Question

3. (Climate Change) (20 pts) a. Use the following graph to explain why E* is the efficient level of pollution. Efficient Level of Pollution (Emission) Marginal Damage Cost (MD) Marginal Cost ($ per unit) Total Damage Costs Total Abatement Costs Cost (MAC Marginal Abatement Emit E Abate Quantity of Pollution (Emission) b. Can we apply the same method to solve the climate change problem? Why is climate change a global public goods problem? Explain. c. Why adaption policy is important for climate change? List any two examples of mitigation policy

Answer 1

a)

If we observe the graph, Marginal damage cost is the damage cost to the environment for every additional unit of pollutant emitted. And similarly, marginal abatement cost is the cost to reduce every one unit of pollutants emitted. With environment and industries being the main stakeholders in this scenario, we can achieve efficiency only when both are at equilibrium or in simple both the cost curves intersect. Therefore E* is the efficient allocation.

b)

Yes we can apply. The pollutants emitted by different countries can be scaled up to their respective damage costs to achieve the efficient emission of contaminants. Climate change is an exemplary global public good, because each country's emissions of greenhouse gases contribute to the cumulative increase of the overall pollutant concentration, and each country's abatements has higher cost than benefit.

c)

Climate change adaptation helps organizations to deal with inevitable consequences of climate change. It involves taking practical actions to manage risks from climate impacts, protect communities and promote a resilient economy.

Some of the examples of mitigation policy are establishing renewable resource systems, sustainable transportation systems such as Electric vehicles, etc which can reduce greenhouse gases.

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