CRCDS Microeconomics Solution to Address Climate Change Discussion Discussion on Solution to address climate change ( 1 question only)Note: the answer shou

CRCDS Microeconomics Solution to Address Climate Change Discussion Discussion on Solution to address climate change ( 1 question only)Note: the answer should be a paragraph.After learning about negative externalities, and seeing that climate change is a global externality, what are some solutions that you can think of to address the issue, and why do you think it will work? Along with that, what are potential issues that may arise from your solution?I want to see the actual economic logic and analysis of what you propose. What you propose can be as small scale or large scale as you would like, as long as you discuss the cost and benefits of it. Note that response to others’ policies is also equally valued. I want this forum to be a way for students to talk civilly about this issue. Please be respectful to others in your discussion and responses.Key thing to check for when making your post: Are you using tools that we have learned in our class to analyze the issue? Carbon Emissions in the U.S.
Emissions are down since 2007.
Key reasons why:
1. Improvements in automobile fuel economy
a) Policy (fuel-efficiency standards)
b) Higher gas prices
2. Continued decline in manufacturing
3. Natural gas replacing coal because of success of fracking
(natural gas produces twice as much heat per carbon
emitted as coal)
Mail ha
Alternate Policies
Cap and Trade
The amount of pollution is capped (limited) through permits
(i.e. allowances/quota to emit carbon)
• Permits are then allowed to be traded in a permit exchange
market
Kyoto Protocol (1997) was an attempt at this, but failed because
U.S. and China were not involved
• The European Union has a Cap and Trade program, and China
just recently started its own
Subsidizing Clean Energy
Germany is pushing for getting 30% of electric power
from “clean” energy (wind/solar)
Carbon Tax
1 Gal
CO2
1 gallon of gas leads to emission of 20 lbs CO2
A number of studies suggest, as a ballpark figure, $20 of cost to
environment per ton of CO2
• an appropriate Pigouvian tax.
That’s 20 cents a gallon. For reference, in Arizona gas tax is 36.4 cents
per gallon (federal: 18.4 cents per gallon, state: 18 cents per gallon)
Additional comparison: Germany gas tax is about $3 a gallon!
Application
Let’s discuss externalities in the context of a very relevant policy
issue – climate change
• This is an externality on a global level. (Carbon emitted in the U.S.
impacts China and vice versa)
There is a scientific question about the impact of human behavior
on climate. Let’s skip the science for this course.
• If no negative externality arises from human behavior, the most
efficient thing to do is to do nothing.
But what if there is a negative externality? This is a more interesting
question that economics can address.
Let’s focus on policies that can potentially be pursued that impact
carbon consumption.

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