Most important/hard questions Flashcards
What are the planetary boundaries?
The concept was formulated in 2009 by a group of 28 scientists in collaboration with the Stockholm Resilience Center. They are 9 fundamental processes that regulate the stability and resilience of the Earth system. Living within these quantitative planetary boundaries, humans can continue to develop and thrive for generations to come. Crossing these boundaries increases the risk of generating large-scale abrupt or irreversible environmental changes and ultimately to a new state of the Earth system. Some examples of planetary boundaries include: climate change, novel entities, stratospheric ozone layer depletion, atmospheric aerosol loading, ocean acidification, biogeochemical flows, freshwater use, land use and biodiversity loss. They are all connected→ domino effect (CO2). Climate change and biosphere integrity are core boundaries: significantly altering either of these core boundaries could drive the Earth System into a new state.
Each boundary has a set of variables that are used to monitor the changes (like CO2 for climate change). For each variable we can identify a green zone is the safe operating space, the yellow represents the zone of uncertainty (increasing risk), and the red is a high-risk zone.
Unfortunately, 5 of the 9 planetary boundaries have now been crossed as a result of human activity: biodiversity integrity, biogeochemical flows of nitrogen and phosphorus, environmental pollutants and other novel entities like plastic, climate change, and land-system change. Economics questions can be what might be the costs in crossing these thresholds?
Explain difference between CBA and risk approach
CBA can be useful to understand
the costs (of mitigation): like the ones needed to reduce GHGs
the benefits: the avoided impacts (already happened) or the risks (expected in the future).
This can be done because CBA uses monetary terms to measure things allowing to compare the costs with the benefits, remembering that there are always uncertainties.
Since it uses monetary terms we must allocate a price both for the costs and the benefits. To determine the price of the costs we can look at the technologies needed for mitigation actions (photovoltaics, nuclear…) keeping in mind that the more we increase abatement efforts the more our costs go up; we can use the marginal cost curve to look at the costs of production of any good keeping in mind that the final price is set by the most expensive technology. To determine the price of the benefits ( which is more challenging) we can look at the demand curve which corresponds to the willingness to pay (WTP).
For the risk approach the focus is on thresholds instead of cost and benefits. We make a decision based on science. It is close to the precautionary approach: taking decisions even when there is uncertainty. →The potential risk (expected impact) is traded off with the costs (often unknown)
Economic evaluation (direct / indirect approach) of benefits Two basic approaches have been usually employed both look at WTP of people. indirect approach : look at the prices of houses, based on location. direct approach: cost of illness, relation between mortality and changes in T
Define risk
Risk can be defined as the potential impact in the future(whereas an impact is a risk that has already manifested). It depends on:
hazard (a threat that can have consequences)
exposure (humans or the natural system affected by hazard)
vulnerability (sensitivity of the system exposed, i.e old VS young people)
→ RISK = Hazard x Exposure x Vulnerability
The IPCC adds one:
response (risk of maladaptation) i.e heat waves = air conditioning is a way to respond but leads to an increase in energy consumption. It is a maladaptation because it gives a short term solution but with consequences in the long run.
The concept of risk provides the leading framework across all AR6. The IPCC defines some key risks and classifies them as related to:
probability of occurrence
magnitude of impact
persistence over time
possibility to be irreversible
limited possibility to adapt.
Within the debate over GDP, what are the differences between the green growth approach, the reformist approach, and the radical approach?
The green growth approach
Sub-groups: sustainable growth, ecological modernisation
Key assumptions:
economic growth can be decoupled from environmental impacts
changes can be achieved with the existing institutions and system of capitalism.
Goals: improving economic growth while reducing environmental impacts.
How: through improved technology, resource efficiency, renewable energy, decoupling.
Ex: SDGs
Problem: still focus too much on economic growth and GDP
The reformist approach
Sub-groups: a-growth, pragmatic post-growth…
Key assumptions:
infinite growth is not possible (G. 1); decoupling could still be possible (G.2)
the necessary changes are compatible with current institutions
Goals: decouple wellbeing from GDP growth, multidimensional social wellbeing and environmental goals
How: through resource limits, reforms and wellbeing, changes in our lifestyles, social justice
Ex: Doughnut approach
The radical approach
Sub-groups: eco-socialism, eco-anarchism
Key assumptions:
decoupling is most likely not possible
the necessary changes are most likely not compatible with capitalism
Goals: decouple wellbeing from GDP growth, reduce impacts
How: complete change of the economic, cultural systems to achieve environmental sustainability since existing systems are unsustainable. The civil society and social movements play a critical role.
Ex: individual downshifting
Different ways to measure wellbeing
he OECD approach is a system developed by the Organization for Economic Cooperation and Development as an alternative to GDP (why GDP is not good). It focuses on measuring well-being and quality of life by looking at a range of indicators such as life expectancy, education, employment, income, and environmental quality.
→The hedonic approach focuses on subjective well-being; it measures it with surveys →based on the pleasure or satisfaction goods and services bring (1-10). A good society builds on individuals maximizing their happiness.
