Prices & Markets Assesment 2 Final Report PDF

Preview

Summary

Download Prices & Markets Assesment 2 Final Report PDF

Description

1

2

ECONS1025 Assessment Task 2 Topic: Climate Change and Greenhouse Effect Word Count: 2183 Submitted by: Prices & Market LF01 Group 330 Shaun Tan Zhong Jun Mahaysan Chandrasegaran Evangeline Lim Hui Min Nicklaus Savio Tan Khai Sheng

3

Table of Contents 1. CLIMATE CHANGE AND GREENHOUSE EFFECT................5 2. FACTORS CONTRIBUTING TO EMISSIONS OF GREENHOUSE EFFECT...............................................................5 3. IMPACT ON ENVIRONMENT AND ECONOMIC MARKET.....6 4. MEASURES TAKEN TO REDUCE GREEN-HOUSE EMISSION......................................................................................6 5. DEMAND FACTORS FOR GHG EMISSIONS..........................8 6. SUPPLY FACTORS FOR GHG EMISSIONS............................9 7. WELFARE IMPLICATION........................................................10 8. GOVERNMENT INTERVENTION............................................12 9. CONCLUSION.........................................................................13 WORK ALLOCATION OUTLINE.................................................14 REFERENCE LIST:......................................................................15

4

1. Climate Change and Greenhouse Effect Climate change is primarily defined as the change in global or regional climate patterns and is attributed largely due to the increase of atmospheric greenhouse gases around the globe. Greenhouse effect is a natural process that gradually warms the Earth’s surface. When energy from the sun reaches the Earth’s atmosphere, some are radiated back to space, and the remaining are reabsorbed back into the Earth’s atmosphere by greenhouse gases. Greenhouse gases include water vapour, carbon dioxide, methane, nitrous oxide, ozone and some artificial chemicals such as chlorofluorocarbon (CFCs). The absorbed energy warms the Earth’s atmosphere and surface. The problem that the world faces now is an increase of greenhouse gas emissions mainly due to human activities in particular, burning of fossil fuels (coal, oil and natural gas) which rapidly enhances the process of the greenhouse effect and ultimately leading to climate change (global warming) (Department of the Environment and Energy 2019).

2. Factors Contributing to Emissions of Greenhouse Effect The factors that contribute to the enhanced greenhouse effect in present times are mainly due to human activities. Burning of fossil fuels (coal, oil and natural) mainly for the production of electricity and transportation purposes (Figure 2), deforestation, farming & agriculture, increase in world’s population and industrial waste and landfill all contribute to the heightened emissions of greenhouse gases (Causes of the Greenhouse Effect - Conserve Energy Future, 2017).

Figure 2: Chart showing sources of greenhouse gases

5

3. Impact on Environment and Economic Market The planet has been getting warmer and the average global surface temperature has spiked by more than 1.6 Degrees Fahrenheit which results in devastating changes for the environment, wildlife and as well as human population. Climate change has led to the thawing of glacial masses which directly corresponds with rising sea levels. These impacts will greatly affect both wildlife and human life as increased flooding in these areas would be detrimental for the population and ultimately, threaten their survival. Climate change would also bring about increased occurrence of extreme weather phenomena like hurricanes, droughts and bushfires which would ultimately impact agriculture and livestock industry. Changes in temperatures and seasons are affecting the proliferation of insects, invasive weeds and diseases that can be detrimental to crops, similarly for livestock. Droughts destroy food crops and make it harder to feed the ever-growing world population (Iberdrola, 2019). World leaders have to spend billions of dollars to aid and relieve areas and populations directly affected by the negative impacts of climate change. It is estimated by the World Employment and Social Outlook 2018 that climate change potentially threatens 1.2 billion jobs (Amadeo, 2014).

4. Measures Taken to Reduce Green-house Emission 4.1 Paris Climate Agreement Global warming has become a serious problem and actions need to be taken to tackle this issue. Hence, the Paris Climate Agreement was invented. The Paris Climate Agreement was signed on 12 December 2015, which every member state has agreed to formulate its own national commitments in terms of general mitigation targets to address climate change (Oxford University Press, 2017). 1) One objective of the paris climate agreement is to limit the global average temperature between 1.5 to 2 Celsius. 2) 5 year review cycle. This commits countries to devise and communicate long-term plans for achieving low greenhouse gas emission and to update action every five years. Each successful phase must be as effective as the current one. 3) Long term objective, zero-emission by 2060-2080. To achieve a balance between anthropogenic emission by sources and removal by sinks of greenhouse gases in the second half of this century.

