Climate as a public good
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Transcript of Climate as a public good
Climate
as a Public GoodGala Korniyenko
UBPL 705
Economic Analysis for Planners
March 2015
• Excludability
• Rivalry
• Externalities
• Common/global pool resources
• Tragedy of commons and Eleanor Ostrom
• Free rider problem
• Degrowth
• International environmental agreements: Kyoto Protocol
• Carbon emissions trading
• Cap and trade
OUTLINE
THE PROBLEM
We are sinking …
Source: http://www.wcpo.com/news/local-news/kenton-county/covington/jeff-ruby-waterfront-
restaurant-barge-taking-on-water-sinking-into-ohio-river
What are positive and
negative externalities of public
goods?
The Economic Risks of Climate Change
Source:
http://riskybusiness.org/reports/national-
report/regions/great-plains
The Economic Risks of Climate Change
Source:
http://riskybusiness.org/reports/national-
report/regions/great-plains
The Economic Risks of Climate Change
Source:
http://riskybusiness.org/reports/national-
report/regions/great-plains
How much should company pay
for damaging the climate?
AN ECONOMIC EXAMINATION
ANALYZING THE GOODS AND EFFECTS
Contributing markets Affected markets
Coal/oil industry Electrical power sector
Lumber industry Construction/Coastal property
Metallurgy Agriculture
Chemical industry Healthcare
Petroleum coke industry Tourism
Landfills Car production
Urban sprawl Customers
Developed countries Developing countries
Which goods in the table are public and which are private?
What is special about cost/benefit of public goods?
GOALS AND OBJECTIVESEnvironmental Economics
Paul Samuelson global public good
non-rivalrous and non-excludable throughout the whole world
Common-pool resources free-rider problem
congestion, overuse, or degradation
http://www.nbcbayarea.com/news/national-international/Incredible-Photo-Weasel-Hitches-Ride-on-Woodpecker-
294899771.html
How to solve the problem of a
free rider dealing with
climate?
MITIGATION STRATEGIES
THE KEY CHALLENGE IS MANAGEMENT
Source: http://www.andysinger.com,
https://www.pinterest.com/pin/411586853419930966/
Eleanor Ostrom: “when a common-pool
resource is closely connected to a larger social-
ecological system, governance activities are
organized in multiple nested layers”
Source:http://www.shareable.net/sites/default/files/blog/top-image/elinor_ostrom.jpg
Source: http://www.covenantofmayors.eu/index_en.html
Source: http://tutor2u.net/economics/revision-notes/as-marketfailure-negative-externalities.html
Cap
Source:
https://www.youtube.com/watch?v=fJ
rFSLfaeeE
Can private companies which are
polluting the environment voluntarily
reduce the emission?
Trade
Source:
https://www.youtube.com/watch?v=fJrFSLf
aeeE
Carbon trading
Source: http://www.macleans.ca/economy/business/why-the-difference-between-carbon-taxes-and-
cap-and-trade-isnt-as-important-as-you-think/
Emission Emission
greenhouse gas-emitting
products
Ukraine – Japan Agreement
Source: www.carbonunitsregistry.gov.ua, http://www.asiaecon.org/special_articles/read_sp/12632
New trains for Kyiv metro
Source:
http://photo.unian.net/eng/themes/517
17/
Data of the Agreement/Effectiveness
• Ukraine was the first country in the world which transferred Assigned Amount Units
to Emission Reduction Units (ERU). Rate: 1 ton of reduced CO2 costs 10 Euros
• 53 million of Ukrainian ERUs among the 111 million of the world’s ERUs. That is
56% of the world market
• ≈ 92 million of Ukrainian carbon units were issued by SEIA (the State Environmental
Investment Agency of Ukraine) as on 1 November 2013
• 817 projects, 7 of a big scale projects: metro and hybrid cars some of them: the
projects with Japan saved ≈ 60 million Euros
• 1220 hybrid cars "Toyota Prius” were supplied by "Sumitomo" (Japan) to the Ministry
of Internal Affairs
• The "Comprehensive train modernization (E-type) for Kyiv Metro"- 7945 tones of CO2
eq. per year reduced
• "Technical re-equipment (replacement of existing police patrol cars with hybrid
engine" - 31 692.89 tones CO2 eq. / Year
Source: 2014 year report of State Environmental Investment Agency of Ukraine
Source:
http://www.thehindu.com/news/inter
national/world/climate-change-us-
china-unveil-ambitious-goals-to-cut-
pollution-levels/article6589412.ece
Climate-Smart CitiesSource:
https://www.youtube.com/watch?v=X5ZZxx2v1
No
EXAMINING THE STRATEGIES IN ECONOMIC TERMS
CONCLUSION• The free market does not deal effectively with public goods. Regulation,
privatization and auction are the alternatives considered, and they fit in different situations.