→The Eudaimonic approach is a way to measure wellbeing in a more objective way, by looking at the basic needs and fanfictions of an individual. Is Multidimensional = definition of human well-being. Is an approach which looks at more than just pleasure and satisfaction. It looks at factors such as purpose, self-actualization, and meaning in life. This approach focuses on the idea that true well-being is more than just the accumulation of material wealth and happiness, and that it is also about finding meaning and purpose in life.
Define public goods and why they are important
A public good is a good or service that is available to all members of a society, without exclusion. Public goods have the following characteristics:
Non-excludable: All members of society are able to use the good or service, regardless of their ability to pay.
Non-rivalrous: The consumption of the good or service by one person does not reduce the amount available to others.
Relevance: The good or service is relevant to the needs of the society.
An example of a public good is a national defense or healthcare system is some states→ we care about them because they benefit all members of society
An important issue that is related to public goods is referred to as the free-rider problem. Since public goods are made available to all people–regardless of whether each person individually pays for them–it is possible for some members of society to use the goods despite paying for it. People who do not pay taxes, for example, are essentially taking a “free ride” on revenues provided by those who do pay them.
Why do we use game theory?
Are a tool to predict possible outcomes in social interactions.
Players: actors
Strategy: action each player can play
Information: what each player knows
Payoffs: benefits - costs = 2 players make a decision at the same time so we have possible outcomes, each outcome has a payoff.
Game: a model of strategic interaction that describes players, feasible strategies, information, payoffs.
→the invisible hand game ,the pest control game, the public good game → punishments (free riding problem), the climate change game
Global public goods and international cooperation
Global public goods are needed because our well being depends on these goods. All global public goods are desirable but under-provided. Ex: biodiversity and ocean protection = life-supporting systems. How to manage them?
Voluntarily? but volunteerism cannot always be successful. Ostrom does not apply to global commons.There is not one authority to compel states to behave differently.
→The only alternative is international cooperation. We can identify a typology of public goods characterized by a similar incentive structure:
Single-best effort
Global PG can be provided by one (big) country who has incentives. Here the benefits are way bigger than the costs. The problem of free riding is very limited. Ex: collision with an asteroid (in the past) thanks to cooperation in science and technology we know the risk is very low. The US invested a lot in space science to manage this risk but as a consequence the entire world benefits from this. But then who would be responsible? how to regulate these behaviors.
Weakest link
Even small countries play an important role. Ex: vaccine against global disease smallpox to eradicate it 100% every single country had to contribute. To obtain success all countries must participate.
Aggregate effort
Cooperation here gets more difficult. The success depends on the aggregate effort. Ex: climate change. The benefits are not that evident here. Countries are affected in different ways. Some might gain more than others. Impacts are heterogeneous and not obviously evident. Some efforts are costly (like reducing CO2) . Maybe not all countries want to spend this money (problem of public opinion). Stronger free rider incentives. Cooperation is key but difficult to achieve. Important dimensions of a problem like climate change that might require global cooperation (finance, funds, loss and damage…)
Define the different steps through which a Multinational Environmental Agreement is negotiated and applied.
A MEA is a legally binding international agreement between two or more countries that cooperate to address global environmental issues such as climate change, biodiversity loss, and pollution. The agreement outlines objectives, responsibilities of countries, as well as the means of monitoring and enforcing.
Treaty-making is a complex, non-linear process where groups or coalitions lob together. Steps:
Pre-negotiation: discuss topics in general, big delegations that need to form a negotiation position (=who is going to the negotiation, delegates, environmental experts, not ministry of finance). In last years has increased the number of people from fossil fuel industries that go to COP for lobbying.
Also in this step an agenda is defined or at least discussed.
Groups and alliances are formed.
Negotiation: agenda setting + setting procedure. Decisions are based on consensus (COP27 was broad consensus). Negotiations done by informal working groups.
Ratification: trade-off. Different agreements have different ways of entering into force, with a signature (not very strong to be legally binding) or ratification (normally requires the approval of a state’s parliament with majority rules that vary from country)
Implementation: Reporting, verification, and monitoring. For instance:
The Paris Agreement established the Enhanced Transparency Framework (ETF) to monitor actions of countries. Developed countries have to report GHGs.
Global Stocktake: a process conducted every 5 years to monitor what countries are proposing and their progress. Having entered into force, implementation requires domestic legislation and the adoption of implementing regulations. Countries are normally free to choose the means of implementation. Policy instruments are the main means of implementation of international environmental agreements.
Renegotiation and withdrawal: A treaty can be adjusted, or amended (e.g. Montreal Protocol) or withdrawn if it is a formal process, which requires a written notification and usually can take place only after a certain period of time (1 year)
What is the task of COP?
A key task for the COP is to review and assess the effects of the measures taken by Parties and their progress in achieving the ultimate objective. The COP meets every year, unless the Parties decide otherwise. The first COP meeting was held in 1995 and the venue shift.
