Rishabh Yadav - General Economics - Batch of 2019:
There is an increasing amount of scientific evidence highlighting the need for action on climate change. It addresses the importance of reducing greenhouse gas emissions all over the world to overcome the risk of high damage and potentially irreversible impacts on the ecosystem, society and the economy.
The range of issues covered in current research has arisen from the fact that economists have identified different ways to calculate the costs and benefits of the impact of climate change. Shadow pricing, discounting rates and the future valuation of natural resources are a few such methods.
They ascertain that the benefits of strong and early action are far more than the economic cost of a lack in response or delayed measures. Estimated results from formal economic modelling discussed in the IMF’s (2008) paper, “The fiscal implications of climate change” show that inaction could cost a loss of 5% to the global GDP annually.
Quoting the Stern Review on “The Economics of Climate Change”, “the risk of the worst impacts of climate change can be substantially reduced if greenhouse gas levels in the atmosphere can be stabilised between 450 to 550 ppm CO2 Equivalent (CO2E). The current level is 430 ppm CO2E today; it is rising at more than 2 ppm each year. Stabilisation in this range would require emissions to be at least 25% below current level by 2050, and perhaps more”.
The larger responsibility lies with developed countries who are obligated to cut down their emissions as evidence over time suggests that blame for the current situation lies with them, and moving hand in hand developing nations should have to take significant steps too, as a new carbon market has already begun working effectively in developed nations for driving clean and green growth.
Climate Change and Economic Activity
Climate change opens the gates for many business opportunities in low-carbon energy technologies and other low-carbon goods and services. Handling climate change is a pro-growth strategy for the longer term; it should be accomplished in such a manner that it does not restrict the growth of higher or lower-income countries. Energy efficiency should be increased by cutting down the emission through adoption of clean energy for power, heat, and transport facilities. 60% of decarbonisation is required in the power sector by 2050 to maintain the atmospheric concentration below 550 ppm CO2E.
Three things should be kept in mind during the policy making: first is pricing of carbon, second is policy which is supportive to innovation for low-carbon technologies and the third is removing cap from energy efficiency.
Furthermore, agreements across the international framework (in the mould of the Kyoto Protocol, the Doha Round of talks and the Paris agreement) have to be established in such a way that the scaling up of flow of carbon finance to developing countries to support effective policies and programmes for reducing emission are given precedence. International collaborations are required to accelerate technological innovation in the corporate world; Facebook and Microsoft are among 60 companies and over 50 leading project developers and service providers participating in a new network, the Renewable Energy Buyers Alliance, known as the REBA, that aims to break down barriers to lower-carbon energy. Restricting deforestation through community involvement programmes is another highly cost-effective way of reducing greenhouse gas emissions.
Climate change is the greatest market failure the world has ever seen and that is why very strong and cautious policy should be required to minimize emission in both developed and developing economies. Developing nations like China have already taken their first initiatives to combat these issues by implementing technological and legislative advances, but in this era of political uncertainty and occasional irrationality in questioning the very basis of climate change’s existence. Consensus building, and resolute actions are the need of the hour.
REFERENCES:
Stern, Nicholas. 2007. The Economics of Climate Change: The Stern Review. Cambridge, UK: Cambridge University Press. Available at:
International Monetary Fund, Fiscal Affairs Department (2008), “The Fiscal Implications of Climate Change”, Available at SSRN: http://www.imf.org/external/ np/pp/eng/2008/022208.pdf