Term Paper, 2013
14 Pages, Grade: 1,0
2. No name of the game - disagreement about the results of global warming and responsible actors
3. Perspectives on environmental challenges - Transaction cost and property rights approach meets other mind sets
3.1. Absent rules of the game: Global passivity towards environmental challenges? An explanation using transaction cost and property rights approach
3.2. Other approaches supporting the explanation given by New Institutional Economics
5.1. Books and Articles
5.2. Newspaper articles, online sources and other papers
In media and politics a debate about global warming and climate change started to be discussed intensely in the last years, although environmental scientists and observers agreed already decades ago that human consumption behaviour, production and the careless use of fossil resources can cause disastrous problems regarding the environment. The observation of temperatures and carbon dioxin emissions led in the late 1970s to the conclusion that the human consumption has to be changed in order to prevent the world from an environmental catastrophe and ecologists like George Woodwell, who was a member of the Council on Environmental Quality, were demanding for a public awareness (Pomerance, 1989, 259). Nevertheless only in 1992 the first international event took place - the United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro, which focussed alternative sources of energy, the consequences of the use of fossil resources and global warming (United Nations, 1997).
Still, it seems that no attention was drawn to the rising problems until Al Gore produced the movie “An Inconvenient truth” and received the Nobel Peace Prize for his commitment to increase awareness of the economic issues caused by global warming. An intense discussion in many countries across the globe started already in 1995 at the first annual United Nations Climate Change conference, dealing with the topic and searching for long-term solutions.
It seems as if too little has been happening: Newly industrialized countries like China, India and Brazil are increasing their carbon dioxin emission due to economic growth, higher production and consumption, while countries which have already reached a high economic standard reject taking measures to reduce their emissions by signing international treaties obliging to ecological improvement, e.g. the Kyoto Protocol, such as the United States of America, Canada in contrast first signed the treaty but then decided their withdrawal in 2011 (United Nations, 2011).
Understanding the complex processes and reasons in an emotionally led debate appears to be difficult since a scientific clash of approaches, ideas and values can be observed. The transaction cost and property rights theory within the theoretical framework of “New Institutional Economy” (NIE) can explain main reasons and core elements of passivity in action in many countries regarding prevention of climate change. This paper will therefore attempt to examine the question why is global wanning an unattractive problem from the perspective of the transaction cost and property rights approach and what can be done to assert such a problem in the global problems agenda ?
Thus, in the following firstly the core assumptions of the ecological perspective on global warming and climate change will be briefly explained (2.) in order to portrait the tension the topic provokes, especially in contrast to the transaction cost theory, which will be used to show the economic reasons for passivity in action in global environmental policies (3.1.)· Afterwards the approach of environmental security within International Relation studies, the Copenhagen Consensus will be used, as well as new green ideas (3.2.) to support the arguments developed in 3.1.
Final remarks will be made in the conclusion in order to summarize the core ideas of this paper (4.).
German climatologist Mojib Latif states that there is no doubt the global warming will occur as an important environmental topic in the 21st century across all regions of the world - the question is simply how big its impact on biodiversity and human life will be (Latif, 2012, 95). He is presenting several scenarios showing an increase of the temperature of 3,5° Celsius is expected. His worst case scenario includes a model in which the average temperature will increase up to 6° Celsius, caused by many factors, one of the main reason is human consumption and production, which is directly linked to carbon dioxin emission. (Latif, 2012, 95) Data from the Intergovernmental Panel on Climate Change (IPCC) support such an assumption by showing the continuing increase in the global average temperature and the global average sea level and the simultaneous decrease of the snow cover in the Northern hemisphere since the half of the last century (IPCC, 2007, 6).
But what challenges can be expected due to the predicted climate change? An important issue that can be identified is the availability of water and the problems related to the lack of drinkable water. Since only one percent of the total amount of water is accessible drinking water, which as well is being used for agricultural production (Mustafa, 2010, 36), it can be expected that with increasing temperatures and less humidity in the agricultural soil, more regions will have to struggle with limitations of water to maintain quality of agriculture and thus the human life in the future.
