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ERE11: International Environmental Problems

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ERE11: International Environmental Problems International externalities Optimisation analysis Game-theory analysis Acid rain Depletion of the ozone layer – PowerPoint PPT presentation

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Title: ERE11: International Environmental Problems


1
ERE11 International Environmental Problems
  • International externalities
  • Optimisation analysis
  • Game-theory analysis
  • Acid rain
  • Depletion of the ozone layer
  • Climate change

2
Last week
  • Instruments of Environmental Policy
  • Criteria, incl. cost-effectiveness
  • Instruments
  • Institutional
  • Command and control
  • Market based
  • A comparison

3
International Externalities
  • International externalities are the unintended
    and uncompensated by-product of one countrys
    consumption or production on another countrys
    welfare
  • Natural and environmental resources do not
    respect administrative borders, so exploitation
    of shared (water) and mobile (fish) resources as
    well as persistent emissions (water, air) lead to
    international externalities so do resources such
    as biodiversity

4
Pollution flows over national boundaries
Country X
Country Y
No spillover
UXUX (MX)
UYUY (MY)
Unidirectional spillover
Country X
Country Y
UYUY (MX, MY)
UXUX (MX)
Reciprocal spillovers
Country X
Country Y
UXUX (MX, MY)
UYUY (MX, MY)
5
Non-Cooperative Solution
  • For all countries, optimal emissions are such
    that the marginal benefits of emitting equal the
    marginal costs to the country itself
  • Objective function
  • Necessary conditions
  • So, even in the cases with spillover effects,
    this will be ignored and does not influence the
    choice of emission level

6
Cooperative Solution
  • For all countries, optimal emissions are such
    that the marginal benefits of emitting equal sum
    of the marginal costs to all countries
  • In our example
  • Unidirectional solution
  • Reciprocal solution

7
Unidirectional externality

Non-cooperative
Cooperative
Emissions
8
Insights
  • A non-cooperative solution ignores externalities,
    and is therefore not optimal
  • A cooperative solution is in the best interest of
    all together, although not necessarily in the
    interest of each individual
  • Under some conditions, a cooperative solution
    generates enough surplus to compensate the losers
    of cooperation but it is the losers of
    pollution that pay

9
Game Theory
  • To analyse choices where
  • the outcome of a decision by one player depends
    on the decisions of the other players
  • decisions of others are not known in advance
  • The pay-off to doing pollution control or not
    depends on ones own choice and that of others
  • Tool to explain characteristics of effective
    international environmental agreements

10
Prisoners Dilemma
Pay-offs (net benefits)
x y Pollute (x) Abate (x)
Pollute (y) 0,0 5,-2
Abate (y) -2,5 3,3
  • Emission reduction costs 7 units for the one
    abating
  • Emission reduction creates a benefit of 5 units
    for each

11
Achieving Cooperation
  • How to achieve at least partial cooperation?
  • Self-enforcing agreements
  • No signatory can gain by unilaterally withdrawing
    from the agreement
  • No non-signatory can gain by unilaterally
    acceding to the agreement
  • The role of commitment
  • Side-payments and other benefits of cooperation
  • E.g. trade linkages

12
Trade and the environment
  • Prospects for international environmental
    cooperation might be increased by trade linkages
  • International trade brings welfare to all
    countries
  • However, if countries do not internalise their
    environmental externalities, trade may hurt
    welfare
  • Indeed, lax environmental regulation can be a
    competitive advantage
  • This is frequently quoted as a reason to restrict
    international trade, but improved environmental
    policy would be a better

13
Stability of Cooperative Solutions
  • Bargaining solutions are more difficult to
    achieve when
  • A high number of parties is affected
  • Bargaining power is unevenly divided
  • Gains and losses from cooperation differ widely
  • Property rights are non-existent/not well defined
  • Bargaining is about public goods
  • Costs of bargaining are relatively large
  • Uncertainty about costs and benefits is larger

14
Acid Rain
  • Acidification became apparent in Europe in the
    1960s and led to research on causes, consequences
    and remedies
  • Sources are sulphur dioxide and nitrous oxide
  • SO2 Fossil-fuel combustion, in power plants and
    vehicles
  • NOX From transport and via ammonia from
    agriculture
  • Once in the atmosphere pollutants travel long
    distances (1000m) before being deposited after a
    couple of days
  • Acid rain can be dry and wet
  • dry deposition direct uptake by vegetation
  • wet deposition acidic substances in rain drops

15
Consequences
  • Increased acidity of lakes
  • aluminium poisoning, salt and oxygen starvation
  • Increased acidity of soils and air
  • Forest damage, through roots and leaves
  • Human health, through acidic air and water
  • Damages to some stone, metal, glass
  • Loss of visibility