– Regulation fits well with environmental pollution
– Privatization fits well with toll road, for example
– Auction fits well to sell rights to pollute the environment (Coase Theory)
• Climate change affects public and private goods, which require different mitigation strategies.
– Cap and trade is effective at the acid rain program and can be extended to carbon.
– Cap and trade falls short where is no an Assigned Amount Unit (AAU) (a tradable 'Kyoto unit' or 'carbon credit) cadaster or register, as it is the basis for trade.
– Where we need to go: develop a national adaptation plans for agriculture, water, energy, transport, health, urban space, forests and landscapes, coastal areas, biodiversity etc. Senate has to sign The American Clean Energy and Security Act of 2009, an energy bill that would have established a variant of an emissions trading plan similar to the European Union Emission Trading Scheme.
• Culture and political structure affect the effectiveness of the mitigation strategies; therefore, different countries need different approaches: tax deductions, subsidies, incentives to install energy efficient equipment etc. Degrowth
Background / literature reviewImages:Picture of a sinking hotel from Scripps Media, Inc.
http://www.wcpo.com/news/local-news/kenton-county/covington/jeff-ruby-waterfront-restaurant-barge-taking-on-water-
sinking-into-ohio-river
http://en.wikipedia.org/wiki/Global_public_good
https://www.e-education.psu.edu/geog432/node/277
image captured by British amateur photographer Martin Le-May, a weasel leaps onto the back of a flying woodpecker
http://www.nbcbayarea.com/news/national-international/Incredible-Photo-Weasel-Hitches-Ride-on-Woodpecker-
294899771.html#ixzz3TO4ZhykZ
http://www.shareable.net/sites/default/files/blog/top-image/elinor_ostrom.jpg
http://www.covenantofmayors.eu/index_en.html
Articles and books:Hudson, Blake and Rosenbloom, Jonathan, "Uncommon Approaches to Commons Problems: Nested Governance
Commons and Climate Change" (2013). Journal Articles. Paper 153.
http://digitalcommons.law.lsu.edu/faculty_scholarship/153
http://www.economicshelp.org/2008/02/can-economics-solve-problem-of-global.html
http://www.macleans.ca/economy/business/why-the-difference-between-carbon-taxes-and-cap-and-trade-isnt-as-important-
as-you-think/
Econ 101: What you need to know about carbon taxes and cap-and-trade, Stephen Gordon, September 17, 2012
http://www.macleans.ca/economy/business/why-the-difference-between-carbon-taxes-and-cap-and-trade-isnt-as-important-
as-you-think/
Mapping The Commons November 13, 2012
The Creation of the Urban Commons, by David Harvey
https://mappingthecommons.wordpress.com/2012/11/13/the-creation-of-the-urban-commons-by-david-harvey/
2014 year report of State Environmental Investment Agency of Ukraine
Elinor Ostrom. Governing of Commons, Cambridge University Press, November 1990
The problem of social cost, R. H. Coase, Law and Economics, October,1960, Volume III
http://www.epa.gov/captrade/
THANK YOU FOR YOUR ATTENTION,
SMART COMMENTS AND QUESTIONS!