Transcript implementation plan - University of Wisconsin

University of Wisconsin-Eau Claire
The Economics of Externalities
& Climate Change
Eric Jamelske
Department of Economics
University of Wisconsin-Eau Claire
[email protected]
University of Wisconsin-Eau Claire
Overview




Externalities
Energy & Externalities
Greenhouse Gasses (GHG) & Climate Change
Equitable/Efficient Reduction of Emissions
University of Wisconsin-Eau Claire
Externalities

An externality arises when an activity influences the well-being
of others with no compensation for that effect.

When the impact is adverse, the externality is negative.
– Over do

When the impact is beneficial, the externality is positive.
– Under do

Externalities cause markets to be inefficient, and thus fail to
maximize well-being.
University of Wisconsin-Eau Claire
Externalities

Negative Externalities
– Automobile exhaust
– Factory pollution
– Cigarette smoking
– Barking dogs (loud pets)
– Airplanes (landing/take-off)
– Chicken Litter
– GHG (carbon)
University of Wisconsin-Eau Claire
Tragedy of the Commons

Over-grazing on common land

Over-fishing in common waters

Congestion on common roadways

Pollution of common air and common waters
University of Wisconsin-Eau Claire
Energy & Externalities

Coal (SO2, Acid Rain, GHG, Carbon)

Oil & Gas (Automobiles and Refineries)

Nuclear (Radioactive Waste)

Solar, Wind, Water, Biofuels
University of Wisconsin-Eau Claire
GHG, Carbon vs. Other Pollution

Water and Air Pollution
– You can see it, You can smell it
– Can’t breathe, Can’t drink
– Cost/Benefit?

GHG, Carbon and Global Climate Change
– You can’t see it, You can’t smell it
– Raises global temperature
– Cost/Benefit?
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
Is this fair?
Is this efficient?
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
Is this fair?
Is this efficient?
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
Is this fair?
Is this efficient?
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
University of Wisconsin-Eau Claire
Cap & Trade (Tax)

The cost of reducing pollution to target level of emissions is
lowest when cleanup is done by those with the lowest cost of
reducing emissions

Preferred by all firms

Efficient/Fair

Not Perfect

There are no SOLUTIONS……just TRADEOFFS!