Global warming is one of the most important issues that the global community encountered in the last 50 years. Despite the mounting evidence and increasing public unrest, the reality of the situation falls on the death ears of the government. The recent withdrawal of the United States from the Paris Accord is not the first and will not be the last shortsighted political decision in relation to global warning. Persistent misinformation about the issue and the fear of economic decline often drive such decisions, but there is another factor that has an effect on the policymaker. This paper will examine the issue of global warming from an economic standpoint, as well as cover the free rider problem and how it affects the fight against global warming.
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Economic Growth and Carbon Dioxide Emissions
The link between economic growth and carbon dioxide emissions is a commonly discussed topic that is directly related to the issue of global warming. The literature on the topic often provides different results based on the different countries observed by the researchers and can be hard to interpret. However, most studies show that there is a certain connection between economic growth and carbon dioxide emissions. One of the more established methods of measuring this relationship is through the use of the environmental Kuznets curve.
The environmental Kuznets curve hypothesis proposes during the early stages of development pollution increases with economic growth. However, in the later stages, it decreases due to various factors. One of such factors is the greater desire to pay for environmental quality at higher levels of income. At later stages of economic development, citizens of the country are more likely to demand clean air and water from the government. Unfortunately, the local hypothesis does not appear to be applicable to the global pollutants such as carbon dioxide emissions. Countries often fail to account for the emissions produced in one country being consumed in another during the creation of the environmental goals (Fernandez-Amador et al. 270). Subsequently, it leads to less effective policies and plans.
The issue of energy consumption and its connection to economic growth also has an effect on global warming. It is a less researched area, but the current data outlines four types of connections with different implications for energy policy. The first is the neutrality hypothesis. It states that there is no causality between energy consumption and GDP. It can be supported if no relationship between them is found. The second is the conservation hypothesis that proposes a unidirectional connection from GDP to energy.
If an increase in real GDP causes an increase in energy consumption, then it could be supported. The third is the growth hypothesis, and it postulates that a unidirectional causality runs from energy to economic growth. This hypothesis can be true if the real GDP increases after energy consumption increase. Finally, feedback hypothesis suggests that energy consumption and economic growth have bidirectional causality. This hypothesis implies that both growth and consumption affect each other at the same time. The choice of the hypothesis depends on the country. For example, a study of the countries of Bahrain, Qatar, and Saudi Arabia found evidence for the feedback hypothesis, while another study into Kuwait and Oman encountered support for the conservation hypothesis (Magazzino 3).
Public Goods and the Free Rider Problem
One of the less-discussed reasons for ineffective environmental policies is the difficulty of public goods production. From an economic viewpoint, public goods are non-excludable and non-rivalrous goods that can be used by individuals without other individuals losing access to them. Under this definition fall a number of goods and services such as fresh air, education, public lighting systems, flood control systems, and others. Some public goods, such as air, are available globally, which makes everyone responsible for its production. As previously mentioned in the paper, carbon dioxide emissions have a global effect on the quality of air, and therefore affect the production of this public good.
The main issue, however, comes from the so-called “free rider” problem. Due to the non-excludable nature of the public good, people are able to access it without paying. On a smaller scale, it can be reflected in people refusing to pay taxes while using public parks and roads (Stiglitz and Rosengard 105). However, on a global scale, it can extend to countries either setting insufficient carbon emission goals because their governments expect other countries to pick up their slack in the fight against global warming. Unfortunately, the recent withdrawal of the United States from the Paris Accord, and the previous collapse of the Kyoto Protocol are indicative of this problem.
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With governments having to balance their environmental impact and economic growth, the free rider problem is likely to affect their decisions. The reasons for this problem are also not always rational, as the supposed improvement of the economic growth can be greater if a company dedicates itself to ecologically beneficial technologies. In fact, despite the United States withdrawal, the Chinese Government is planning to create a large alternative fuel industry to provide more jobs and avenues of distribution in the future. Perhaps this push is also motivated by the negative ecological situation in China, which removes the distance between carbon emissions and their consequences that exists in less polluted countries. Nevertheless, their futureproofing efforts might pay off in the next decade.
Although there is not a single solution to the issue of global warming, a number of possible solutions exist. The difficulty of finding a comprehensive solution is affected by a myriad of factors such as the dependency of current technology on fossil fuels and industrial manufacturing. Additionally, psychological factors such as willful ignorance and denial of global warming by politicians and citizens can also have a negative effect on research funding, and implementation of these solutions. However, each solution has a unique approach with different benefits.
The most popular solution lies in the research and development of alternative fuels and energy sources. Fossil fuels are non-renewable and are one of the main causes of air pollution. However, coal, oil, and gas are still utilized by all major industries, as well as the private sector. This dependency on limited and harmful resources became the driving point in the search for renewable and clean energy. The types of fuels vary between industries and their requirements.
For example, a study of alternative and raw materials for use in cement industry found municipal solid waste, mean and bone animal meal, sewage sludge, biomass, and end-of-life tires to be effective substitutes for the traditional fuels (Aranda Usón et al. 242). A different study shows that the efficiency of biodiesel fuels can be significantly higher if its blend is in 10%-20% ratio. 15 blends were examined during the study, including fish oil, cottonseed oil, diethyl ether, and linseed oil (Chauhan 1358). The variety of available options ensures that the resources would be easier to renew. These are only two examples of a wide field of alternative energy solutions.
