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Unformatted text preview: HM Treasury, Cabinet OfFce. 2007. The economics of climate change: The Stern review. Chapter 2-climate change results from greenhouse-gas emissions associated with economic activities, including energy, industry, transport, and land use-human-induced climate change at its most basic level is an externality-as the full cost of GHG emissions are unlikely to be fully borne by the emitter, there is little incentive to reduce emissions, and no requirement to compensate those affected-the climate is a public good, as it is non-rival and non-excludable-climate change has special features that pose particular changes for standard economic externality theory;-climate change is global in both its causes and consequences-the impacts of climate change are persistent and develop over time-the uncertainties are considerable, both about potential size, type, and timing of impacts, and about the cost of combating climate change-the impacts are likely to have a signiFcant effect on the global economy-the optimum level of climate change abatement is the balance between the marginal social cost of carbon SCC) and the marginal abatement cost (MAC)-we cannot sensibly calculate an SCC without assuming that future emissions and stocks follow some speciFed path-it is very likely that SCC will rise over time as the stock of GHGs continue to rise, so too must the MAC, despite the MAC curve shifting down with learning-the argument becomes more complex when uncertainty is included in the analysis, as prices and technology can change and move the optimum point-generally, poor countries, and poor people in any given country, suffer the most, despite the fact that the rich countries are responsible for the bulk of past emissions-the underlying ethics of basic welfare economics focuses on the consequences of policy for the consumption of goods and services by individuals in a community-the objective is to work out the policies that would be set by a decision-maker acting on behalf of the community and whose role it is to improve, or maximize, overall social welfare-Frst the consequences of actions is looked at, then the consequences in terms of impacts on ʻ utility ʼ are assessed-the implications of the four main dimensions (consumption, education, health, and environment) are assessed in terms of aggregating consequences between generations, and over time-developing countries will be hit particularly hard by climate change because of their geography, their stronger dependence on agriculture, and their fewer resources which leaves them more vulnerable-the standard welfare-economics framework has a single criterion, and therefore a single governmental decision-maker, but the global nature of climate change suggests that such a single-player framework is insufFcient-the objective of social welfare function is simply to maximize the sum across individuals of social utilities of consumption ENVR 203 - Coursepack reading notes-the relationship between measure of social well-being and the goods and...
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This note was uploaded on 11/15/2010 for the course ENVR 200 taught by Professor Rhemtulla during the Fall '10 term at McGill.
- Fall '10