Good explanation from CNBC of carbon trading with both positives and negatives of the ‘cap and trade’ system. Excellent for CIE A2 Unit 3 – Externalities. Also mention of the problems facing developing economies and pollution.
Interesting video from Al Jazeera about pollution in China.
Smog levels in Beijing were almost seven times the maximum exposure recommended by the World Health Organization. That makes the smog a matter of life and death. In the first quarter of this year more than 90 percent of Chinese cities failed to meet the government’s own air-quality standards.
Air pollution contributes to 17 percent of all deaths in China. As many as 1.6 million people died this year as a result of air pollution, the Berkeley Research Group estimates. That’s about 4,400 people dying every day. But what is the government doing to tackle the issue? And why has it failed to strike a balance between economic growth and public health?
Coal remains one of the easiest and cheapest form of energy and this is very apparent in India where usage is about 62% of energy needs. India is the second largest consumer after China and ahead of the USA. Also coal consumption is growing about 7 percent a year to power the country’s economic catch-up. As China is going through a growth period similar to Europe many years earlier, their argument will be that European countries polluted the environment by a similar amount
Climate change activists have highlighted concerns of rising temperatures by 2100, however are rising temperatures as significant when you consider the long-term implications of much higher unemployment?
Last week I attended a PD for Teachers hosted by the University of Waikato Economics Department. Amongst the presentations was one on Developments in Environmental Policy. Questions were asked as to what is the Economic Way of Thinking about Pollution:
* What is the ‘efficient’ level of pollution?
* Rarely zero – choices have to be made* How should we get there?
* How can this be achieved at least cost?
* Who should bear the cost?
One particular example that was presented was the “Nutrient emissions reduction scenarios in the North Sea”. Ultimately for economists it is a cost benefit analysis with – Marginal Abatement Costs v Marginal Damage Costs (See graph below).
Theoretical representation of different management positions based on economic considerations and different interpretations of the precautionary principle (assuming that all cost can be expressed in monetary terms). Marginal abatement costs (ranging between AC1 and AC2) and marginal damage costs to the environment (ranging between DC1 and DC2) are shown
The letters on the horizontal axis represent the following:
A = Strict Precautionary Principle (As near as possible to pristine condition)
B = Precautionary Principle implemented through the best available technology
B – C = Safety Margin
C – E = Risk threshold zone of uncertainty
D = Implementation of the best available technology not entailed excessive costs for society
F – G = Economic Optimal zone
H = Implementation of the best available technology not entailing excessive private costs
Here is a clip I got from the Tutor2u A level economics blog. From Channel 4 news in the UK it takes you through what some of the 10 million residents in Shinjiazhuang live through – China’s most polluted city. Forced to wear masks every day there are some real concerns especially for the owner of an upmarket apartment block which is situated beside a coal-fired power station.
Living at a rural delievery address in NZ you get numerous free farming publications in your letterbox. Last week in the “Straight Furrow” publication there was a interesting article on how New Zealand farmers are much worse off than their Aussies counterparts reagrding carbon emissions. The ETS Review Panel have estimated that the Emissions Trading Scheme will cut New Zealand farm incomes by 11% in 2015 but tried to suggest that Aussies farmers are being subjected to the Carbon Farming Initiative (CFI). When you look at what the CFI actually entails the Aussies farmers are so much better off.
ETS – New Zealand farmers will pay for livestock emissions of nitrous oxide and methane
CFI – Australian farmers do not pay for any of their livestock emissions but they can be paid for reducing them.
It really is a carrot and stick situation. The CFI pays farmers to reduce or avoid emissions and as there is money to be made farmers will tend to do it. However the NZ ETS offers farmers no incentive to reduce livestock emissions. Farmers in Australia can also sequester carbon by planting trees or by increasing soil carbon and receive payments for this. Farmers in New Zealand have the same opportunity with regard to tress but not soil carbon. Furthermore Australian farmers will be paid for any activity which avoids an emission – eg. not felling an existing stand of trees.
The truth of the matter is that when NZ needs to buy carbon credits it is likely that they will be buying them off their Aussie counterparts.