Introduction

Question 1

Many people have heard of climate change, but rate it low on their list of day-to-day concerns.

Give four major reasons why they should view the issue as much more urgent.

Answer 1

• severity of impacts: our burning of fossil fuels is literally creating a different planet from the one to which the natural and industrial worlds are adapted
• speed: the planet is changing faster than the ability of natural and economic/social/political systems to adapt
• irreversibility: we have no economic way to retrieve CO₂ from the atmosphere, where large portions will remain for hundreds to thousands of years
• runaway threat: inertias and feed-backs at some point may accelerate the process beyond all hope of our ever reining it in

Question 2

What is market failure, and how does it relate to climate change?

Answer 2

The fact that the full costs to society of burning fossil fuels is not incorporated in their price amounts to a hidden subsidy of their use and puts alternatives like wind and solar at a competitive disadvantage.

This distortion of the price signals is an example of a market failure, and results in an overinvestment in fossil fuels relative to their alternatives, and continuing massive greenhouse-gas emissions.

Question 3

How do you normally fix a market failure?

Answer 3

A standard way to compensate for a market failure is to tax the sale of the relevant goods so that their purchase price reflects the full costs involved in their use.

This in turn will allow the price mechanism to provide alternative fuels with a level playing field.

Question 4

Give two reasons why politicians find it very difficult to address the market failure underlying human-caused climate change.

Answer 4

• politicians may be loathe to impose a corrective tax on carbon pollution for ideological reasons (it goes against their view of the proper role and scale of government), and
• powerful vested fossil-fuel interests (coal, oil, gas) fund efforts both to mislead the public on the severity of the issue and to threaten responsible politicians at a grass-roots electoral level