Global Warming and its Economic Effects
Global warming is one of the most important problems that the world currently is grappling with and the problem is likely to intensify over the years (Burke, Hsiang and Miguel 2015). As per Baer and Singer (2016), the problem of global warming can be seen as the net result of the climatic change that the world is undergoing currently which in turn has been caused by the unethical as well as the irrational utilization of the natural resources of the planet. In addition to this, the high amount of pollution and also the pollutants released by the various business enterprises into the environment has at the same time contributed towards emergence and also the rise of this problem (Epstein 2018). This problem when viewed through the economic lens has huge connotations and is likely to affect the economy of the world in a substantial manner.
In the wake of this event, the national governments of the various nations of the world along with the United Nations are formulating as well as implementing diverse kinds of policies which are likely to mitigate the harmful effects of this problem in a substantial manner (Davis and Gertler 2015). This report will discuss about the economic implications if the problem of global warming is not addressed in an effective manner by the national and the regulatory authorities in an effective manner. In addition to this, the report will also discuss some of the global warming related policies and suggest that marketing-based policies are likely to give the best market outcomes.
Schandl et al. (2016) are of the viewpoint that the process of global warming can be seen as the “observed century-scale rise in the average temperature of the Earth’s climate system and its related effects, as part of climate change”. The primary cause of the process of global warming is generally attributed to the extremely high rate of pollution not only caused by the various business enterprises of the contemporary times but also the human beings (Moore and Diaz 2015). As per a report of Ncdc.noaa.gov (2018), the net result of the process of global warming is the fact that within the last decade the average temperature of the world has increased by almost 1.5°C and within the span of the next decade it is expected to increase by another 2.6 to 4.8 °C. On the other hand, Desmet and Rossi-Hansberg (2015) are of the viewpoint that the average temperature of the world has not increased by any substantial amount and thus there is no need to worry. However, when the adverse effects of the process of global warming is taken into effective consideration the picture is a gloomy one (Drake 2014). For example, on the one hand, there is the melting of the polar ice, the extinction of some of the rare species of the earth and others (Moore and Diaz 2015). On the other hand, there is the economic effect of the same process, like the extra subsidies that the various organizations need to pay, the capital which is being spent early year for the mitigation of the problem of global warming (Moore and Diaz 2015). The below give figure highlights the nations which are likely to get adversely affected in economic terms because of the problem of global warming-
Public Policies related to Global Warming
Figure 1: Nations likely to get economically affected by global warming
Source: Ncdc.noaa.gov 2018
Some of the other adverse economic effects of the same are the shutting down of the organizations that depended on fossil fuels for the process of their business the capital that the organizations incur for effectively following the environmental regulations and others (Leigh and Blakely 2016). In this regard, it can be said that some of the major industries of the world are still dependent on the use of fossil fuels for the process of their business and thus this is likely to affect them in adverse manner.
As per the “Paris Agreement” of 2016 the various organizations are required to make efforts so as to reduce the amount of pollution caused by them by almost 2.5% (Hulme 2016). For the effective implementation of this particular dictum the various organizations not only would have to upgrade the equipment that they use for the process of manufacture of products or services but also to follow various dictums which are likely to cost them a substantial amount of capital (Panayotou 2016). In addition to this, the various organizations would at the same time need to modify the products or the services that they are currently offering to the customers. This is not only likely to affect the quality of the products or the services offered by these organizations to the customers and the customer base which they have but also the annual profit earned by them as well (Shao et al. 2014). As per a report of World Employment and Social Outlook (2018) the process of global warming threatens more than 1.2 billion jobs. Thus, it can be said that the problem of global warming if not mitigated or addressed in an effective manner can significantly hamper the economic prospects of some of the major business enterprises and thereby affect the national economies of some of the major nations.
The United Nations and also the national governments of the various nations in order to combat the adverse effects of the process of global warming have formulated various kinds of policies (Houser et al. 2015). The major goals of these policies are not only to mitigate the process of global warming but also to reduce the damage caused by global warming (Pindyck 2017). More importantly, the majority of these policies are directed to reduce the adverse economic effects of the process of global warming (Houser et al. 2015). Some of the most important policies related to global warming are “Command-And-Control Regulations, Market-Based Policy” and others.
Command-And-Control Regulations
The national governments of the various nations in the recent times have conducted diverse kinds of research works with the inherent desire of finding out the industries or the organizations that caused the maximum amount of pollution or damage to the environment (Stern 2016). On the basis of these finding it is seen that the national governments of various nations have given stringent dictums to the various organizations which they need to need to follow in a sacrosanct manner for the reduction of the amount of damage caused by them towards the environment (Baer and Singer 2016). These dictums are generally related to the manufacturing process used by these organizations, the process of waste management used by them and others. However, it is seen that because of these regulations or for that matter because of this policy of the national government of the various nations, these organizations have not only been compelled to modify the manufacturing process used by them but also to reconfigure the process of waste management used by them as (Stern 2016).