4.2 Renewable energy sources

6

Figure 4.2A: Percentage of Energy Sources in 2018

One of the ways to limit greenhouse gas emission is by using renewable energy sources. ‘All of the four most common energy sources (wind power, hydro power, energy from wood and energy from crops) can replace CO 2 emission but to different degrees’ (Anna-Kaisa, Kosenius, Markku Ollikainen, 2013). In order for Renewable Energy Resources to be sustainable, the distribution of environmental goods and services including the climate system must be inexhaustible and not harmed. The figure above shows the energy consumption in 2008.

Figure 4.2B Estimated Energy Consumption by 2050 (Science & Technology: Energy, Climate, Asia)

The above photo shows the prediction of energy consumption by 2050, development of renewable energy is becoming rapid in the coming years. With government policy, changes of price in fossil fuel and etc, it is possible to make this happen.

7

5. Demand Factors for GHG Emissions 5.1 Increase need for Food Supplies (Agriculture) The global population is ever growing and over the last century, the world’s population has quadrupled. The world’s populations may increase to 9.7 billion in the year 2050, this growth along with the increasing incomes in developed countries will drive up the global demand for food (Global Demand for Food Is Rising. Can We Meet It? 2016). With the global demand for food increasing, more land will be required to produce food supplies to feed the ever-growing world population. Increased deforestation will take place for land clearing for the food industry that would drive up the rates of GHG being emitted.

Figure 5.1: Graph showing the increased in demand co-relating to the increased in supply

From analysing this figure 5.1, it is clearly shown that the increase in demand from D1 to D2, the quantity required from the supply line will also increase from Q1 to Q2. Hence, linking back to the increased global demand for food will drive the food industry to produce more, resulting in increased linked outcomes for the matter at hand like deforestation and ultimately, heightened GHG emissions.

5.2 Increase demand for usage of fossil fuels With the demands of the world increasing in light of population growth as elaborated in 7.1, global usage of fossil fuels which are the main contributors of GHG emissions have also been on the rise. Fossil fuels are found in almost every product we use today. Major uses of fossil fuels are as fuels, gasoline for cars, manufacturing of products around the world and natural 8

gases for the production of electricity. According to the U.S. Energy Information Administration, about 4,178 billion kilowatthours (kWh) (or 4.18 trillion kWh) of electricity were generated in the United States in 2018 and an estimated 63% of this electricity generation was from fossil fuels (Importance of Fossil Fuels 2018). Hence, it is prevalent that the world demands for fossil fuels have been increasing alarmingly. This will have a direct impact on the emissions of GHG. Increased demand for fossil fuels will lead to increased usage by industries to create supply and feed the ever-growing demand and in turn, cause a drastic rise of GHG emissions globally.

6. Supply Factors for GHG Emissions 6.1 Deforestation to clear land for agriculture and industry Referring back to 5.1, it is covered that the growing world population has led to an heightened demand for food and general supplies around the world. Lands will be cleared to make way for construction of agriculture and industry will be required to feed the growing demand. Deforestation will occur as a result. Trees that help to absorb and regulate GHG in the atmosphere will be destroyed and when they are felled, the carbon stored in them would be released in turn (What is the Relationship Between Deforestation And Climate Change? 2018). Hence, demands from the growing population will lead to increased supply from governments and organizations around the world. Deforestation will occur globally as a consequence of the increased need to supply and ultimately, drive the emissions of GHG.

Figure 6.1: Graph depicting increase in supply co-relating to increased Quantity Demanded

9

Observing 6.1, it can be seen that the increase of supply, from S1 to S2, will reflect on the increase of quantity demanded from Q1 to Q2. Rising demands lead to increased supply by government and organisations which will ramp up the emissions for GHG.

6.2 Increase in products that also contribute to green-house effect due to demand (For example, Automobiles - Cars and Motorcycles) Transport has been a huge factor for GHG emission and road transport is 70% of the reason for it. Even still, the demand for automobiles increases as the years go by. When an automobile runs, they release a huge amount of C02 which is the main gas responsible for GHS. This is due to the burning of gasoline and diesel. To counter this automobile companies must implement new technology that reduces CO2 which is going to increase the cost of production. Thus, affecting the supply factor.

