On the day he came to office, President Trump signed a series of executive orders. One of these was to set in motion the process of withdrawing from the UN Paris climate agreement. Section 3(a) of the order reads:
The United States Ambassador to the United Nations shall immediately submit formal written notification of the United States’ withdrawal from the Paris Agreement under the United Nations Framework Convention on Climate Change.
The Paris Agreement is an international treaty on climate change. It was adopted on 12 December 2015 and came into force on 4 November 2016, 30 days after the point was reached when at least 55 countries accounting for at least 55% of global emissions had ratified the treaty.
Currently, all UN countries are signatories to the agreement and only Iran, Libya and Yemen are yet to ratify it. The agreement commits countries to limiting global warming to well under 2°C above pre-industrial levels and preferably to no more than 1.5°C. This would involve reducing greenhouse gas emissions and/or taking carbon absorbing measures.
Since 2020, each country has been required to submit its own emission-reduction targets, known as ‘nationally determined contributions’ (NDCs), and the actions it will take to meet them. Every five years each country must submit a new NDC more ambitious than the last.
Rich countries are expected to provide finance to low-income countries. This is required to help poor countries adopt green technologies and to adapt to the harmful effects of climate change (e.g. through irrigation schemes and flood defences).
Countries set target dates by which emissions would be fully offset by carbon absorption measures (‘net zero’). The UN’s goal is to reach global net zero by 2050. According to the UN Climate Action site:
As of June 2024, 107 countries, responsible for approximately 82 per cent of global greenhouse gas emissions, had adopted net-zero pledges either in law, in a policy document such as an national climate action plan or a long-term strategy, or in an announcement by a high-level government official. More than 9000 companies, over 1000 cities, more than 1000 educational institutions, and over 600 financial institutions have joined the Race to Zero, pledging to take rigorous, immediate action to halve global emissions by 2030.
The Paris Agreement has helped to cut emissions or slow their rate of growth in most countries. Although net zero by 2050 may be unlikely, warming will be less than without the agreement.
The USA and the Paris Agreement
In April 2016 the USA signed the Paris Agreement. As stated above, the Paris Agreement came into effect on 4 November 2016.
President Trump came to office for the first time in January 2017. In June 2017, he signed an executive order in which he announced that the USA would withdraw from the agreement, arguing that it undermined the US economy and put it at a competitive disadvantage. He claimed that global warming is a hoax concocted by China designed to undermine the competitive power of the USA.
However, despite Trump’s intention to withdraw from the agreement, its terms did not allow a country to begin a withdrawal procedure for at least three years after the agreement was ratified (i.e. not before 4 November 2019) and then a year’s notice has to be given. This notice was given on 4 November 2019. In the meantime, the USA had to abide by the terms of the treaty. During this period, US representatives at COP meetings used the opportunity to promote fossil fuels. Withdrawal took place on 1 November 2020, just one day after the presidential election and just over two months before the end of Trump’s first term of office.
On 20 January 2021, his first day in office, President Biden signed an executive order to rejoin the agreement, which took place on 19 February 2021. He committed to cutting total greenhouse gas emissions by at least 50% by 2030. To achieve this, his administration adopted a number of emissions-reducing measures, for example requiring all new passenger vehicles sold after 2035 to be emissions free, giving tax credits for clean electricity generation, providing federal funds for smart agriculture and setting greener appliance and equipment standards.
But, as we have seen, newly elected President Trump for the second time announced that the USA would withdraw from the Paris agreement and would prioritise fossil fuel production, under the mantra, ‘drill, baby, drill’.
The economics of climate change
Climate change is directly caused by market failures. One of the most important of these is that the atmosphere is a common resource: it is not privately owned; it is a global ‘commons’. Individuals and firms use it at a zero price. If the price of any good or service to the user is zero, there is no incentive to economise on its use. Thus for the emitter there are no private costs of using the atmosphere in this way as a ‘dump’ for their emissions and, in a free market, no incentive to reduce the climate costs.
And yet when firms emit greenhouse gases into the atmosphere there are costs to other people. To the extent that they contribute to global warming, part of these costs will be borne by the residents of that country; but a large part will be borne by inhabitants of other countries.
