Affecting of the Environment on the Economic System - Term Paper Example

Affecting of the Environment on the Economic System Introduction Unlike common commodities, the conditions of the environment affect the wellbeing of mankind globally and locally. Thus, the environment is integrated spontaneously into the economic system and it is reasonable to analyze the environment in the framework of economic allocation problems (Wiesmeth, 2011). In 2012 and with a population of 7 billion people the world faces complex social and economic challenges; while conserving natural resources and protecting the environment. Many countries are also struggling with stretched public finances, high levels of unemployment and slow economic growth (OECD, 2012). In the short term the world is to face the worst economic crisis in 80 years. However, the consequences of managing the climate are of entirely different significance (Endres, 2009).Earth’s surface temperatures have reached an all-time elevated level, “tipping point” as greenhouse gases such as carbon dioxide continue to build up in the atmosphere. In summary, planet Earth’s biodiversity is under significant consternation (Vig & Axelrod, 1999). The eminent threat to the environment has been recognized by scientists and conservationists, but it is only in the past four decades that nations have given attention to this issue on a global scale. In 1972, the United Nation’s Conference on Human Environment in Stockholm, Sweden, attended by 113 countries characterized the first organized international efforts to map out an elaborate agenda in order to protect the environment while fostering economic development at the same time. Even though no binding treaties were agreed upon, the UNEP was established (Vig & Axelrod, 1999). There are more than 1000 international environmental agreements already in existence, including the United Nations Conference on Environment and Economic Development in Rio de Janeiro. In spite of this expectant progress, the promise of achieving international levels of co-operation, which is required to control the impact of human-beings on the biosphere/ natural life support systems of the planet, remain grim (Vig & Axelrod, 1999). There are persistent conflicts over the interpretation/connotation of sustainable economic development and the implementation of environmental policies between the economically developed, developing and transitional states around the world. In addition to that, there is vehement strife over the exclusion of economically developing countries from Kyoto protocol negotiations (as of December 1997) that elaborated binding provisions of green house gas emissions (Vig & Axelrod, 1999). Theory The economic theory has not taken the environment: which is the natural set of conditions that characterizes human living space into regard. Since time immemorial, the biosphere (natural environment, e.g. air and water) has been an example of free goods (public/common property) that are available in immeasurable quantities with no price tags (zero prices) underpinned to their utility. Over the years, natural resources have been utilized in economic undertakings without forethought of the long term impact on the environment or possible losses within the context of future generations without the combined output of consumption and production undertakings within the existent economic system. Summarily, the environment has fallen from the paradise of free goods to the sphere of lack. A case in point is the dramatic depletion of the ozone layer since the 1990’s: a phenomenon that was discovered by natural scientists. In addition to that through research and scientific experiments carried out over the years epidemiologists have ascertained that there is a correlation between illnesses and water and air pollution (Siebert, 2008). Microeconomics is simply the science of scarcity and coping with the ramifications of scarcity (Broh et al., 2011). The environment has become a sparse commodity from an economist’s point of view. In short scarcity implies that competing utilities exist for a given good (which is the environment) and that not all requirements for its use can be met. Thus, these competing utilities have to be eliminated or reduced (Siebert, 2008). Scarcity here does not only imply lack of basic needs but to any divergence between desire and reality (Broh et al., 2011). Hence, the constraint here is to establish which possible use is to be given priority. Environmental utilities pose a distribution problem (Siebert, 2008). However, the most important thing within the context of observable scarcity of environmental commodities is the state of environmental awareness in a designated population. An elevated level of environmental awareness attracts attention to burning environmental issues in a society, which serves as a precursor or pre-requisite to establishment effective environmental policy. Thus the major constraint adoption of same emission standards is that environmental awareness itself seems to rely on the level of economic well being. Typically, developing countries are characterized by low levels of environmental awareness coupled to growing environmental problems. Light or simple issues like food shortage, shelter are temporarily vital for developing countries; which is a con/disadvantage while adopting same emission standards (Wiesmeth, 2011). This fact is gaining momentum in the framework of increasing international environmental issues. For instance, today the EU, U.S. and China have differing views on ecological relevance of global warming. This contrast in views with respect to the imperativeness of appropriate measures and need to reduce greenhouse gas emissions are also the implications of reduced environmental awareness; which is an economic con for the developing countries in the adoption of same emission standards. It brings us to the cognizance/realization that cross-border environmental matters in one country may not be of concern in another one and may not be too much of a problem; issues with no environmental relevance at one point in time may gain higher ecological relevance at another point in time, e.g. in the 1960’s in Ruhr valley, Germany, “grey sky” was due to air pollution symbolized economic development and was rarely perceived as threat to one’s health. At some point China’s priority seemed to be ensuring rapid economic growth/development at the expense of utilizing fossil fuels (Wiesmeth, 2011). In the 21st century the world faces two major constraints that determine our future: (I) possibility of catastrophic changes (II) struggle against poverty. The financial crisis was caused by inappropriate management of risk in the financial sector; similarly severity of climate crisis is reliant on the management of greenhouse