Scientist now believe that global warming is fact, although disagreements contin

Question

Scientist now believe that global warming is fact, although disagreements continue about the speed with which it is occurring. In broad outline, factories, cars and other sources emit gases into the air that have the effect of warming the entire planet, not just the country where the emissions occur. Global warming, in turn, has implications, most of them negative, for the viability of coastal communities, species extinction and other effects.

The big question is what to do. Under one set of proposals, industrialized countries are asked to reduce their emissions, while poorer countries get a pass. The poorer countries, notably China, generally emit more than factories of comparable scale in the more industrialized countries.

Using concepts used just in Microeconomics(and ignoring any that you might think relevant from Macroeconomics), what does economics have to say about global warming? Is the lesser role for he market and of competition in China(compared to the US or Japan) part of the problem or part of the solution?

Explanation / Answer

Competition from China is part of the problem. If the US decreases production in order to limit emissions, the world demand for fuel drops, which decreases costs for factories in China. This induces factories in China to produce more using dirtier machinery. So, the net effect of reducing production in the United States is to INCREASE world pollution. One potential solution that would allow developing countries to improve while helping to protect the environment would be for developing countries to buy patents from their domestic developers and sell them at a loss to developing countries. While this would cost developing countries money, they would benefit more from the collective decrease in pollution.

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