CH 13 The Global Environment VOCABULARY EXTERNALITIES costs or benefits for stakeholders other than the actor undertaking an action When an externality exists the decision maker does not bear all the costs or reap all the gains from his or her actions NONEXCLUDABLE characterizing a public good if the good is available to one actor to consume then other actors cannot be prevented from consuming it as well CFCS CHLOOROFLUOROCARBONS chemical compounds used in aerosols insulating materials refrigerator and air conditioner coolants and other products CFCs are widely banned today owing to their damaging effect on the ozone layer OZONE LAYER part of lower stratosphere blocks harmful UV radiation GLOBAL CLIMATE CHANGE human induced change in the environment especially from the emissions of greenhouse gases leading to higher temperatures around the globe NONRIVAL IN CONSUMPTION characterizing a public good one actor s consumption of the good does not diminish the quantity available for others to consume as well KYOTO PROTOCOL an amendment to the UN Framework Convention on Climate Change adopted in 1997 and entered into force in 2005 that establishes specific targets for reducing emissions of CO2 and five other greenhouse gases COMMON POOL RESOURCES goods that are available to everyone such as open ocean fisheries User s consumption reduces the amount available for others OVEREXPLOITATION consumption of a good at a rate that is collectively undesirable even if it is efficient from the view of any single actor VIENNA CONVENTION a framework convention adopted in 1985 to regulate activities especially emissions of CFCs that damage the ozone layer MONTREAL PROTOCOL an international treaty signed in 1989 that is designed to protect the ozone layer by phasing out the production of a number of CFCs and other chemical compounds FRAMEWORK CONVENTION ON CLIMATE CHANGE an international agreement enacted in 1992 and entered into force in 1994 which provided an overall framework for intergovernmental efforts on climate change I Greenhouse Effect Greenhouses gases particularly Carbon Dioxide trap solar energy II Collective Action Problem Countries seek to free ride on other countries and the global environment suffers o The problem of collective action and our incentive to free ride on environmental efforts arise because our choices produce externalities when a decision costs benefits others not making the decision Negative externality a firm decides to dump pollution into a river so others bear the cost of using contaminated water or having to purify it Positive externality school club cleans a part of the beach all the people beside club members also benefit from a clean swim area o Individuals are typically motivated to act only by their private cots benefits and they don t take into account the costs benefits imposed on others Many environmental issues take the form of a public good because they re o Nonexcludable Example CFCs destroy the ozone layer that protects us from harmful UV rays No one can be excluded from the damage and everyone suffers from higher levels of UV radiation o Nonrival in consumption The UV radiation that reaches one person does not diminish the greater quantity of UV radiation that will harm the next o We all suffer or not together Its because of these qualities of nonexcludability and nonrivalry that make environmental issues a global problem III Solving CAP Privatizing public goods this means creating private rights for the goods o Enclosure Movement o Kyoto Protocol For centuries villages in Europe had a commons that was open to all villagers animals for grazing But overtime it was transformed to the enclosure movement through which the commons was divided into private lots International treaty on how to reduce greenhouse gas emissions Countries turn over their right to regulate the amount of toxic emissions that are allowed in their own country This organization decides the amount that is okay Didn t work because lack of monitoring and punishing o Emission Trading System Each firm receives tradable allowances for greenhouse gases up to the level of existing emissions If firms want to exceed those levels they now have to purchase credit from other European firms Because the amount is capped simple shifts of credit from one company to another has little effect on overall output The way to make this work give a good amount of credit Too much credit doesn t help Too little people can sell for higher price than the amount of money they would be fined for Keep group small o As number goes down free riding is less likely to occur Monitoring is easier More similar preference o Long Range Transboundary Air Pollution LRTAP Convention 1979 Acid rain is primarily a localized phenomenon emissions from the US fell mostly on itself and Canada The limited number of countries in each acid rain region was a key factor to fixing the problem Reduce sulpher emissions that helped produce acid rain by more than 50 Originally just US and Canada Encourage repeated interaction o Repeated interaction facilitates reciprocal punishment o In Nepal irrigation networks a common pool resource shared among hundreds of farmers have endured for centuries because of farmers mutual dependence on each other Encourage joint products o Public goods and private goods come bundled for which actors are willing to pay cooperation is also facilitated Example beneficial to entire world in saving Brazil s Amazon Saving acres in a rain forest to preserve a global carbon sink and promote biodiversity also provides erosion control to local landowners and opportunities for ecotourism Responsible for nearly 50 of CFCs emissions in DuPont and CFCs the US DuPont recognized the government could make their business go out if they didn t change their products DuPont changed their products and saw an opportunity for increased profits Joint products good for DuPont and the Ozone layer Create a privileged group o Compromises one or a small number of actors who receive sufficient benefits themselves from the public good that they are willing to bear the cost of providing that good for all Examples CFCs and the US The benefits of reducing ozone depletion were sufficiently large to the US that it was willing to bear the costs of banning CFCs unilaterally and leading the international fight against their use CO2 and the US and China Existing polluting firms better situated to solve the problem of collective action IV Bargaining
View Full Document
Unlocking...