In economics, negative externalities are side-effects of economic activities. They arise somewhere during the lifecycle of products or services, are not considered by the market actors but have an influence on society’s welfare. When the negative effects (social costs) that are not taken into account at the market exceed the private gain, the market outcome does not maximise society’s welfare and thus externalities are one case of market failure.
Inhaltsverzeichnis (Table of Contents)
- What are the characteristics of the GHG-emission externality?
- What are examples for additional climate policy-related technology externalities?
- Is more than one policy instrument required to tackle these externalities? If yes, why? What would be suitable policy instruments?
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper examines the economic externalities associated with climate change, particularly focusing on greenhouse gas (GHG) emissions and the development of green technology. It aims to highlight the market failures inherent in the production and adoption of these technologies and explores the potential for policy interventions to mitigate these issues.
- The nature of GHG emissions as a negative externality.
- The role of green technology in mitigating climate change and its associated positive externalities.
- The challenges of incentivizing innovation and diffusion of green technologies.
- The need for a multi-faceted policy approach to address both negative and positive externalities related to climate change.
- Suitable policy instruments for internalizing externalities and promoting green technology development.
Zusammenfassung der Kapitel (Chapter Summaries)
- The first chapter defines GHG emissions as a negative externality, explaining how the market fails to account for their social costs, leading to an overproduction of GHGs. It discusses how market actors, like producers and consumers, do not bear the full cost of their emissions, resulting in a mismatch between private gains and social welfare.
- The second chapter explores the positive externalities associated with green technology development, highlighting how these technologies can lead to increased efficiency and lower environmental impact but face market barriers due to factors like high investment costs and uncertainty surrounding their potential. The chapter further explains how these barriers can hinder the necessary innovation and diffusion of green technologies.
- The third chapter emphasizes the need for a multi-faceted policy approach to tackle both negative and positive externalities associated with climate change. It advocates for a combination of economic instruments, such as emissions taxes and cap-and-trade systems, to internalize the costs of GHG emissions and promote sustainable practices. Furthermore, it suggests the use of public investments in research and development, intellectual property protection, and incentivizing efficient technologies to encourage green technology adoption.
Schlüsselwörter (Keywords)
Climate change, externalities, GHG emissions, green technology, innovation, market failure, policy instruments, emissions taxes, cap-and-trade systems, public investments, intellectual property.
- Quote paper
- Simon Valentin (Author), 2017, Externalities of climate change and how to tackle them, Munich, GRIN Verlag, https://www.grin.com/document/386156