7. Welfare Implication With the emission of Green-House Gases (GHG) increasing rapidly, society and the government can do its part to reduce its level of carbon footprint. These causes affect the government's approach to economic solution policies, and their involvement in the economy is to help correct market failures in which private organizations cannot maximize the value. This includes providing public goods, incorporating externalities and enforcing competition. (Moffat M, July 2019). The two types of externalities in market failure include positive and negative. Positively, society can increase global awareness and education on climate change. While pollution to the environment (carbon/pollution tax) is based on negative externalities and increasing its societal costs can help affected people understand the consequences of climate change. Externalities are costs or benefits generated by the production or consumption of goods and services. Government responds to market failure according to various situations: If externality is positive, SMC = Price Market Cost (PMC) - positive externality

10

Figure 7.1 Consumer & Producer Surplus - Positive Externality

If externality is negative, SMC = Price Market Cost (PMC) + negative externality

Figure 7.2 Consumer & Producer Surplus - Negative Externality

With the equation, we will be able to identify the value of deadweight loss. Therefore, as we have discussed, climate change is a market failure - thus deadweight loss is present.

11

8. Government Intervention Organizations or individuals can contribute to help reduce emissions of GHG by: Private

Justification / Explanation

Implement use of electric cars or e-vehicles

Being one of the larger sources of greenhouse gases, partial or fully electric cars can help to reduce or omit emission of fossil fuels by having lesser or no carbon dioxide and noise released (EDF website). Instead of running fully on petrol or diesel, it is designed to be replaced with batteries - renewable energy.

Dietary changes to reduce carbon footprint: vegan, vegetarian or organic foods

Red meat has a greater impact on greenhouse gases as they contain chemicals and release methane as a byproduct. In addition, it produces nitrous oxide - contributing to our carbon footprint. Whereas, plant-based diets and organic foods have smaller impacts as they are free from artificial chemicals and improve soil quality and the conservation of groundwater. It also reduces pollution and may be better for the environment (Brown, M. J, May 2016)

Since cost plays a major role and is important in our daily lives, government adjusting prices has a stronger effect on the public and impact towards greenhouse gases. In this case, the government can contribute to help reduce emissions of GHG and improve climate change by: Public Taxes for emission of Greenhouse gases

Justification/Explanation These forms of taxes are called “Carbon Tax”. By implementing taxes, it levies a fee on the production, distribution and use of fossil fuels based on how much carbon their combustion produces. These fossil fuels are more expensive for the organizations to run. Thus, it encourages businesses and individuals to reduce consumption and increase energy efficiency. Rising costs have a stronger impact on consumers and hence, lowering greenhousegas emissions.

Price Ceiling - subsidies for companies or organisations who aims to be or are eco-friendly

Eco-friendly products tend to be more expensive as demand is not as high as traditional products yet and labour and ethical costs are higher (Kathy, 2019). Thus, with subsidy by the government, such organizations can lower their cost and encourage more consumers to purchase and learn from these “green-organizations”.

12

9. Conclusion In conclusion, greenhouse gas emissions will rise with the leading human activity factor. If no counter-measures are taken to curb the fossil fuel burning and other known factors as described above, a snowball effect will undoubtedly come into play overtime, thereby impacting both the climate and the economic market. It is out of the question to fully eliminate the need for human activities that cause the increase of greenhouse gases, but what government and private sectors / industries can do is to at least minimize and take climate change seriously. The Kyoto Protocol and the Paris Accord will be only two good examples. All parties are taking several steps to accomplish the same goal, aiming to reduce the global rise in temperature by reducing the need for human activities creating carbon footprints. Yet the general public still has an important part to play. The government has also made subsidies and taxes and price caps in an attempt to save the situation in an effort to reassure and inspire its people.