These climate costs are external costs to the firm and are illustrated in the figure. It shows an industry that emits CO2. To keep the analysis simple, assume that it is a perfectly competitive industry with demand and supply given by curves D and S, which are equal to the marginal private benefits (MPB) and marginal private costs (MPC), respectively. There are no externalities on the demand side and hence MPB equals the marginal social cost (MSB). Market equilibrium is at point a, with output at Qpc and price at Ppc. (Click here for a PowerPoint.)
Assume that the emissions create a marginal cost to society equal to MECc. Assume that the MEC increases as output and total emissions increase. The MECc line is thus upward sloping. At the market price of Qpc, these external climate costs are equal to the purple vertical line. When these external climate costs are added to private costs, this gives a marginal social cost given by MSC = MPC + MECc. The gives a socially optimal level of output of the product of Q* at a price of P*, with the optimum point of c.
In other words, other things being equal, the free market overproduces products with climate externalities. If the output is to be reduced to the social optimum of Q*, then the government will need to take measures such as those advocated in the Paris Agreement. These could include imposing taxes on products, such as electricity generated by fossil fuels, or on the emissions themselves. Or green alternatives, such as wind power, could be subsidised.
Alternatively, regulations could be used to cap the production of products creating emissions, or caps on the emissions themselves could be imposed. Emissions permits could be issued or auctioned. Only firms in possession of the permits would be allowed to emit and the permits would cap emissions below free-market levels. These permits could be traded under a cap-and-trade scheme, such as the EU’s Emissions Trading Scheme. Again, such schemes are advocated under the Paris Agreement.
Effect of the USA’s withdrawal from the Paris Agreement
Withdrawal from the Paris Agreement and promoting fossil fuels will increase US emissions. Scientific consensus is that this will have a negative effect on climate change. Only part of these climate costs will be borne by the USA, although the severity of recent fires in California, fanned by strong Santa Ana winds, and more violent hurricanes are two examples of costs of climate change to the USA itself.
A bigger worry is whether the USA’s withdrawal will encourage other countries, such as Argentina, to do likewise. Then the climate costs of US withdrawal will be greater.
But all is not bad news. The transition to green energy is well advanced and the costs of solar and wind power are decreasing. Global investment in clean energy has increased by 60% since 2015. China is investing heavily in renewable energy technology, which is giving it a significant trade advantage. The EU has taken significant actions to promote green energy and technology. Similarly, industrial processes that economise on emissions are developing apace and it is becoming increasingly profitable for private companies to make climate-friendly investments without subsidies. In the USA itself, many Democratic states and local governments, and even some Republican ones, will continue to adopt climate-friendly policies.
In this environment, the Trump administration does not want to fall behind in the development of new technologies and markets. And with Elon Musk having a significant influence on Donald Trump, the USA’s investment in EVs and battery technology is likely to continue. This will help to reduce the price of green energy and transport.
Videos
Articles
- Trump vows to leave Paris climate agreement and ‘drill, baby, drill’
BBC News, Matt McGrath (20/1/25)
- What is the Paris climate agreement and why has Trump withdrawn?
BBC News, Esme Stallard and Mark Poynting (21/1/25)
- Six Trump executive orders to watch
BBC News (21/1/25)
- The real message behind Trump’s withdrawal of US from the Paris climate agreement
Sky News, Tom Clarke (21/1/25)
- Trump signs order to withdraw US from Paris climate agreement for second time
The Guardian, Dharna Noor (20/1/25)
- Explained: how Trump’s day one orders reveal a White House for big oi
The Guardian, Oliver Milman and Dharna Noor (22/1/25)
- Donald Trump can’t stop global climate action. If we stick together, it’s the US that will lose out
The Guardian, Bill Hare (6/11/24)
Trump to pull US from Paris climate agreement: What could this mean for the environment?
ITV News, Martin Stew (21/1/25)
- 10 reasons why US president-elect Donald Trump can’t derail global climate action
The Conversation, Wesley Morgan and Ben Newell (8/11/24)
- Trump has rejected the Paris agreement again, but game theory shows how other countries can still lead by example
The Conversation, Renaud Foucart (27/1/25)
Information
Questions
- Summarise the Paris Agreement.