As per Baer and Singer (2016), to ensure that these organizations are following these regulations as well as the dictums of the national government in a sacrosanct manner, the national governments conduct regular inspections of these organizations so as to ensure that they are following the standard regulations or the dictums of the national government. Furthermore, in case of a lapse on the part of the organizations to follow these stipulations and meet the standard criteria various kinds of penalties are being imposed by the government authorities (Burke, Hsiang and Miguel 2015). In addition to these, in serious cases the governmental authorities even give the order for the liquidation of the organization as well (Davis and Gertler 2015). The primary strength of this regulatory policy is the fact that this regulation by imposing penalties and other kinds of punishments on the various organizations ensures the fact that the stipulations provided related to the mitigation of global warming are being followed in an ardent manner by the various organizations (Moore and Diaz 2015). On the other hand, the weakness of the regulation can be said that to be fact that because of the stringent stipulations provided the organizations often need to reconfigure several sections of their business operations and thereby end up incurring a substantial amount of capital loss (Davis and Gertler 2015).
Houser et al. (2015) are of the viewpoint the Market-Based Policy tries to overcome the limitations of the Command-And-Control Regulations and this is the major reason for the greater amount of flexibility as well time frame that this policy offers to the organizations. This policy tries to analyze the different kinds of pollutants that are being released by the organizations and the effect of these pollutants on the environment in the longer run (Carleton and Hsiang 2016). The mandates or the stipulations that are provided to the organizations which they need to follow for the process of business operations are on the basis of this particular fact. This is drastically different from the Command-And-Control Regulations wherein regardless of the damage caused by the pollutants the organizations needed to reduce the emission of them. Thus, in a way it can be said that this is a more feasible as well as a sustainable options for the various organizations and also the reduction of the amount of damage that are being caused by the business activities of these organizations towards the environment.
Market-Based Policy takes the help of the reward system for the purpose of ensuring the fact that the organizations are effectively following the regulations or the stipulations provided by the national government related to the reduction of the process of global warming (Houser et al. 2015). As per this policy, the governmental authorities provide an initial warning to the organizations and also the emission of the pollutants that they need to reduce. Furthermore, in cases where the governmental authorities notice that the amount of the emission of these pollutants has reduce the government offers various kinds of incentives as well as rewards to the organizations. Moreover, these rewards are not only limited to various kinds of certificates and recognition but also include various kinds of monetary rewards and relaxation in terms of taxes and subsides to the shareholders, investors and other stakeholders of the organization including the owners (Carleton and Hsiang 2016). However, the concept of punishment comes into play when inspite of repeated warnings the organization fails to take these stipulations into effective consideration. The primary strength of this policy is the fact that this policy through the effective utilization of the concept of rewards and also because of the flexibility that it offers to the organizations actually helps the organizations to reduce the amount of pollution caused by them in the longer run (Drake 2014). The weakness of this particular policy can be said to be the fact that because of the flexibility which is offered to the various organizations they fail to take the stipulations of the governmental authorities in a serious manner.
Carleton and Hsiang (2016) are of the viewpoint that the Market-Based Policy is a more sustainable as well as practical in comparison to the Command-And-Control Regulations. Furthermore, the stringent dictums of the Command-And-Control Regulations often rather than encouraging the organizations to follow them discourage them (Burke, Hsiang and Miguel 2015). On the other hand, the Market-Based Policy which takes the help of the process of reward and incentives and also provides greater flexibility often encourages the organizations to follow them in an ardent manner (Shao et al. 2014). Moreover, the organizations through the effective use of this method can not only reap long-term benefits but at the same time contribute in a meaning manner towards the cause of the environment as well (Burke, Hsiang and Miguel 2015). In addition to this, it is seen that the Command-And-Control Regulations requires the organizations to make drastic changes within the business processes used by them and these organizations thereby end up incurring a substantial of loss because of the various changes that they need to make (Carleton and Hsiang 2016). However, the use Market-Based Policy does not require the organizations to make such drastic changes and therefore is a more beneficial one for the organizations.
Conclusion
To conclude, the problem of global warming has emerged as one of the major ones of the world which is not only threatening the stability of the world but at the same time its very existence as well. Furthermore, it is seen that the economic effects of the process of global warming is adversely affecting not only the various organizations but at the same time the national economies of the different nations as well. Thus, to reduce or mitigate the adverse effects of the global warming the various nations of the world including the United Nations have formulated various public policies that the organizations needs to follow for the process of their business. Two of the most important policies in this regard are Market-Based Policy and the Command-And-Control Regulations. However, a detailed analysis of the two policies clearly indicates that the Market-Based Policy is a much better option and is likely to offer long-term benefits and at the same time is a sustainable one.
References
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