Global Economics Why Is the Climate Change Problem So Hard to Solve? Applicable Concepts: emissions trading and effluent taxes reduce emissions. At Copenhagen, developing coun- tries sought millions of dollars to reduce emissions. Another controversy is over whether countries, developed and developing, should receive credit for offsets. Brazil, for example, wants credit for slow- With much ado, representatives from 192 countries traveled to Copenhagen, or Hopenhagen, as it was referred to, in late 2009, hoping to build upon the Kyoto Conference to reach agreement on steps to reduce carbon emissions, which the participants be- lieve are contributing to global warming. Two weeks ing or reversing the rate at which it is cutting down later, they came away with little more than a non- binding agreement brokered between the U.S. and China that five countrics agreed to mitigate their car- bon emissions, and that the U.S. would be able to its rainforests. Trees store carbon. Countries could receive carbon credits for planting trees, or possi- bly even slowing the rate at which trees are being cut. Brazil and other developing countries want de- monitor China's compliance with the agreement. In veloped countries to pay them, as they claim they short, the conference produced almost no progress on greenhouse gas emissions. Why is this problem proving so difficult to solve? There has now been widespread, although far from universal, agreement that human activity is countries are still developing. At Kyoto, China was contributing to a warming planet, which could lead to flooding, descrtification, weather events such as stronger hurricanes, and the spread of tropical dis- nearly a 10 percent annual rate for the last tine eases to warming countries. First, consider Copenhagen. Participants came are slowing their own development by growing new forests or slowing the conversion of existing forest to agricultural uses. Further, there is not even agreement over which still classified as developing, exempt from taking ac- tion at its own expense. After growing its GDP at decades, and becoming the world's largest green- house gas emitter in the process, is it still a devel- from both developed and developing countries. De- oping country? For purposes of avoiding the cost of veloping countries threatened to walk out on the slowing emissions, never mind reducing them, it is meetings. Kyoto set a precedent that only developed advantageous to claim you are still developing. The countries would be expected to pay the cost of re- ducing emissions. Developing countries would either be exempt, or would expect to receive subsidies or technology transfer from developed countries to argument goes, developed countries were able to grow and emit greenhouse gases with impunity; it Is only fair that developing countries be able to do the same. Developed countries have benefited from 1. A compre hensive summary of the issues faced by delegates to Conenbagen was conrained in a sescial section er the Wall Street fournal, sntitlo industrialization without having to pay for their emissions, so it is fair that they should do so now. If countries at an international conference do agree to be financially responsible for reducing emis- sions, they may face problems when they bring those proposals home. First, they face opposition from those who do not accept the argument that human change is one of the most difficult problems humans activities contribute to global warming. Recent sur- veys of the U.S. population showed a decline in those have contributed to the problem, what countries are who were convinced that human activities contrib- responsible for paying for the solution, and how to ute to global warming. And this was even before develop a mechanism that can overcome externalities the incident that has become known as Climategate, and public goods problems. In the end, we may find whereby intercepted emails of climate change scien- ourselves left to adapt to climate change, abandon- tists showed the likely suppression of evidence not fa- ing low-lying lands, accepting millions of immigrants vorable to their view, and obstacles put in the way of from those countries, switching to hot weather crops, those more skeptical of climate science. Some of the intercepted emails had been written by members of the International Panel on Climate Change (IPCC), a challenge. Nobel Prize-winning group containing thousands of scientists, including Nobel laureates in Economics. Even more recently, their work was found to have numerous errors, not the least of which was predict- ing the melting of Himalayan glaciers by 2035, when the actual studies had arrived at 2350. But perhaps most fundamentally, a solution will have to address the problems of externalities and public goods. Consumers and producers of carbon- emitting products, such as coal-burning power plants and gasoline-burning automobiles, will, in the absence of government intervention, ignore emissions. Fur- thermore, any global agreement to reduce emissions will benefit everyone, whether or not an individual has borne the expense of reducing emissions, a classic example of a public good. Benefits are non-rival and non-excludable. And agreeing on whether we will ac- tually reduce emissions, or simply slow them down, will be contentious. Nor is CO, the only greenhouse gas. Methane, of which cows are a major emitter, is smaller in volume, but more potent in effect. So in sum, taking action to slow or stop climate have faced. There is disagreement on whether humans and losing flora and fauna that cannot adapt, unless we can develop new approaches to addressing this ANALYZE THE IssUE 1. Give an example of an equity (fairness) issue that arises in working toward a global agreement to limit greenhouse gas emissions. 2. Give an example of an efficiency (market failure) issue that arises in working toward a global agreement to limit greenhouse gas emissions. 3. Many countries argue that they should get credit for offsets, such as planting trees. Explain whether the case for offsets is based on efficiency or equity arguments.