- Using a diagram similar to that above, illustrate how the free market will produce a sub-optimal amount of solar power because the marginal social benefit exceeds the marginal private benefit.
- How might game theory be used to analyse possible international decision making in the context of US climate policy?
- Is it in America’s interests to cease investing in green energy and green production methods?
- Go through each of the reasons (not specific to Australia) given in The Conversation article linked above why ‘Donald Trump can’t derail global climate action’. To what extent do you agree with each one?
The election of Donald Trump saw the market price of bitcoin rise from $67 839 on election day (5 November 2024) to £106 168 on 18 December: a rise of 56%. It was $104 441 the day before inauguration (20 January 2025).
Trump has been a keen supporter of cryptocurrencies. He has stated that he wants the USA to become the world’s ‘crypto capital’. Indeed, he and Melania Trump have launched their own meme coins hosted on the Solana blockchain. Meme coins are tokens, a form of cryptocurrency, inspired by specific individuals, characters, cartoons or artwork.
On 23 January, three days after his inauguration, President Trump signed an Executive Order. This states that it is:
…the policy of my Administration to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy, including by … protecting and promoting the ability of individual citizens and private-sector entities alike to access and use for lawful purposes open public blockchain networks without persecution, including the ability to develop and deploy software, to participate in mining and validating, to transact with other persons without unlawful censorship, and to maintain self-custody of digital assets…
The full Executive Order can be read here.
Cryptocurrencies
Although cryptocurrencies can be used for certain transactions and avoid the need for banks, their use as a medium of exchange or unit of account is limited by their price volatility. The supply of national or regional currencies, such as the US dollar, the euro and the pound sterling is controlled by central banks, and central banks have a key mandate of achieving price stability, where price is in terms of their currency’s consumer price index. Although exchange rates fluctuate and thereby affect the prices of internationally traded goods and assets, such fluctuations are small in comparison with crypto price fluctuations.
The supply of many cryptocurrencies is not controlled with the objective of achieving price stability. Indeed, certain cryptocurrencies, such as bitcoin (the coins with the highest total market value of approximately $2060bn) have a limited maximum supply. The supply of bitcoin in January 2025 is officially 19.81m, 94.3% of the eventual official total of 21m. However, with some 1.8m coins lost, the current effective total supply is more like 18m and the ceiling 19.2m. New coins are created by ‘mining’, involving massive computer power to perform complex calculations. Coins in circulation at any one time are therefore fixed and increase only slowly and at a decelerating rate over time, with increased mining costs per coin. On any one day, however, the supply offered for sale can fluctuate wildly.
Some other crypto currencies also have a long-term supply ceiling and are created by mining. Others, such as ether (the coins with the second highest market value of approximately $394bn) do not have a fixed supply ceiling. They are not created by mining, but by a system known as ‘Proof-of-Stake (PoS)’. This uses the cryptocurrency’s owners, who stake some of their currency, to validate transactions on the Ethereum blockchain. They receive new ether as a reward. PoS uses considerably less energy than mining and hence is regarded as greener.
Unlike mined coins, Ethereum coins (ether) created by PoS can be ‘burned’: i.e. removed from circulating supply. This can more than offset new coins created and lead to a net decrease in supply. See the Fidelity Digital Assets and Paxful links below for a discussion of what determines the net burn/net creation rate of ether. Other coins, such as BNB (Binance’s cryptocurrency), have regular burns to control supply.
There are some cryptocurrencies that are suitable as a medium of exchange and as a unit of value. These are ‘stablecoins’, whose value is linked 1:1 to a major currency, such as the US dollar or euro. Supply is adjusted to maintain this value. Stablecoins are used primarily for transactions. They account for some two-thirds of all transactions using crypto. They are particularly used for transactions in parts of the world with monetary instability and/or limited access to major currencies.
With the exception of stablecoins, crypto currencies are best seen as assets, rather than as a means of exchange or unit of account. As such, they are more comparable to gold than to conventional currencies.
