Global Warming Problem - Essay Example

Global Warming Student’s Name Course: Tutor’s Name: Date: To some people, the possibility of global warming is welcome owing to the belief that such an occurrence would delay the next ice age, or increase agricultural production in the continents. Other people are however worried that global warming will bring about famine, drought, floods and political and economic tensions among other negative impacts. Flavin (1989 cited by Jenkins, 1996) specifically states that global warming may induce greenhouse warming, a concept which would in turn bring about dramatic climate changes. While Flavin’s views would have appeared like unfounded speculation back in 1989, recent climatic conditions have alerted scientists of the possibility that global warming could in deed have the effect that Flavin and others had envisaged. But does it mean that the current generation needs to be more focused cutting down on activities that cause global warming? Additionally, how best can humankind deal with activities that contribute to global warming if the same activities provide the much-needed resources for economic development? Well, the neoclassical argument suggests that the current generation does not have to forgo short-term economic gains in order to stop or reduce global warming rates, for the sake of preserving the environment for future generations. The neoclassical economic argument projects the world as a perfect market, with externalities that can be internalised in order to make private markets efficient. Seeing that some environmental goods are non-renewable, the neoclassical theory understands that such may be scarce since the market forces cannot possibly create them. As such, the neoclassical argument suggests that allocating such resources through time would require evaluating the discounted value of the resource presently. According to Jenkins (1996), neoclassical microeconomics is predominantly applied to environmental matters. The neo-classical approach advocates for efficiency, arguing that no aggressive mitigation measures in carbon emissions are called for in the short term (Gerlagh & Van der Zwaan, 2002). Yet, Jenkins (1996) argues that the “reliance on an unreconstructed neo-classical economic model for human progress is largely responsible for an economic development path which is both unsustainable and undemocratic” (p. 228). Jenkins takes issue with the fact that despite the market failing to solve problems that occur when humans exploit the natural resources, scientists still rely on economic theories to guide policy-making initiatives. Global warming has for years now been a major concern to governments and humankind in general. In mainstream economics, Jenkins (1996) argues that global warming is treated as a “pervasive externality” (p. 231). In economics, externalities are third parties affected by market transactions, even though they were not directly involved in the transaction. To the neo-classical economists therefore, global warming is a market failure that is induced by human activities, in what should be an otherwise perfect economic system. Studies conducted by scholars such as Fanhauser (1992) and Cline (1992) estimate the cost of allowing carbon dioxide emissions to double as being between 1-percentage and 2-percentage GDP by the time they wrote their respective articles. Such estimates include the cost of lifestyle adaptation, damage costs, and even human deaths occasioned by climate change. In the short-term however, Jenkins (1996) holds the opinion that global GDP relies heavily of fuel generated through fossil fuels, something that leads to more carbon dioxide emission into the atmosphere. Consequently, the emissions hasten or perpetuate global warming. To Jenkins (1996), such trends in the global economy are unsustainable, dangerous to imitate and ecologically inefficient. To the neo-classical economist, global warming is a technical problem rather than a moral or social one. Based on such line of reasoning, Gerlagh and Van Der Zwaan (2002) argue that overconsumption by the affluent countries or people, disregard of environmental matters or over exploitation of natural resources and the governments’ failure to restrict such exploitative tendencies. Aghion and Howitt (1998) however observe that succeeding generations do not have to inherit a well catered-for environment from their predecessors. Rather, they can inherit intellectual and physical capital, which can benefit them in a similar manner as the natural capital would. Aghion and Howitt (1998) however acknowledge that intellectual and physical capital is a low substitute for natural capital. Notably however, the authors argue that the current generation does not have any moral obligation to preserve natural resources for future generations. Such an argument is based on the fact that there would be other capacity for future generations to develop. According to Gerlagh and Van Der Zwaan (2002), neo-classical economists see environmental resources as “just another type of capital, i.e., as a set of stocks that contribute to future welfare” (p. 332). As such, environmental capital can be substituted for other types of man-made capital should they (environmental capital) cease to exist anymore. This perspective however attracts a fair amount of criticism. For example, Brown (1998) states that natural resources such as trees serve many functions: they are lumber sources, they prevent soil erosion, they beautify the