13

Work Allocation Outline Week

6

7&8

Task

Allocated to

Progress

Shaun

Nicklaus

Mahaysan

Evangeline

Choose topic

✓

✓

✓

✓

Completed

Analyse

✓

✓

✓

✓

Completed

Definition of Climate Change and Greenhouse Effect

✓

✓

Completed

Factors and Impacts of Greenhouse Gas (GHG)

✓

✓

Completed

Factors affecting Demand and Supply of GHG

✓

✓

Completed

Welfare Implications and Market Failures - Externalities Consolidated and linked final work with each other

✓

✓

✓

✓

✓

Completed

✓

Completed

✓

Completed

9 Finalised overview of assignment

✓

Conclusion

✓

✓

✓

Completed

✓

Completed

Make final adjustments to report

✓

✓

✓

Report Reflection and work allocation outline

✓

✓

✓

10 Completed

14

Reference List: 1. https://www.thebalance.com/economic-impact-of-climate-change-3305682 - Amadeo, K 2014, Climate Change Facts and Effect on the Economy, The Balance, The Balance 2. https://www.conserve-energy-future.com/greenhouseeffectcauses.php - Causes of the Greenhouse Effect - Conserve Energy Future 2017, Conserve Energy Future 3. https://www.environment.gov.au/climate-change/climate-science-data/climatescience/greenhouse-effect - Department of the Environment and Energy 2019, Department of the Environment and Energy 4. https://www.iberdrola.com/environment/greenhouse-effects-consequences-and-impacts Desertification and flooding among the consequences of the greenhouse effect 2019, Iberdrola 5. https://www.edfenergy.com/electric-cars/environment - Electric Cars and The Environment 6. https://academic.oup.com/oxrep/article/26/2/117/369275 - Environmental Policy, Government and the Market 7. http://www.foodsystemprimer.org/food-production/food-and-climate-change/ - Food and Climate Change 8. https://hbr.org/2016/04/global-demand-for-food-is-rising-can-we-meet-it - Global Demand for Food Is Rising. Can We Meet It? 2016, Harvard Business Review 9. https://www.iberdrola.com/environment/impacts-of-climate-change - Iberdrola 2019, The Impact Of Climate Change, Iberdrola, Iberdrola 10. https://www.iagc.org/importance-of-fossil-fuels.html - Importance of Fossil Fuels 2018, International Association of Geophysical Contractors | Houston, TX, 77008 11. https://courses.lumenlearning.com/boundless-economics/chapter/introducing-marketfailure/ - Introducing Market Failure 12. http://clarifygreen.com/eco-friendly-products-cost-more/ - Kathy, January 2019 Why Are Eco-friendly Products More Expensive? 13. https://www.wri.org/blog/2015/12/insider-understanding-paris-agreement-s-long-termgoal-limit-global-warming - Levin K, Morgan J and Song J, December 2015, INSIDER: Understanding the Paris Agreement’s Long-term Goal to Limit Global Warming 15

14. Moomaw, William & Yamba, Francis & Kamimoto, Masayuki & Maurice, Lourdes & Nyboer, John & Urama, Kevin & Weir, Tony & Jäger-Waldau, Arnulf & Krey, Volker & Sims, Ralph & Steckel, Jan & Sterner, Michael & Stratton, Russell & Verbruggen, Aviel & Wiser, Ryan , 2012, Renewable Energy and Climate Change.

15. https://www.nytimes.com/interactive/2019/04/30/dining/climate-change-food-eatinghabits.html - Moskin J, Plumer B, Lieberman R and Weingart E, April 2019 16. Napp, T., Hills, T., Soltani, S.M., Bosch, J. and Mazur, C., A survey of key technological innovations for the low-carbon economy. 17. Paris Climate Agreement 2017. In Mann, T. (Ed.), Australian Law Dictionary. : Oxford University Press. Retrieved 16 Mar. 2020, from

18. https://ourworld.unu.edu/en/can-japan-go-100-renewable-by-2050 - SCIENCE & TECHNOLOGY : Energy, Climate Change, Asia 19. https://www.thoughtco.com/the-governments-role-in-the-economy-1147544 - The Government’s Role In Economy, Moffatt M., July 2019 20. https://www.rainforest-alliance.org/articles/relationship-between-deforestation-climatechange - What is the Relationship Between Deforestation And Climate Change? 2018, Rainforest Alliance 21. https://www.healthline.com/nutrition/what-is-organic-food - What Is Organic Food, and Is It Better Than Non-Organic?, Brown M. J, May 2016

1...