavior. For example, thegovernment may decide to grease ones palms only from those firms that meet certainpollution standard or to offer financial aid to those that install pollutioncontrol equipment. Tax incentives such as faster depreciation for pollutioncontrol equipment may also be used. Overall, the trend has been forgovernments to use more flexible, market oriented approaches such as tradeableallowances, pollution fees and taxes, and incentives, to achieve the goals ofprotecting the environment and mitigating climate change. (Lawrence &Weber, 2017)Many challenges remain though.2C stabilization goal set at the Paris Climate company requires decarbonization of the world economy.Carbon pricing would be a necessary tool in reaching that goal. The advantagesof carbon pricing would be the following it would trigger economy-widedecarbonization in a cost efficient manner, generate revenues that can be used forfinancing the sustainabl e development goals and become a focal point forinternational climate policy cooperation focusing on carbon pricingcoordination.For many policy issues, there isan important and clear distinction between the short-run and the long-runresponses by businesses and individuals. The short run is a period when businessesand individuals are locked in to some past decisions and have fixed costs thatthey are not able to avoid. But over a period of time, they might respond bymaking gradual adjustments in their behaviors and choices. They are moreresponsive in the long run than in the short run because they have more timeand opportunities to respond to a change in price. As we know, supply anddemand are generally more elastic in the long run. We can use the example of agas tax that was introduced as a tool to reduce pollution. If we look only atthe short-run elasticity of demand, we might come to conclusion that a gas taxwill have little effect on driving since demand is inelastic. However, if wehad an estimate of the long-run elasticity of demand, we might see that thedemand curve is flatter. As recent studies how, the effectiveness of manymarket-based environmental policies depend on the responsiveness of businessesand individuals to a change in incentives, economists and policymakers should keepin mind the difference between short-run responses and long-run responses(Global Warming Causes, 2017). compendiousTheoverall effect of climate change on economic growth will most likely benegative in the long run. Although there will be winners and losers fromclimate change at different levels of warming, the impact of climate changewill be widespread due to the financial, political and economic integration ofthe worlds economies. Global warming will primarily influence economic growththrough damage to property and infrastructure, lost productivity, massmigration, security threats.The issue of global warming andclimate change invokes the highest form of global citizenship. The nations haveto be willing to sacrifice hundreds of billions of dollars of presentconsumption in an effort that will largely benefit people in other countries,considering that the benefit that will not be instant. Moreover, the threat ofclimate change is uncertain and based on modeling rather than directobservation. In considering climate changepolicies, the fundamental trade-off that society faces is between consumptiontoday and consumption in the future. By taking measures to slow emissions ofgreenhouse gases now, the economy reduces the amount of output that can bedevoted to consumption and productive investment. This is the opportunity costof the investment into mitigating global warming. However, the return for thisinvestment is lower damages and higher consumption in the future. The climateinvestments involve reducing fossil-fuel consumption and moving to low-carbonfuels. In return, the impacts on energy,agriculture, economic growth and inflation as well as the potential forcat astrophic climate change will be reduced. Appendices Figure 1 Global exertion Function (Wade, K., 2017) Figure 2 Supply and Demand (Wade, K., 2017) ReferencesCarbon Pricing for Climate Change Mitigation and Financingthe SDGs. (n.d.). Retrieved April 01, 2017, from https//www.global-economic-symposium.org/about-the-ges/council-of-global-problem-solving/recommendations/carbon-pricing-for-climate-change-mitigation-and-financing-the-sdgsClark, D. 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MIT Press, Cambridge Mass., 2000. ISBN 0 262 14071 3. UN projects world population toreach 8.5 billion by 2030, driven by growth in developing countries. (2015, July 29). Retrieved April 23, 2017, from http//www.un.org/apps/news/story.asp?NewsID=51526.WP083IWcHIU