What elements does an economically sensible solution to limiting greenhouse-gas emissions to prevent excessive global warming include? Explain each of these briefly.

Question

What will be an ideal response?

Answer 1

POSSIBLE RESPONSE: Global problems require global solutions and long-term problems require long-term solutions. The solution to excessive global warming includes economic incentives which are created by establishing a "price for greenhouse-gas emissions," to reflect their external costs. Pricing emissions encourages reductions in two ways. First, with a cost now attached to emissions, the price of emission-intensive products increases, and consumers react by buying less. Second, producers have the incentive to look for technologies that generate fewer emissions per unit produced. Through both of these effects, the policy spurs emission reductions at a low cost. Pricing of emissions can be achieved by a tax on emissions or by tradable rights to pollute such as those used by the European Union to meet its obligations in the Kyoto Protocol. 

"All countries should be involved" for both effectiveness and efficiency. With no policies restricting emissions (often called "business as usual"), emissions will grow quickly in developing countries, so that by 2040 they would be the source of more than half of the world's emissions. There is no way to stabilize greenhouse gases in the atmosphere at reasonable levels without the participation of developing countries. Furthermore, the marginal costs of reducing emissions are generally lower in developing countries because they often do not make use of the most efficient technologies and because they often rely heavily on coal to generate electricity. To achieve reductions in global emissions at low cost, much of the reduction should occur in developing countries. The policies should be in place for a "long timespan," because they should affect decisions about investments in long-lived capital equipment and decisions about research and development of new technologies that can lower future emissions. The price of emissions in the future is a key input into these investment and research decisions.