Sunday, 11 January 2015

Global Warming and Externalities (United Kingdom)


Country: United Kingdom 

Global Warming is the increase of Earth's average surface temperature due to effect of greenhouse gases, such as carbon dioxide emissions from burning fossil fuels or from deforestation, which trap heat that would otherwise escape from Earth. This is a type of greenhouse effect.
To understand the cause of Global Warming, we need to first understand the concept of greenhouse effect. A small part of the heat radiated by the sun is absorbed by the Earth's surface whereas a large part of it is reflected back into the atmosphere in the form of radiations. The atmosphere has greenhouse gases, which absorb this radiation and reflect it back on the earth to keep it warm. Today, due to human activities, the amount of these gases in the atmosphere is increasing as a result of which the temperature of earth is rising and hence we are experiencing global warming.

Use of fossil fuels leads to negative externalities. Many of the environmental problems our country faces today result from our fossil fuel dependence. These impacts include global warming, air quality deterioration, oil spills, and acid rain. Among the gases emitted when fossil fuels are burned, one of the most significant is carbon dioxide, a greenhouse gas that traps heat in the earth's atmosphere and causes global warming. Climate scientists predict that if carbon dioxide levels continue to increase, the planet will become warmer in the next century. In coastal areas, sea-level rise due to the warming of the oceans and the melting of glaciers may lead to the inundation of wetlands, river deltas, and even populated areas. Clean air is essential to life and good health. Several important pollutants are produced by fossil fuel combustion: carbon monoxide, nitrogen oxides, sulfur oxides, and hydrocarbons. In addition, total suspended particulates contribute to air pollution, and nitrogen oxides and hydrocarbons can combine in the atmosphere to form tropospheric ozone, the major constituent of smog. During the electricity-generation process, burning fossil fuels produce heat energy, some of which is used to generate electricity. Because the process is inefficient, much of the heat is released to the atmosphere or to water that is used as a coolant. Heated air is not a problem, but heated water, once returned to rivers or lakes, can upset the aquatic ecosystem. Here the marginal social costs are clearly higher that the marginal private costs, which puts the society at a disadvantage. Although the company is not affected much, the citizens of UK and the world experience problems like global warming which put human existence at a risk.
UK is concerned about the condition of the environment and has implemented laws to limit the amount of negative externality. Some of these are:

  In 1993, the UK government introduced the fuel duty escalator (FDE), an environmental tax on retail petroleum products. The tax was explicitly designed to reduce carbon dioxide emissions in the transport sector. Since carbon is in fixed ratio to the quantity of fuel, the FDE is roughly approximated as a carbon tax. The transport lobby in the UK was extremely critical of the FDE. The FDE, which was the UK's only "real" carbon tax, failed because of the political criticism it provoked, and the automatic increase of the FDE was cancelled in 1999. Increases in fuel tax have since been discretionary. The politically damaging fuel protests in 2000 contributed to the government decision to reduce the real rates of fuel tax. At the time, tax and duty represented more than 75% of the total pump price. In money terms, the past increments of the FDE remain in force, but in real terms, increments have been reduced by the rate of inflation. In 2006, tax represented about of the pump price. 
  But in current times, Britain's carbon tax will be frozen at 2015 levels of 18.08 pounds per tonne, Chancellor George Osborne said on Wednesday, as a part of the government's annual budget. The move is a downscaling of Britain's carbon price floor, which came into effect in April 2013 aiming to ensure power producers pay at least 30 pounds per tonne for emitting carbon dioxide (CO2) by 2020, to help spur investment in low carbon technology and encourage utilities to switch from burning coal to gas.
  The EU Emission Trading System (ETS) gives companies from heavy industries and the power sector flexibility to decide whether to invest in carbon abatement or to purchase emission allowances to comply and UK wants to change certain aspects of this system to make it more efficient. Some of them are:
           1 Cancellation of surplus allowances before 2020 to help restore the balance between supply and demand, and put the system back on track once and for all. If not tackled, the surplus will continue to depress the carbon price, delaying the low-carbon investment that is needed now to meet our emissions reduction targets cost-effectively.
            2 Revision of free allowances provisions. The system of free emission allowances, crucial for certain businesses to stay competitive during the transition to a global low-carbon economy, must continue to protect those who need support most to adjust over the long term.
            3 Cutting unnecessary red tape to strike a better balance between fairness, cost-efficiency and simplicity.
  The British government have announced that significant subsidies will be granted to homes, businesses and schools that are using or converting to renewable heating systems throughout the country. One of the most common methods is a conversion to woodchip burners for heating rather than a continued reliance on fossil fuel heating systems, which of course also provide additional pollutants. The new scheme is to begin shortly with more than £850 million ($1.4 billion US/CA) earmarked over the next four years. It’s expected that most of the subsidized funds will be directed to hospitals, schools and community housing simply due to the size of the equipment involved. Nevertheless it’s a positive and encouraging step by a coalition government who have had their green credentials challenged and selection last year. It’s another step toward the EU target for renewable energy reaching 20 percent in the years to come, although the UK has set a lesser target of 15 percent at present.
Hence, UK in all its power is trying to reduce the carbon emission in the country and it has been successful in reducing the amount as seen in the graph below which shows that UK has reduced its carbon emission from 10 metric tonne in 1986 to 7.86 metric tonne in 2010 which is the lowest of the 3 countries shown in the graph.

Hence international laws such as the EU Emission trading system are very important in preventing global warming as they help eliminate the causes of global warming. It is evident that the EU system has had a huge impact in lowering the carbon emissions in UK and it also has the same effect on other countries. And so the carbon emission in major countries is now decreasing due to such agreements, which force the countries to work in an environmentally friendly way, and also they try to reduce the marginal social costs in comparison to the marginal private costs. 

-Abhijit Agrawal

Bibliography:
http://www.livescience.com/37003-global-warming.html
http://en.wikipedia.org/wiki/Carbon_tax
http://uk.reuters.com/article/2014/03/19/uk-britain-budget-carbon-idUKLNEA2I02620140319
http://www.ucsusa.org/clean_energy/our-energy-choices/coal-and-other-fossil-fuels/the-hidden-cost-of-fossil.html#.VLLYQMaDndk
https://www.gov.uk/government/news/uk-calls-for-major-changes-to-eus-cap-and-trade-emissions-system
http://planetforward.ca/blog/uk-announces-subsidies-for-conversion-to-renewable-heating-sources/

1 comment:

Bipin Kala said...

Good work Abhijit,
Wonderful lot of research for completing this question.
In discuss or evaluate questions we need to emphasis on the consequences for various stakeholders in accordance to the problem raised in the question.
well done keep it up.