Economics

Global warming is the increase in temperatures occasioned by environmental pollution through carbon dioxide emission. A lot of carbon dioxide is emitted during the combustion process of fossil fuels used in the energy sector. It is estimated that the combustion of fossil fuels contributes about a billion metric tones of carbon every year. The change in land use is estimated to make a contribution of approximately 1.2 gigatons of carbon.  There is a global rapid increase in emissions resulting from the combustion of fossil fuels. This has been fuelled by industrialization especially in developed countries. This paper identifies the marginal costs and marginal benefits of reducing energy consumption and the economic effects of massive government intervention on reducing green house gas emission.

Question one. Marginal costs and benefits of reducing energy consumption

Fossil fuel is one of the cheapest primary sources of energy and therefore reducing the use of carbon fuel will mean going for the alternative sources of energy which are more expensive. The reality is that there is a general increase in the demand for cheap energy globally. Developed countries and emerging economies are increasingly looking for cheap sources of energy to power a rapidly growing industrialization process. On the other hand developing countries need this energy to provide electricity and energy for cooking to its citizens. Coincidentally, it is expected that developing countries will experience an increase in demand for energy to power their economic growth. It is a costly investment to finance the installation of infrastructure to generate carbon free energy. These sources include nuclear plants, hydroelectric power plants, solar and wind power plants which are expensive especially when they have to be used on a large scale. According to estimates from the international Energy Agency, it would cost approximately 45 trillion dollars to cut global carbon emissions to half. There are arguments that abolition of fossil fuels could trigger global economic recession. Despite the huge costs associated with reduced energy consumption, it is very clear that there are a lot of benefits that arise from this move. One of such benefits is prevention of environmentally instigated natural calamities. These disasters have in the past caused huge destruction of property and even death. Changing to alternative sources will only mean that countries redirect their energy investment to alternative technologies which will be of greater benefit in the long-run. Agriculture, a global economic activity will also benefit enormously from stabilized weather. This will go a long way to solve the problem of global food crisis.
Question two. Economic effects of government intervention on reducing green house gas emission.
Reduction of green house gas emissions can be easily achieved through massive government intervention. This is especially so when you consider the fact that the fight against global warming is a globally collective issue that demands intergovernmental coordination and proper policy implementation. Governments can benefit by pulling together resources to explore green technologies. This will significantly reduce the costs of searching for alternative sources of energy. However for this to be achieved there needs to be certain levels of consensus that will see governments pull together.

Comments to question three

Re global warming  by Nicholas Mayr (Jan 10, 2010 3.21 pm)

To a great extend I agree with your argument on the benefits and costs of cutting on energy consumption. My only concern is that your argument applies more on the short term and overlooks serious long term implications. For instance US security cannot be guaranteed through green technologies because that is not the force behide terrorism. Religious civilization is the problem. Secondly, a decline in living standards occasioned by a rise in prices for commodities will only happen in the short-run. Things will however change in the long-run as the benefits of cheaper sustainable technologies trickle down to the individual persons. Remember that renewable energy sources are deemed expensive because of the infrastructure required, but once put in place, you pay nothing but maintenance costs.