COP3 - Kyoto Protocol
COP21 - Paris Agreement - great success, at least the political support allowed the IPCC to prepare the seminal 1.5C report.
What are PIs?
Policy instruments are the techniques used by the governing authorities (government or public) to promote certain policies to achieve a predefined set of goals.
PIs can be of 2 types:
economic incentives (using markets or creating them)
ex: subsidies and property rights
normative approaches (operates with regulations, environmental regulation and engaging the public)
ex: permits and quotas, public participation
An example is the carbon tax is a policy instrument that is used to reduce the emissions of GHGs. STABILIZE PRICE OF CO2!!!!!! This is achieved since:
The tax is applied to emitters of Co2 or other GHGs. So it becomes an expensive cost for businesses that produce them.
This cost is then passed on to consumers who, having to pay more, are incentivized to reduce their consumption of goods and services that rely on emissions-producing activities.
The revenue generated from the carbon tax can then be used to fund other environmental initiatives or public goods, such as renewable energy and public transportation.
Why do we need PIs?
We need Policy Instruments to address problems like:
→CPRs and public goods, their risk of being over-exploited: tragedy of commons. →environmental impacts by humans
→Problems that emerges from social interactions
→Problem of overproduction that usually lead to negative externalities
When markets fail it means there is no longer an efficient allocation (pareto efficient allocation). What to do? internalize the externality. How? With policy instruments.
Therefore PIs are a way to align the profit incentive with the social incentive.
There are two types of PIs:
economic incentives (using markets or creating them)
ex: subsidies and property rights
normative approaches (operates with regulations, environmental regulation and engaging the public)
ex: permits and quotas, public participation
In conclusion, PIs can change private incentives, can be used to provide public goods, can be used to address distributional/equity issues.
How to choose among Pis? Based on which criteria?
Choosing between different policy instruments will depend on the specific circumstances. First of all I need to consider that there are two types of PIs:
economic incentives (using markets or creating them)
ex: subsidies; property rights
normative approaches (operates with regulations, environmental regulation and engaging the public)
ex: permits and quotas; public participation
Second of all, I need to think of the outcome I want to achieve. For example:
taxed can be used to ensure public goods or to make polluter pay
property rights can be used to address the issue of a negative externality (ex. lake)
subsidies can be used to incentive abatement
But also consider the possible complications .For instance subsidies entails important costs for the government and they might cause more polluters to enter the market just because there are incentives.
Market-based instruments are more efficient but the feasibility / effectiveness depends on the market structures. In Us there were many industries with lead so cap and trade was effective (more flexible) but in countries with very few industries using lead then a ban or a tax would be more effective.
What is a cap and trade scheme?
One reason for market failures can be a lack of property rights; so the idea of cap and trade scheme is to create property rights associated with a use of a resource. The cap and trade system is commonly used for
air pollutants but can also be used
for the management of natural resources (like fisheries).
It is called cap and trade because it is a policy instrument that sets a limit or cap on the total amount of a pollutant that can be emitted by a group of sources; permits are given to them, it is essentially is the right to use the resource, also is the right to pollute; and then it gives polluters the possibility to trade these permits giving life to a market (sources that emit less can sell their permits to those that exceed their limit).
This system provides an economic incentive to reduce emissions and encourage innovation and the development of cleaner technologies. The idea behind cap and trade scheme is that once you assign property rights the agents can freely bargaining to find an agreement between them, and find an efficient solution.
The key mechanism behind the cost effectiveness of cap and trade and all other market based instruments is the Least Cost Theorem useful in a situation with a mix of pollutants like GHGs. Allows to achieve efficiency in a decentralized way.
When it comes to design of this system the steps are:
establish cap and number of permits
establish the scope (which industries do we want to include?)
allocation of permits (should permits be free, or do an auction?) and establish hot to distribute them
international offsets: allowing the possibility of buying permits from different countries, should be allowed?
temporal flexibility: the time-window on when to use permits
With a cap and trade scheme we have certainty on the amount of abatement we will achieve but we have uncertainty about the price (is the opposite of a tax).
Fit for 55 main points
Fit for 55 is a bundle of rules and legislative proposals that have been presented by the EU commission, to become laws they need to be accepted by the parliament and the counsel of the EU, they are still proposals being discussed. Called 55 because the aim is to reduce GHGs emission by at least 55% by 2030 compared to 1990 levels and to achieve climate neutrality in 2050. Includes modifications of several elements, including improvement of the emission trading scheme (ETS).
The Green Deal 2019 (set the European agenda for environmental policies and transformation) was very broad, covering climate change but also persistent pollutants, ecosystems, biodiversity…. is a much broader scheme. But now within Fit for 55, which is trying to propose new rules and laws to actually implement the European climate deal, there are also specific proposals for the ETS European emission trading scheme. Most importantly, there is the idea of expanding emission trading to other sectors, especially to buildings and transports. This is why Germany went ahead and implemented domestic schemes, by 2026 also Eu should theoretically have them.
