MITIGATION OF GREEN HOUSE GASES AND THE CONCEPT OF EXTERNALITIES
- Explain the concept of an externality. How can putting a price on pollution correct for an externality? (Respond in one short paragraph less than 100 words)
- Why is the mitigation of GHG’s characterised as a public good and what is the main implication of this? (Respond in one short paragraph less than 100 words)
- Role play, where you are the principal advisor of the Minister for the Environment. The Minister has an upcoming media interview on a new policy to reduce greenhouse gas emissions. The Minister requires a precise and concise answer for the following question.
What are the reasons for the government to have a policy to reduce emissions? (Use dot points to present the information to the Minister, no more than 100 words in total)
SAMPLE SOLUTION
Externality is the cost incurred by a party that did not choose to incur it. Economists often advise governments to develop policies that internalize externalities so that costs and benefits are only incurred by companies that have opted to incur them. The theory of externality applies where a company’s production decreases the well-being of other companies that are not paid or compensated by a firm. Imposing a price on pollution ensures that only companies that benefit from the pollution are charged for overall costs connected with the pollution cleanup (Borland 2012).
Mitigation of Green House Gas (GHG) is characterized as a public good as it involves measures intended to control factors that contribute to increase in global warming. Mitigation of GHG seeks to address the issues related to climate change like drastic weather changes that leads to adverse temperatures, drought and floods. Globally, when one ton of carbon dioxide is emitted in one part of the world, it has a similar effect on climate as the same amount of carbon dioxide that is ton emitted in another part of the world. All emissions released to the atmosphere from different sources and nations determine the actual concentrations of GHG globally and the subsequent climatical changes.
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