16
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17
Acid Rain Policy in Europe
  • In Europe, acid deposition is falling
  • What are the factors influencing the abatement
    effort
  • Emission problems are relatively concentrated
  • Vehicles also contributed to urban air pollution
  • Power plants typically operated by
    semi-governments
  • There was strong public demand, and a not
    excessively expensive technical fix
  • Coal, the dirtiest fuel, was becoming less and
    less competitive
  • Eastern European industry collapsed
  • The EU acted as an international political
    institution

18
Ozone Depletion
  • Ozone is formed by ultraviolet light, destructed
    by oxides of chlorine, nitrogen and hydrogen
  • Ozone concentrations are highly variable
  • Anthropogenic emissions of CFCs have increased
    the decay rate of ozone, leading to the ozone
    hole
  • CFCs are extremely stable and travel around for
    years
  • They climb higher and higher until the sun is
    strong enough to break down the molecules
  • CFCs originate from equipment
  • aerosol propellants, cushioning foams, cleaning
    materials, and refrigerative material

19
1978-1987
20
Consequences and Countermeasures
  • The increase of UV radiation leads to
  • Skin cancer (40 million cases, 1 million deaths)
  • Affects immune systems causes blindness
  • Genetic damages
  • Damage to marine plankton
  • CFCs are industrial products that can be
    replaced by other substances that fulfill the
    same role
  • HFCs are slightly worse and slightly more
    expensive

21
Ozone Policy
  • Vienna, 1985 Threat recognised agreement on
    information sharing
  • Montreal, 1988 24 mainly OECD countries agree to
    phase out production and consumption of CFCs
  • London, 1990 59 nations agree to accelerate and
    extend the Montreal Protocol
  • Jan 2001 Consumption and production of CFCs is
    forbidden in the OECD and in most developing
    countries
  • Main instrument Substitution

22
Ozone Policy (2)
  • Why this success? After all, the ozone hole is a
    stronger externality than acid rain, and a global
    deal was reached
  • Strong public demand
  • Availability of a cheap, technological fix
  • Developing countries bribed with money,
    technology, WTO access
  • Illegal trade and waste remains a problem

23
Climate Change
  • Fossil fuel combustion and cement production emit
    carbon dioxide
  • Coal mining, agriculture and organic waste lead
    to methane emissions
  • Agriculture, fossil fuel combustion and nylon
    production lead to nitrous oxide emissions
  • A range of other activities lead to emissions of
    other greenhouse gases
  • These emissions change the radiative balance of
    the atmosphere, and thus climate

24
The Greenhouse Effect
Some of the infrared radiation passes through the
atmosphere, and some is absorbed and re-emitted
in all directions by greenhouse gas molecules.
The effect of this is to warm the earths surface
and the lower atmosphere
Some solar radiation is reflected by the earth
and the atmosphere
Solar radiation passes through the clear
atmosphere
Most radiation is absorbed by the earths surface
and warms it
Infrared radiation is emitted from the earths
surface
25
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26
Anthropogenic emission of greenhouse gases broken
down by sector for the year 2000 (EDGAR 3.2)
27
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28
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29
Climate Change (2)
  • Climate change affects everything that depends on
    climate
  • Sea level
  • Unmanaged ecosystems
  • Agriculture
  • Water resources
  • Energy consumption and production
  • Human health
  • Infrastructure
  • Tourism
  • And so on

30
Climate Change (3)
  • Some of the impacts are negative, others are
    positive
  • In general, poorer, hotter countries are more
    vulnerable than richer, cooler countries
  • A few degrees of warming would mean positive,
    monetary impacts but negative impacts for the
    majority of people
  • More than a few degrees of warming would imply
    net negative impacts

31
Climate Change (4)
  • Greenhouse gas emission reduction is complicated,
    as we are dealing with a wide range of activities
    of almost everybody
  • However, energy and transport are the prime
    emitters
  • Accelerating energy-saving and a gradual shift to
    carbon-free energy sources (solar, wind, hydro,
    nuclear, biomass) would be fairly cheap
  • More ambitious, rapid emission reduction could be
    very costly

32
Climate Change Policy
  • To date, climate policy is mostly talking
  • The Rio 1992 convention set-up a framework treaty
  • Kyoto 1997 filled in a lot of details but left
    many crucial elements undefined
  • At the moment, the international negotiations are
    stuck, and national policies are waiting for the
    world
  • Whats the difference with ozone hole and acid
    rain?

33
Climate v Ozone, Acid
  • More countries
  • More sectors
  • No cheap technological fix in sight
  • Significant number of people remains unconvinced
  • Issue is more complex, and scientific uncertainty
    and illiteracy are greater
  • So far, international climate policy has
    confirmed economic theory ...
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