Forget Politics: Understanding the Economic Perspective of Climate Change


Article by Mahesh Pai

The question of the belief in climate change is akin to the question of the belief in physics. The possibility of climate change traces back to 1859, when John Tyndall identified carbon dioxide as a greenhouse gas that could affect the global climate.

The calculations he found that would truly change climate were thought to be too high for humanity to produce alone, until humanity would eventually find the technological means to do so.

Dr. Richard Alley, a climatologist and member of the IPCC group that won the Nobel Peace Prize, has suggested other derivative problems that stem from climate change. He states that climate change and the effects of carbon dioxide emissions can have wide-reaching international and economic impacts.

With the increase in carbon dioxide causing a climate temperature increase, even by a mere 1 or 2 degrees Celsius, drastic changes will occur overall. Parts of Russia will experience a warming of their coldest temperatures in winter. This could allow Russia to expand their naval activity into the Arctic Sea and potentially drill for oil in Siberia.

The United States would also face many changes in the southern portion of the country. According to NASA, the vast majority of the increase of carbon dioxide has occurred within the last 35 years. Within that period, scientists have observed some of the most recent years being the warmest on record, with ocean acidification and glacial recession on the rise.  

There is also a question of politics concerning climate change. How is the voter meant to respond? Is political action required? Generally, policy enforcement is an ineffective way to avert climate change. Some countries attempted to enact an “odd-even rule” to regulate car emissions.

Image Credit: Charles Fettinger

The odd-even rule stated that those with odd-ending license plate numbers and those with even-ending license plate numbers would drive on alternate days. Those who failed to obey the rule were ticketed. When India attempted to regulate automobile emissions by implementing the “odd-even rule” for car traffic in New Delhi (for which I was present), it failed within a week. One should instead adopt a consumer approach to dealing with climate change.

The vast majority of carbon dioxide emissions are caused by automobile exhaust as well as industrial output from factories. It is up to consumer demand to display a desire for cars containing alternative energy sources. The same method can be applied to the industrial sectors. If the demand is high, the supply must be met. The global economy will adjust accordingly.

Dr. Alley claims that price signals and carbon tax could be effective economic methods to tackle carbon dioxide emissions. These price signals act as an indicator of supply and demand regarding products that emit carbon dioxide.

A proper carbon tax will incentivize the corporations responsible for these products to reduce carbon emissions and research alternative energy methods. In addition, he states that solar energy panels spread throughout the world will have the ability to substitute much of the energy supply that petroleum had previously provided.

Each macroscale problem that a society faces generally comes down to an individual choice that we all must make. One government entity does not have the complete means to change the entire course of climate change through policy enforcement. Ultimately, it comes down to every one of us to make a choice that is akin to all of human nature.




Feature Image: Properties built in a flood prone area in Popua Village a suburb in the outskirts of Nuku’alofa, the Capital of Tonga. ADB / LUIS ENRIQUE ASCUI

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