Furthermore two major effects on oceans are expected with the rise of temperatures: 1. if the global climate becomes significantly warmer, glaciers in polar regions will be melting which would directly cause the increase of the sea water level, threatening coastal areas, e.g. in Northern Australia or Bangladesh (Hare, 2005, 2). 2. An average increase of more than two degrees Celsius would cause extinction of maritime species (Schneider et al., 2007, 792). This can cause a chain-effect in the gradual collapse of food chain in the world seas, consequently endangering the sustainable food supply for the huge part of world human population But not only maritime species are threatened by global warming, the complete biosphere, including terrestrial flora and fauna, is endangered by changes of the global average temperature (Schneider et al., 2007, 792). Considering the natural balance of biodiversity, a collapse of the global ecosystem seems possible if predictions turn out to be right.
Another problem linked to global warming is the challenge to grow crops: an increase of the average temperature of one degrees Celsius endangers agricultural production in developing countries, an increase of two degrees or more leads to great challenges worldwide, industrialized countries, according to the climate models (Hare, 2005, 3). Not only economic challenges will be faced (caused by distribution difficulties due to less yields), but as well the intensity of natural phenomena unknown so far would predictably emerge - weather imbalances can be explained by global warming processes (Schneider et ah, 2007, 796). These changes are the starting point for the problems related to economy and nutrition and this can lead to migration issues. Although in general reasons for human migration differ, the Foresight programme within the British Government Office for Science states that environmental and climate changes lead to an increase of migration (2011, 67), which brings as well another dimension of social and economic challenges on a global scale due to climate change.
The presented aspects are only few core elements in the discourse about global warming showing the negative predictions on a social, economic, political and environmental level. These challenging tendencies effecting public discussions built up a certain tension in (European) post-industrial countries like Austria or Denmark. These now are asking for measures in order to prevent further damage caused by global warming but very few steps were taken on a global scale. The reasons for this will be explained in the following.
Although strong ecologic criticism is existing for decades, human production and consumption still causes increasing global carbon emission (Boden et ak, 2010) - but why? Is the threat too abstract? Are predictions too uncertain? Are there no applicable approaches for the solution of environmental problems? Or are incentives just simply too low to act? The trans- action cost and property rights approach embedded in the NIE can explain why any real measures aren’t taken for an improvement of the global environmental situation.
The general assumption regarding solutions to the global environmental problems is: On the international level, the property rights (broadly speaking) system in relation to the potential global public goods (atmosphere, seas, Antarctica, etc.) is not clearly established. Thus the formal and informal institutions are weak to state who owns these potential global public goods (and who is possible stakeholder in the management of their quality), who is responsible for its decreasing quality and sustainability (and if the sustainability of biosphere is global public good) and who and how is to punish such a free-riders, since there is no formal authority and formally institutionalized mies to even firstly name the game and maybe later set the mies of such a game. The basic institutional vacuum - reminding the well know tragedy of commons in which nobody manages and everybody exploits - suggest huge transactions costs for a possible action which bring consequently the low incentives to act. The Coase theorem including perfect knowledge of own and others’ rights to keep negative externalities on the low does not function in the complexity of international economic reality and the competitive pressure of global markets which forces the states, companies, people to prefer the short-term profit to the long-term sustainability. This assumption can be easily explained by the application of the basic theoretic framework of NIE.
Considering “transaction costs [as] the costs of mnning the economic system” (Arrow, 1969, 48), it becomes clear that due to the imperfection of human beings, who are responsible for the economic system, transaction costs are always emerging (Fumbotn/ Richter, 2005, 47-8), since information, strong institutions and well-defined property rights are necessary to keep transaction costs low (Ménard/ Shirley, 2005, 4-5). Defining property rights as “sanctioned behavioural relations among men that arise from the existence of things and pertain to their use” (Furubotn/ Pejovich, 1972, 1138-9), knowing their importance for the reduction of transaction costs and understanding “institutions [as] the rules of the game - both formal rules, informal norms and their enforcement characteristics” (North, 2005, 22) one of the core reasons for global passivity regarding global warming and other environmental issues is becoming obvious: in the international system strong institutions, clear property rights and the access to information about externalities are lacking, which keeps transaction costs high. Hence, incentives are missing since the processes regarding the use of the market are linked to high transaction costs. It has to be mentioned that asymmetric information increases transaction costs, which happens often during communication processes and negotiations (Mandewirth, 1997, 37).
 Accordili to Hare (2005, 2) the loss of up to 50 of the wetlands is considered a threat, which mi ht occur with the avera e temperature increase of one to three de rees Celsius, leadin tomi ration and production crises
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