The market for crypto in the long term
The market price of cryptocurrencies is determined by supply and demand. With limited supply, their price is likely to increase as demand is forecast to increase relative to supply. This is particularly the case with mined cryptocurrencies where there is a ceiling to supply. But even with PoS-created currencies, the amount supplied is likely to increase more slowly than demand, especially with burn mechanisms in place.
With many countries recognising and embracing cryptocurrencies as an asset, so the long-term price should rise. The endorsement by Donald Trump is likely to hasten this process.
The market for crypto in the short term
While the total supply of cryptocurrency is limited, the supply to market can fluctuate wildly, as can demand. This can cause huge gyrations in price.
Short-run demand and supply decisions are governed largely by expectations of future price changes, over anything from the next few hours to the coming months. If people think the price will rise, people will demand more, while those already holding crypto and thinking of selling will hold back. These actions will amplify the very effect they had predicted, namely a rise in price.

This is illustrated in Figure 1. Assume an initial rise in demand for a particular cryptocurrency from D0 to D1. Equilibrium moves from point a to point b and the price of the cryptocurrency rises from P0 to P1. Speculators believe that this is a trend and that prices will rise further. Demand increases to D2 as purchasers rush to buy; and supply falls to S2 as potential sellers of the crypto hold back. Equilibrium moves to point c and price rises to P2.
But in their exuberance, people may have pushed the price above the level that reflects underlying demand and supply. People respond to this overshooting by selling some of the currency to take advantage of what they see as a temporary high price. In Figure 2, supply rises from S2 to S3. Meanwhile, potential purchasers wait until price has settled back somewhat. Demand falls from D2 to D3. Equilibrium moves to point d, with price falling to P3. (Click here for a PowerPoint of the two diagrams.)

A similar process of speculation takes place when people expect prices to fall, with price potentially plummeting before it then recovers somewhat.
With computer algorithms interpreting underlying economic/political data, the price changes are likely to be frequent, with speculation amplifying these changes.
Articles
- Trump orders crypto working group to draft new regulations, explore national stockpile
Reuters, Hannah Lang and Trevor Hunnicutt (24/1/25)
- Bitcoin soars past $109,000 ahead of possible early action on crypto by Trump
MSN, Alan Suderman (20/1/25)
- 3 Things to Watch as Trump Becomes Memecoin Billionaire and US President
PYMNTS (20/1/25)
- Crypto Community Reacts to Trump and Melania Meme Coins as Market Sinks
Decrypt, Vismaya V (20/1/25)
- Trump’s plan for a strategic bitcoin reserve could trigger a crypto ‘arms race’ and reshape the global economic order
The Conversation, Huw Macartney, Erin McCracken and Robert Elliott (14/1/25)
- Bitcoin’s resurgence: A regulatory reset and a path to innovation
crypto.news, editorial (17/1/25)
- Bitcoin Retreats As Traders Await Trump Crypto Executive Order
Bloomberg on NDTV Profit (21/1/25)
- Bitcoin edges higher as investors shake off initial Trump Day One disappointment
Reuters, Tom Westbrook and Elizabeth Howcroft (21/1/25)
- Has bitcoin’s limited supply driven its rally? Experts weigh in
ABC News, Max Zahn (10/12/24)
Background information
Data
Questions
- What determines the supply of cryptocurrencies (a) in circulation; (b) to the market at any given time?
- Why are the prices of digital currencies so volatile?
- Why or why not are cryptocurrencies a good asset to hold?
- How may speculation (a) amplify and (b) dampen price fluctuations?
- What determines the net burn/net creation rate of ether?
- Should cryptocurrencies be classified as ‘money’?
Back in November, when Joe Biden had just been elected, we considered some of his proposed policies to tackle climate change (see A new era for climate change policy?). On 20th January, the day of his inauguration, he signed 17 executive orders overturning a range of policies of the Trump presidency. Further executive orders followed. Some of these related directly to climate change.
The first was to cancel the Keystone XL oil pipeline project. If it had gone ahead, it would have transported 830 000 barrels of oil per day from the Alberta tar sands in Canada to refineries on the Gulf Coast of Texas. It would have involved building a new pipeline from Alberta to Nebraska, where it would have linked to an existing pipeline to Texas. Extracting oil from tar sands is a particularly dirty process, involves cutting down large areas of forest (a carbon sink) and total emissions are around 20% greater per barrel than from conventional crude.