Another potential solution might lie in the use of technological solutions to improve the efficiency of existing power sources. This could be done on a smaller scale through the improvement of factories, as well as on a large one through the concept of the so-called “smart city.” Such approach requires a complex and powerful information network that could monitor the work process, automatically correct it if possible, distribute the appropriate amount of resources required for the task, and subsequently complete the task.
To control a whole city, an enormous amount of data and data-processing hardware is required, but by reducing the waste of resources such as water, oil, and electricity, a city can save funds, as well as improve its environment (Ramaswami et al. 940). However, this solution is hardly foolproof and can result in negative consequences for the citizens of those cities (Viitanen and Kingston 803).
An interesting idea was proposed by Martin Weitzman as a possible solution for the free rider problem. In his paper, he examines an idea of negotiating a uniform carbon price to internalize the issue of global warming. It is a purely theoretical model, but it is one of the few solutions directly targeted at the free rider problem. Weitzman proposes that “negotiating a single internationally binding minimum carbon price (the proceeds from which are domestically retained) counters self-interest by incentivizing agents to internalize the externality” (29).
Outlook on the Future
Through a series of unfortunate political choices, we began living in the times of great uncertainty. If only a few years ago I was able to have a skeptical but optimistic view on the global environmental efforts, the current situation at best elicits the feelings of worry. The effects of global warming are becoming more evident with each year.
Research on droughts shows that although global warming does not increase the frequency of droughts but makes them set in quicker and be more intense (Trenberth et al. 17). The recent drought in California led to massive water shortages and continued for an unusual amount of time. This raises the question of water scarcity which is also affected by the higher global mean temperatures. It is projected, that more water will be required for irrigation if these temperatures raise higher. This could have a strong negative effect on large parts of southern and eastern Asia (Haddeland et al. 3251).
The increasing rejection of expert opinions and scientific evidence in the western world creates an oppressive atmosphere for me. Throughout my life, I was taught to value research and people, who devote their lives to science, but it seems that last year all the standards were thrown out, and baseless but loud opinions became valued more than scientific theories backed up by evidence. This left me in a state beyond pessimism, as I do not see the near future as being anything but a step backward in terms of environmental and scientific efforts.
Research funds are being cut, disastrous anti-environmental policies are being enacted, and these actions are supported by a frightening number of people. Perhaps this is only temporary, and the actions of other countries could have a positive influence on the world, but in these times even hope seems more like a self-defense mechanism rather than a driving force. I believe that my pessimism is rational because all of the efforts of the current president are motivated by non-scientific thought, and any criticism in his direction is completely ignored.
The United States is one of the top countries in the dumping of plastic waste into the ocean, as well as one of the most wasteful countries in the world, which makes its participation in the global environmental efforts essential for their success (Jambeck et al. 768). Therefore, for me to change my pessimistic outlook, a much larger effort should be established.
Global warming is by definition a global issue. Its dangers have been signaled by the scientific community for decades, but no global effort has yet succeeded in addressing it. A clean environment is a public good which is affected on a global scale. This fact magnifies the free rider problem to a much larger one. With countries putting their responsibility on the shoulders of others, it is becoming progressively difficult to address this issue. A number of solutions exist that could be implemented simultaneously in various industries. However the efforts vary in their results. With the current political situation, I do not see a bright future for the global environmental efforts. Perhaps it will eventually change, and our obituary will not show pictures of smokestacks.
Aranda Usón, Alfonso et al. “Uses of Alternative Fuels and Raw Materials in the Cement Industry as Sustainable Waste Management Options.” Renewable and Sustainable Energy Reviews, vol. 23, no. 6, 2013, pp. 242-260.
Chauhan, Bhupendra Singh et al. “Practice of Diesel Fuel Blends Using Alternative Fuels: A Review.” Renewable and Sustainable Energy Reviews, vol. 59, no. 5, 2016, pp. 1358-1368.
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Haddeland, Ingjerd et al. “Global Water Resources Affected by Human Interventions and Climate Change.” Proceedings of the National Academy of Sciences, vol. 111, no. 9, 2013, pp. 3251-3256.
Jambeck, J. R. et al. “Plastic Waste Inputs from Land into the Ocean.” Science, vol. 347, no. 6223, 2015, pp. 768-771.
Ramaswami, A. et al. “Meta-Principles for Developing Smart, Sustainable, and Healthy Cities.” Science, vol. 352, no. 6288, 2016, pp. 940-943.
Stiglitz, Joseph E, and Jay K Rosengard. Economics of the Public Sector. W. W. Norton & Company, 2015.
Trenberth, Kevin E. et al. “Global Warming and Changes in Drought.” Nature Climate Change, vol. 4, no. 1, 2013, pp. 17-22.
Viitanen, Jenni, and Richard Kingston. “Smart Cities and Green Growth: Outsourcing Democratic and Environmental Resilience to the Global Technology Sector.” Environment and Planning, vol. 46, no. 4, 2014, pp. 803-819.
Weitzman, Martin L. “Can Negotiating a Uniform Carbon Price Help to Internalize the Global Warming Externality?” Journal of the Association of Environmental and Resource Economists, vol. 1, no. 2, 2014, pp. 29-49.