environment, and clean the environment by taking in carbon dioxide and releasing oxygen into the atmosphere. As such, Brown (1998) argues that it is impossible for any other man-made capital substitute to serve the multiple roles that trees play in the environment. Nordhaus (2008) is among the key economists who view global warming as an externality. Based on his beliefs, he came up with dividing responsibility to carbon emissions through what he terms as ‘carbon tax’ or ‘carbon price’, which are proposed discount rates for the carbon emissions by each country. Nordhaus goes further to state that people should not second guess future market trends, since they could even “come to love the altered landscape of the warmer world” (Nordhaus, 2008 p. 19). This suggests that since the effect of global warming will not give people any other choice, they will inevitably have to adapt to their new circumstances. As such, those displaced from their land due to rising water levels or extended dry weather patterns will have no choice but adapt to their new lifestyles. By following Nordhaus’s argument one can easily argue that current market activities are a reflection of what the current generation truly values. In the same light, one can argue that if people were truly concerned about the effect of global warming, they would alter their market behaviours in the short-term. This is in line with Nordhaus’s believes that how people behave is the marketplace is a representation of their true preferences. As such, whatever the market generates cannot be blamed for the effect witnessed in such areas as climate change. Estimating the effects of global warming using mainstream economic tools can be done using a cost-benefit analysis as suggested by Jenkins (1996). Taking such an approach requires one to: 1) approximate the objective effects of global warming e.g. rise in sea level, and increase in temperature; 2) Model the consequent behaviour changes e.g. changing eating, cropping, and human movement habits; 3) account for all benefits or costs occasioned by behaviour changes; and 4) approximate the net economic gains or losses incurred by humanity at large. An economic perspective would also require a sensitivity analysis to be performed in order to account for any economic, scientific or behavioural uncertainty. One would need to include the fact that some changes would be non-marginal. This is in addition to deciding the cut-off point for use when tracing the implications of climate change. The cost based analysis approach suggested by Jenkins (1996) above does however contain some suspect assumptions. For example, the approach makes it clear that concepts such as ‘the polluter pays principle’, ‘internalisation’ and ‘externalities’ are only satisfactory when the economy has renewable resources and a capacity to absorb waste generated therein. Despite the difficulties of applying economic theory to global warming, economists still use traditional techniques to balance the gains and costs of slowing global warming and hence reducing the rate of climate change. Such scientists attach a monetary value to the cost of lifestyle changes, damages to the environment and even human deaths resulting from global warming (Franhauser, 1992). The pursuit of economic advantages is no doubt one of the reasons why countries and governments justify activities suspected to contribute to global warming. Most developed countries cannot just give up economic activities suspected to contribute to global warming without suffering huge economic losses. As such, Jenkins (1996) argues that “global warming is directly attributable to economic activity, the benefits of economic growth go to the economically articulate ‘developed’ countries, and the disbenefits in terms of environmental damage are borne by the economically inarticulate ‘developing’ countries and future generations unable to incur defensive expenditures” (p. 231). According to Neumayer (1999), the full effect of global warming will not be felt by the current generation; rather, the future generations will have to bear the full brunt of the phenomenon. To an economist, this should be interpreted to mean that the costs of abating the phenomenon should be borne by the present generation, while the benefits of their current practices will be realized by future generations. To neo-classical economists, this could mean that the current generation is losing money-generating opportunities in order to protect income-generating potential of the future generation. As Sagoff (2004) argues, the neo-classical economic theory rarely addresses ethical or moral issues; rather, it perceives such issues as potential changes in incomes, which can be addressed by changes in investor and consumer behaviour. An issue of great concern to some people is the fact that the neo-classical economic perspective fails to address the environmental, political, and ethical issues of global warming. For example, Jenkins (1996) holds the opinion that some regions will suffer substantial harm from the resulting climatic changes and some regions, countries, or cities may have to be abandoned; and in some cases, the climatic changes resulting from climatic changes may be catastrophic. Is it sustainable? Neoclassical economic theorists define sustainability as “the maximisation of welfare over time” (Harris, 2000, p. 7). As such, the economic perspective posits that human welfare, which includes elements such as health, food, housing, clothing, education, and