The pipeline would have cut across First Nations land and any spills would have been highly toxic to the local environment. In terms of profitability, returns on tar sands oil extraction and transportation are very low. This is likely to remain the case as oil prices are likely to remain low, with greater global energy efficiency and the switch to renewables.
Critics of Biden’s decision argue that the pipeline project would have created some 5000 to 6000 temporary jobs in the USA during the two-year construction phase. Also they claim that it would have contributed to greater energy security for the USA.
The second executive order was to rejoin the Paris Climate Agreement, a process that will take 30 days. Rejoining will involve commitments to cut greenhouse gas emissions and the adoption of various measures to bring this about. During the election campaign, Biden pledged to achieve economy-wide net-zero emissions no later than 2050. As we saw in the previous blog, under Biden the USA will play a leading role in the November 2021 UN COP26 climate change conference in Glasgow.
At present, the Paris agreement is for countries to aim to reach a peak of greenhouse gas emissions as soon as possible to achieve a climate neutral world by mid-century. Many countries have have made commitments about when they aim to achieve carbon neutrality, although concrete action is much more limited. It is hoped that the COP26 conference will lead to stronger commitments and actions and that the USA under Biden will play a leading part in driving this forward.
In addition, to cancelling the Keystone XL pipeline and rejoining the Paris Agreement, the executive orders reversed more than 100 other decisions with negative environmental effects taken by the Trump administration – many overturning environmental measures introduced by previous administrations, especially the Obama administration.
These orders included reversing the easing of vehicle emissions standards; stopping reductions in the area of two major national monuments (parks) in Utah; enforcing a temporary moratorium on oil and natural gas leases in Alaska’s Arctic National Wildlife Refuge; and re-establishing a working group on the social costs of greenhouse gasses.
Then there will be new measures, such as adopting strict fuel economy standards and investment in clean public transport. But it remains to be seen how far and fast the Biden administration can move to green the US economy. With the desire for bipartisanship and seeking an end to the divisive policies of Trump, there may be limits to what the new President can achieve in terms of new legislation, especially with a Senate divided 50:50 and only the casting vote of the chair (Kamala Harris as Vice-President) being in Democrat hands.
The articles below consider the various green policies and how likely they are to succeed in their objectives.
Articles
- Climate change: Biden’s first act sets tone for ambitious approach
BBC News, Matt McGrath (20/1/21)
- Biden nixes Keystone XL permit, halts Arctic refuge leasing
The Hill, Rachel Frazin (20/1/21)
- Biden’s return to Paris pact just a first step for U.S. climate action
Reuters, Megan Rowling (20/1/21)
- Court Decision Lets Biden Set New Emissions Rules To Meet Paris Agreement Climate Goals
Forbes, Allan Marks (20/1/21)
- Biden to ‘hit ground running’ as he rejoins Paris climate accords
The Guardian, Oliver Milman (19/1/21)
- What could a Biden-Harris administration mean for the planet?
Euronews, Marthe de Ferrer (20/1/21)
- Ask a Scientist: What Should the Biden Administration and Congress Do to Address the Climate Crisis?
ecoWatch, Elliott Negin (18/1/21)
- Biden marks Day One with burst of orders reversing Trump policies on climate and health
Science Business, Éanna Kelly (21/1/21)
- What Is the Paris Climate Agreement That Joe Biden Will Rejoin, Why Did Donald Trump Leave?
Newsweek, Kashmira Gander (18/1/21)
Questions
- Find out what other environmental policies are being pursued by President Biden and assess their likely effectiveness in achieving their environmental objectives.
- Would policies to reduce carbon emissions necessarily be desirable? How would you assess their desirability?
- When is it best to use the ‘precautionary principle’ when devising environmental policies?
- To what extent is game theory relevant in understanding the difficulties and opportunities of developing internationally agreed policies on carbon reduction?
- If the objective is to tackle global warming, is it better to seek international agreement on limiting the extent of global warming or international agreement on carbon reduction? Explain.
