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Global Warming: Evidence and Effect

During the 1980s, the public learned that the earth was supposedly warming. But it was not before the beginning of the following decade that, via the media and the rise of environmentalist political parties, attention was focused on the problem. A first step against global warming was taken in 1992 when many countries (some 166 of them) signed the Convention on Climate Change agreeing to reduce emissions of greenhouse gases to their 1990 levels by the end of that decade.

The greenhouse effect is a natural process allowing life to be possible on earth. As its name indicates, it plays the same role as a greenhouse and it is defined as the “trapping of thermal infrared radiant energy in the lower troposphere” (Schneider 27). As stressed in literature, the greenhouse effect is a natural process not dangerous in itself and even more: essential to life. Without the greenhouse effect, the earth would be too cold for people, animals or plants to live; its average temperature would approximate -20 degrees instead of +15.

At the opposite, if a component of the atmosphere permits more solar energy to reach a planet’s surface than it allows radiant heat to escape, the balance between absorption and radiation is lost and the earth warms. In the medium and long run, the greenhouse effect will alter the current environment, enhance natural disasters and require that human activities be adapted to it. These will be the results of a rapid climate change. The most probable impact of worldwide warming is certainly sea level rise. Glaciers and polar ice caps will melt as temperature increases.

Moreover, even if the emission of greenhouse gases were to end immediately, sea level will still rise in the future because of the lag between greenhouse gas concentration and temperature change and the reaction of oceans and ice sheets. Since many countries, like the Netherlands, Bangladesh and Egypt for example, have much population clustered around a river or a sea, a generalized sea level rise may cause damages to urban infrastructure and a necessity of either relocation or construction of adequate protection (Houghton 202). Externalities have basically five characteristics.

First, they can either be positive or negative depending on whether the activity of an agent increases or decreases the welfare of others. It follows that pollution is a negative externality. Secondly, they can be classified as consumption or production externalities if the choice of an individual directly affects a consumer’s utility or a producer’s production function respectively. This means that, by polluting the river, the steel mill creates a negative production externality for the fishery. They are either marginal or inframarginal.

A change in the level of the activity generating the externality has an impact on a marginal but not on an inframarginal externality. The steel mill is a marginal externality because a change in the discharge into the river affects the number offish to be captured; and so is global warming because the change in greenhouse gas emissions has an impact on the variation of temperature. The steel mill externality is qualified as a technological as opposed to a pecuniary externality (where the effect is transmitted through price changes) (Baumol and Oates 109-10).

Since greenhouse gases are associated with a public good (atmosphere), global warming is a technological externality communicated through the area of public good. These two last properties can be detailed a bit more. Domestic or transnational pollution is a public good -or “bad”- externality because it has the character of a public good: it is non excludable and undepletable. Pollution is indeed non excludable in the sense that it is accessible to all, that everybody can “consume” it. Moreover, a person’s “consumption” of pollution does not decrease the amount available to others, which satisfies the undepletable character of the public good.

At the opposite, a private externality involves a depletable good. It can also be claimed that pollution is a technological and not a pecuniary externality. The difference is important because the latter does not produce a misallocation of resources whereas the former does (Baumol and Oates 112 – 13). Going back to the definition of externality, it is stated that the agent generating an externality imposes a cost or a benefit on others without compensation because he does not take into consideration his actions on the welfare of other individuals.

Thus there exists a divergence between the private cost or benefit faced by the affecting agent and the social cost or benefit associated with his activity. This creates an economic inefficiency or a market failure: Pareto optimality will not result from the market mechanism because the agent generating the externality will equalize its private cost and benefit instead of its social cost and benefit. Since pollution, as a negative technological externality, creates a market failure, the same should be true if it is characterized as a public good externality.

It indeed is, and as Varian stresses, it is due to the free rider problem (Varian 67). As a matter of fact, every individual is tempted to let others pay for the provision of the public good or the elimination of the public bad without contributing himself since everybody will have full use of the service if it is acquired. Hence, in general, purely individualistic mechanisms will not generate the optimal amount of a public good or bad. Every single country in the world freely emits greenhouse gases into a common property resource, the atmosphere.

It is a reciprocal externality since the decision by any country to pollute will cause repercussions on all other nations as well as itself (Singer and Avery 54). Of course, the atmosphere is a renewable resource capable of regenerating itself, but the higher the pollution and the longer pollutants are active, the lower the speed of regeneration. In other words, if nations of the world pollute at such a high rate that the atmosphere is not able to regenerate itself anymore, the renewable resource is in danger of extinction.

And that is precisely what the risk is because it is beneficial for all nations to overuse the atmosphere: a scarce renewable resource. As a matter of fact, each nation is likely to extend its use of the commons as far as it is beneficial for itself, and without regard for the consequences to the others. And conversely, no country has an incentive to conserve and use the resource efficiently because it would thereby subsidize the welfare of other nations. Works Cited Baumol, W. and Oates, W. The Theory of Environmental Policy. Fifth Edition.

Cambridge University Press, 2003. Houghton, John. Global Warming: The Complete Briefing. Cambridge University Press; 3 edition, 2004. Schneider, Stephen H. Global Warming: Are We Entering the Greenhouse Century? Sierra Club Books, San Francisco, CA, 1989. Singer, S. Fred and Avery, Dennis T. Unstoppable Global Warming: Every 1,500 Years, Updated and Expanded Edition. Rowman & Littlefield Publishers, Inc. ; Upd Exp edition, 2008. Varian, H. Intermediate Microeconomics: A Modern Approach. Seventh Edition, New York, NY: Norton, 2005.

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