gases. Human activities have led to exceptional economic bulge in pursuit of elevated living standards. The Organization of Economic Co-operation and Development (OECD) environmental outlook to 2050, formulated by OECD member states focuses on four areas including: biodiversity, climate change, health impacts of pollution and water. The outlook presents attainable solutions, bringing out connections between various environmental matters and some of the challenges and trade-offs facing competing demands. By 2050, the world’s GDP is expected to quadruple despite recent financial slump/recession (OECD, 2012). In coming decades, the average GDP rates are expected to slow down in China and India. While Africa remains the world’s impoverished/poorest continent it is expected to experience the highest economic growth from 2030 to 2050. By 2050, 70% of the world’s population is projected to be living in cities. Consequently, problems such as waste management in slums, transport congestion and air pollution will be magnified with subsequent serious human health issues. Populations of OECD member countries are expected to live longer, with a quarter of their people expected to live beyond 65 years in comparison to 15% today. On the other hand, India and China are expected to undergo/experience immense population ageing; with China’s actual work force shrinking by 2050. In contrast, populations in other parts of the world, especially in Africa, are expected to grow exponentially. In the absence of a new policy action, the world economy is forethought to utilize 80% of surplus energy by 2050 (OECD, 2012). In addition to that, the global energy mix is not expected to differ significantly from that of today. The share of fossil fuels would remain at 85%, while renewable energy would be just above 10% and the rest would be nuclear energy. Some of the “emerging economies’’, including Russia, South Africa, China, Indonesia, India, are referred to as (BRIICS) those projected to become major energy users, which will lead to overreliance on fossil fuels. In order to feed the world’s growing population with changing dietary preferences, land under agricultural acreage is expected to expand worldwide in the next decade to match the increase in food demand. Consequently, there will be increased competition for sparse land (OECD, 2012). Analysis An elevated level of environmental concern elevates environmental issues in a society which serves as a precursor to the establishment effective environmental policy. Otherwise continued in action and laxity in the formulation of sound environmental protection policies to curb greenhouse gas emissions by 2050 would result in: (I) Increased disruption of climate change with greenhouse gas emissions postulated to increase by more than 50%, due to 70% growth in CO2 emissions due to continued use of fossil fuels. While the recent economic recession did somehow reduce emissions for a limited time only, economic recovery has reversed this trend. (II) Biodiversity loss is projected to continue further by 10% in Europe, Asia and Southern Africa by 2050. About one third of economically invaluable global freshwater biodiversity has already been lost and further loss is projected by 2050, especially in Africa, Latin America and parts of Asia. (III) Further strain in freshwater availability, with 2.3billion more people forecasted to be living in river basins experiencing chronic/severe water stress. Implying that over 40% of the world’s population will be living in water stressed areas by 2050. It is expected that the Millennium Development Goal for sanitation won’t be met by 2015. (IV) The human health situation or scenario continues to worsen, with air pollution set to become top environmental cause of premature mortality globally. Application It makes no sense if, for example, USA acutely minimizes its emissions whereas emerging economies like India and China and the rest of developing world does not fall in line/follow suit. Climate change occurs in a way that is difficult to address. Furthermore, green house gas emissions from one place impact on climate everywhere. This implies that each country has the responsibility to be involved in mitigation efforts of others. A holistic cooperation among nations is required in order to limit greenhouse gas emissions. To make the matters worse, the effect of greenhouse gas emissions varies among countries and regions; these resulting divergence in interests not only pits a country against country but one generation against another. Environmental damages depend on cumulative emissions over years and centuries. Therefore, an effective emission standard would be the one that would benefit the whole world by far and large in future (Hahn & Ulph, 2012) Conclusion Without the establishment ambitious environmental protection policies, lack of coherent emission policies and continued laxity among all nations globally, the future of planet earth looks grim; economically and environmentally. An International environmental policy on adopting the same emission standards would not be effective if the EU, U.S. and China and other emerging economies were not a part of it. Since these countries have differing views on ecological relevance of global warming and environmental protection policies, they are the world’s major emitters of greenhouse gases and economic powerhouses. There is also powerful scientific evidence that natural systems have a tipping point beyond which rapid change becomes irreversible. The difference in views with respect to the imperativeness of appropriate measures and need to reduce greenhouse gas emissions are also the implications of reduced environmental awareness; which is an economic disadvantage/con to the developing countries in the adoption of same emission standards. Bibliography Ashford, N. A., & Caldart, C. C., 2008. Environmental law, policy, and economics: Reclaiming the environmental agenda. Massachusetts: Massachusetts Institute of Technology. Broh, A., Eyre, N., & Howarth, N., 2009. Carbon markets: an international business guide. Quick Silver Drive: Earth Scan. Endres, A., 2011. Environmental economics: Theory and policy. New York: Cambridge University Press. Hahn. R. W., & Ulph, A., 2012.Climate change and common sense: Essays in Honor of Tom Schelling. New York Oxford University Press Inc. OECD, 2012. OECD environmental outlook to 2050: The consequences of inaction. OECD publishing. Siebert, H., 2008. Economics of the environment: Theory and policy. New York: Springer-Verlag Berlin Heidelberg. Vig, N. J., & Axelrod, R., S., 1999. The global environment: Institutions, law and policy. Washington, DC: Congressional quarterly Inc. Wiesmeth, H., 2012. Environmental economics: Theory and policy in equilibrium. Heidelberg Springer-Verlag Germany. Read More