With the election of Joe Biden, the USA will have a president committed to tackling climate change. This is in stark contrast to Donald Trump, who has been publicly sceptical about the link between human action and climate change and has actively supported the coal, oil and gas industries and has rolled back environmental protection legislation and regulation.
What is more, in June 2017, he announced that the USA would withdraw from the UN Paris Accord, the international agreement to cut greenhouse gas emissions so as to limit global warming to ‘well below’ 2°C above pre-industrial levels with efforts to limit it to 1.5°C. The USA’s withdrawal was finalised on 4 November 2020, a day after the US election. Joe Biden, however, pledged to rejoin the accord.
A growing number of countries are pledging to achieve carbon neutrality by mid-century or earlier. The EU is planning to achieve a 55% cut in greenhouse gas emissions by 2030 so as to reach neutrality by 2050. This will involve various taxes, subsidies and public investment. Similar pledges to achieve net zero emissions by 2050 have been made by Japan and South Korea and by 2060 by China. In the UK, legislation was passed requiring the government to reduce the UK’s net emissions 100% relative to 1990 levels by 2050 and thereby achieve net zero emissions.
Constraints on action
Short-termism. One of the problems with setting targets a long time in the future is that they take away the urgency to act now. There are huge time lags between introducing policies to curb carbon emissions and their impact on the climate. The costs of such policies for business and consumers, however, are felt immediately in terms of higher taxes and/or higher prices. Thus politicians may be quick to make long-term pledges but reluctant to take firm measures today. Instead they may prefer to appease various pressure groups, such as motoring organisations, and cut fuel taxes, or, at least, not raise them. Politically, then, it may be easier to focus policy on the short term and just make pledges without action for the future.
Externalities. Various activities that cause carbon emissions, whether directly, such as heavy industry, dairy farming, aviation and shipping, or indirectly, such as oil and coal production, thereby impose environmental costs on society, both at home and abroad. These costs are negative externalities and, by their nature, are not borne by those who produce them. There are often powerful lobbies objecting to any attempt to internalise these externalities through taxes, subsidising green alternatives or regulation. Take the case of the USA. Fossil fuel producers, energy-intensive industries and farmers all claim that green policies will damage their businesses, leading to a loss of profits and jobs. These groups were courted by Donald Trump.

International competition. Countries may well be reluctant to impose green taxes or tough environmental regulation on producers, when competitors abroad do not face such constraints. Indeed, some countries are actively promoting dirty industries as part of their policies to stimulate economic recovery from the Covid-induced recession. Such countries include China, Russia and Turkey. This again was a major argument used in the Trump campaign that US industries should not be hobbled by environmental constraints but should be free to compete.
Misinformation. Politicians, knowing that taking tough environmental measures will be unpopular with large numbers of people, may well downplay the dangers of inaction. Some, such as Trump in America and Bolsonaro in Brazil deliberately appeal to climate change deniers or say that technology will sort things out. This makes it hard for other politicians to promote green policies, knowing that they will face scepticism about the science and the efficacy of their proposed policies.
Biden’s climate change policy
Although it will be difficult to persuade some Americans of the need for tougher policies to tackle climate change, Joe Biden has already made a number of pledges. He has stated that under his administration, the USA will rejoin the Paris Climate Agreement and will play a leading role in the November 2021 UN COP26 climate change conference summit in Glasgow. He has also pledged a Clean Energy Revolution to put the USA on an ‘irreversible path to achieve economy-wide net-zero emissions no later than 2050’.
But readopting the pledges under the Paris Agreement and advocating a clean energy revolution are not enough on their own. Specific measures will need to be taken. So, what can be done that is practical and likely to meet with the approval of the majority of Americans or, at least, of Biden’s supporters?
For a start, he can reintroduce many of the regulations that were overturned by the Trump administration, such as preventing oil and gas companies from flaring methane on public lands. He could introduce funding for the development of green technology. He could require public buildings to use green energy.
According to the Clean Energy Revolution, the US government will develop ‘rigorous new fuel economy standards aimed at ensuring 100% of new sales for light- and medium-duty vehicles will be zero emissions and annual improvements for heavy duty vehicles’.