others, should increase over time. Neoclassical economists further use time discounting to compare the values of consumption in different periods. With such discounting in mind, sustainability should therefore be nothing more but an efficient mode of resource allocation. By applying the economic efficiency criteria, it would appear that resource exploitation, and the consequent damage to the environment is sustainable and therefore acceptable. However, inasmuch as neoclassical economists such as Nordhaus (2008) have argued their points, others like Howarth and Norgaad argue that the discount rate used by the present generation is not necessarily true since it is biased towards the consumption habits of today’s consumers. Considering the impacts that greenhouse gases emission have on global warming, the discount rate adopted by neoclassical economists creates a major partiality towards sustainability. Despite this, scholars such as Cline (1992) have suggested the adoption of a 1.5 percent discount rate, which they argue can provide the much needed balance between long-term benefits and costs of global warming and the resulting climate change. Since the neo-classical economist does not see conservation of natural capital as important, it is worth noting that the economic efficiency in such an approach would jeopardise chances of sustainability. As Common and Perrings (1992) observe, a principle developed by Solow and Hartwick and named the ‘Hartwick Rule’, posits that with increasing or constant consumption of declining non-renewable resources, the proceeds attained from such resources can be reinvested in man-made capital in order to create wealth for future generations. Additionally, the argument by neoclassical economists that markets are the best allocators of resources does not uphold the sustainability concept, which is based on normative social decision-making processes. The use of discount rates in the neoclassical economic argument also diminishes the importance of current decisions, thus making sustainability less likely. As Nordhaus (2008) observes, the use of discount rates is against the concept of environmental sustainability since rational individuals from an economic standpoint should draw benefits from a resource at an equal rate to the discount rate. If global warming is justified by the neoclassical economical argument and hence given room to persist, it is highly likely that environmental amenities available to the current generation will be completely wiped out in future. This no doubt means that the neoclassical argument to global warming is unsustainable. In conclusion, it is worth noting that there is no perfect knowledge that exists regarding environmental resources. Additionally, human beings do not perfectly know or understand what the future holds. Even more intriguing is the fact that economists are yet to develop perfect markets for environmental goods. As such, it is clear that the concept of discounting rates is contrary to the environmental sustainability concept. Seeing that the global economy needs some rational decisions to be made regarding environmental sustainability, and having in mind the point that humankind needs to consider the welfare of future generations, it is worth noting that global warming is an issue that needs compromise among the moralist and economists in order to draw a balance between individual interests and collective good. In other words, the environmental crises presented by rising water levels, floods, and other climatic catastrophes are a clear sign that the impacts of global warming are indeed being witnessed. As such, theoretical approaches from economics and other scholarly disciplines need to be considered in order to provide humankind with the much-needed solutions. The neoclassical argument that global warming is not such a serious problem as people may be inclined to think, and that it does not warrant urgent policy actions, may not be tenable for much longer. References Aghion, P. & Howitt, P. (1998). Endogenous growth theory. Cambridge , MA: MIT Press. Brown, P. (1998). “Toward an economics of stewardship: the case of climate.” Ecological Economics, 26, 11-21. Cline, W. (1992). The economics of global warming. Washington D.C.: Institute for International economics. Common, M. & Perrings, C. (1992). “Towards an ecological economics of sustainability.” Ecological Economics, 6(1), 7-34. Fankhauser, S. (1992). “Global warming damage costs.” University College London, CSERGE Working Paper, GEC, 9, 2-2 9. Gerlagh, R. & Van der Zwaan, B.C.C. (2002). “Long-term substitutability between environmental and man-made goods.” Journal of Environmental Economics and Management, 44, 329-345. Harris, J. M. (2000). “Basic principles of sustainable development.” Global Development and Environment Institute, Working Paper 00-04, 1-24. Howarth, R. & Norgaard, R. (1993). “Intergenerational transfers and the social discount rate.” Environmental and Resource Economics, 3, 337-58. Jenkins, T.N. (1996). “Democratizing the global economy by ecologising economics: the example of global warming.” Ecological Economics, 16, 226-238. Neumayer, E. (1999). “Global warming: discounting is not the issue, but substitutability is.” Energy Policy, 27, 33-43. Nordhaus, W, (2008). A question of balance: weighing the options on global warming policies. New Haven: Yale University Press. Sagoff, M. (2004). Price, principle, and the environment, Cambridge: Cambridge University Press. Read More