One of the biggest commitments is to tackle external costs directly by enacting ‘legislation requiring polluters to bear the full cost of their climate pollution’. This may be met with considerable resistance from US corporations. It is thus politically important for Biden to stress the short-term benefits of his policies, not just the long-term ones.
Given the damage done to the economy by the spread of the pandemic, perhaps the main thing that Biden can do to persuade people of the benefits to them of his policies is to focus on green investment and green jobs. Building a green energy infrastructure of wind, solar and hydro and investing in zero-emissions vehicles and charging infrastructure will provide jobs and lead to multiplier effects throughout the economy.
Articles
- Trump Administration Removes Scientist in Charge of Assessing Climate Change
The New York Times, Christopher Flavelle, Lisa Friedman and Coral Davenport (9/11/20)
- As U.S. leaves Paris accord, climate policy hangs on election outcome
The Washington Post, Brady Dennis, Juliet Eilperin and Dino Grandoni (5/11/20)
- Where next for US action on Climate Change?
British Foreign Policy Group, Evie Aspinall (11/11/20)
- Media reaction: What Joe Biden’s US election victory means for climate change
Carbon Brief, Josh Gabbatiss (10/11/20)
- Joe Biden: How the president-elect plans to tackle climate change
BBC News, Matt McGrath (10/11/20)
- Biden victory ushers in ‘race to the top’ on climate change
Lexology, Baker McKenzie, David P Hackett and Ilona Millar (13/11/20)
- Climate heroes: the countries pioneering a green future
The Guardian, Jonathan Watts (11/11/20)
- ‘Hypocrites and greenwash’: Greta Thunberg blasts leaders over climate crisis
The Guardian, Damian Carrington (9/11/20)
- Five post-Trump obstacles to a global green recovery
The Guardian, Jonathan Watts (11/11/20)
- Biden’s climate change plans can quickly raise the bar, but can they be transformative?
The Conversation, Edward R Carr (10/11/20)
- Jana Shea/Shutterstock Climate change: Joe Biden could ride a wave of international momentum to break deadlock in US
The Conversation, Richard Beardsworth and Olaf Corry (10/11/20)
- Climate change after COVID-19: Harder to defeat politically, easier to tackle economically
VoxEU, Franziska Funke and David Klenert (17/8/20)
Questions
- Identify three specific climate change policies of Joe Biden and assess whether each one is likely to succeed.
- Draw a diagram to illustrate why a free market will lead to over production of a good which produces negative externalities.
- To what extent can education internalise the positive externalities of green consumption and production?
- What was agreed at the Paris climate change conference in December 2015 and what mechanisms were put in place to incentivise countries to meet the targets?
- Will the coronavirus pandemic have had any lasting effects on emissions? Explain.
- How may carbon trading lead to a reduction in carbon emissions? What determines the size of such reductions?
At the annual World Economic Forum (WEF) in Davos, Switzerland, world political and business leaders are meeting to discuss pressing economic issues of the day. This year, one of the key themes is climate change and “how to save the planet”.
The approaches of leaders to the climate crisis, however, differ enormously. At the one extreme there are those who deny that emissions have caused climate change, or who reluctantly acknowledge climate change but think that governments need to do nothing and that technological advances in green energy and transport will be sufficient to curb global warming. This has been the approach of President Trump, President Bolsonaro of Brazil and Prime Minister Scott Morrison of Australia. They may claim to support the general goals of reducing greenhouse gases, but are keen to protect their coal and oil industries and, in the case of Brazil, to continue cutting down the Amazon rain forest to support mining, ranching and the growing of crops.
At his speech at the WEF, President Trump said that he supported the initiative to plant one trillion trees worldwide to act as a carbon sink. However, he gave no details of just what the nature of the support would be. Would there be subsidies or tax breaks, for example, for landowners to plant trees? In the meantime, his administration has relaxed regulations to curb air and water pollution. And he has withdrawn the USA from the Paris climate agreement.
Other leaders, urged on by activists, such as Greta Thunberg, have talked about tougher action to tackle emissions. Countries such as Canada, Norway and the EU countries have adopted a number of initiatives. Policies range from taxing emissions, capping/regulating emissions with penalities for those breaching the limits, tradable permits, subsidising green alternatives, setting local emissions targets with incentives for meeting them, investing in green infrastructure such as roadside charging points for electric vehicles, making environmental education part of a national curriculum, investing in public transport, and so on. But, say, activists, only large-scale measures that truly recognise the scale of the climate emergency will be sufficient.
The year starts with climate being addressed at Davos; it ends with the annual Conference of the Parties (COP26) to the United Nations Framework Convention on Climate Change (UNFCCC). This year it will be in Glasgow. There is much hope pinned on this conference, given the growing realisation of the effects of climate change, from bush fires in Australia, to floods in Indonesia and other parts of southeast Asia, to more extreme hurricanes/typhoons, to rapidly melting glaciers and retreating sea ice, to rising sea levels, to crop failures and the displacement of humans and the destruction of wildlife and habitat.
COP25 in Madrid made little progress; it is hoped that COP26 will be much more successful. Sir David Attenborough has warned that the world faces a ‘climate crisis moment’. He hopes that the world will be ready to take much stronger action at COP26.
But there remains the fundamental economic problem of the tragedy of the commons. As long as the atmosphere and other parts of the environment are free to ‘use’ to pollute, and as long as the costs of doing so are borne largely by people other than the direct polluters, the market will fail to provide a solution. Australia’s bush fires can be directly attributed to climate change and climate change is exacerbated by coal-fired power stations. But Australia’s use of coal as a power source is only a tiny contributor to global climate change. Presumably, the Australian government would rather get a ‘free ride’ off other countries’ policies to cut emissions rather than bearing the economic cost of reducing coal-fired generation itself for little gain in terms of reduced global emissions.
However, people are not entirely selfish. Many are willing to make personal sacrifices to lead a more environmentally sustainable life. Many people, for example, are choosing electricity tariffs that are slightly higher but where the electricity is generated with zero carbon emissions. Firms have shown a readiness to respond to demands from their consumers for more sustainable products.
Articles
- Five essential steps to take right now to tackle climate change
World Economic Forum, Robin Pomeroy (17/1/20)
- Davos: Trump decries climate ‘prophets of doom’ with Thunberg in audience
BBC News (21/1/20)
- Greta Thunberg clashes with US treasury secretary in Davos
The Guardian, Graeme Wearden (23/1/20)
- Australia, your country is burning – dangerous climate change is here with you now
The Conversation, Michael E Mann (10/1/20)
- Climate change: What different countries are doing around the globe to tackle the crisis
Independent, Zoe Tidman (20/9/19)
- How we can combat climate change
Washington Post (2/1/19)
- Sir David Attenborough warns of climate ‘crisis moment’
BBC News, David Shukman (16/1/20)
- Climate change: Where we are in seven charts and what you can do to help
BBC News (14/1/20)
- Ten facts about the economics of climate change and climate policy
Brookings, Ryan Nunn, Jimmy O’Donnell, Jay Shambaugh, Lawrence H. Goulder, Charles D Kolstad and Xianling Long (23/10/19)
- The Federal Reserve Considers the Economics of Climate Change in 2020
Lawfare, Rachel Westrate (16/1/20)
- Bernie Sanders’ economic adviser says Australia’s bushfires are a climate change ‘wake-up call’
The Guardian, Ben Butler (7/1/20)
- Carbon pricing: What the research says
Journalist’s Resource, Harvard Kennedy School’s Shorenstein Center, Clark Merrefield (17/1/20)
- European Parliament backs Green Deal
Resource Media, Imogen Benson (17/1/20)
- Tackling climate change
Committee on Climate change
- Tragedy of the Commons: A Drama That Our Planet Is Not Enjoying
Felix, Xiuchen Xu (9/12/19)
Questions
- Draw a diagram to show how the external costs of carbon emissions cause a more than socially optimal output of products emitting CO2.
- What is meant by the ‘tragedy of the commons’? Give some environmental examples.
- Discuss possible solutions to the tragedy of the commons.
- Why was COP25 generally regarded as a failure?
- Identify four possible policies that governments could adopt to reduce carbon emissions and discuss their relative advantages and disadvantages.
- Are meetings such as the annual World Economic Forum meetings at Davos of any benefit other than to the politicians attending? Explain.