Positive and Normative Model of Climate Change. 1. Figure 2.1 belo...

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Positive and Normative Model of Climate Change. 1. Figure 2.1 below shows the trends in total global emissions for the period 1970-2016, according to the Emissions Gap Report 2017, A UN Environment Synthesis Report. Trends in global greenhouse gas emissions are illustrated in Figure 2.1a, while Figure 2.1b shows the development in global carbon dioxide (CO2) emissions from fossil fuel combustion, cement production and other processes. Please answer the following questions: a. A very simple normative model of the climate would involve greenhouse gas accumulation and a temperature change. One of the claims is that we are experiencing global warming because of higher greenhouse gasses, according to panel 2.1.a describe the trends in total global emissions for the period 1970-2016. Mention what is the major source for total global greenhouse gas emissions. b. In the context of relative stable economic growth, Is there a slow-down in growth of global CO2 emissions? Use Panel 2.1.b to answer this question. c. If cement production and fossil fuel use are good proxies for economic growth, according to the figure below, does economic growth inevitably lead to environmental degradation? Figure 2.1.a: Global greenhouse gas emissions for top six emitting Figure 2.1.b: Global carbon dioxide emissions per region from countries and regions (excluding land use, land-use change and fossil fuel use, cement production and other processes, and from forestry), international transport emissions, and land use, land- international transport. use change and forestry emissions. Global greenhouse gas emissions Global CO2 emissions GtCO2e/year GtCO2/year 60 60 50 -50 40 -40 30 30 20 20 10 -10 -0 1970 1980 1990 2000 2010 2016 1970 1980 1990 2000 2010 2016 Land-use change emissions (net CO2) China EU-28 Russian Federation Other G20 countries International Land-use change fires (CH4, N2O) USA India Japan Other countries transport Note: Other G20 countries include Argentina, Australia, Brazil, Canada, Indonesia, Mexico, Republic of Korea, Saudi Arabia, South Africa and Turkey. The greenhouse 2. Put together a dataset of Gross Domestic Product (GDP) in different geographical units (e.g. Countries) for each year. Locate data on the average annual temperature at a typical location in each geographical unit (e.g. Country's Capital) for the same years. For each geographical unit, you should have two numbers: GDP and average annual temperature. Try to get at least information on 30 geographical units. Answer the following questions: a. Plot these data (GDP on one axis, temperature on the other). b. Is there a relationship between these two measures? Support your answer by computing the statistical correlation between GDP and Annual temperature. c. Instead of looking at annual average temperature, look at changes in temperature from one year to the next. What do you conclude about this analysis. Has the temperature been fairly stable? d. Are there any additional variables that might increase the explanatory power of your data? Economics and the Environment 3. The relationship between economic activity and the natural environment is illustrated by the materials balance model. Answer the following questions: a. State how increased use of pollution prevention technologies affect the materials balance model. b. Assume that stringent pollution controls are place on the flow of residuals released into the atmosphere. According to the materials balance model, what does this imply about the residual flows of inputs into the economy? Understanding Environmental Damage 4. Using the data in the Table below, graphically illustrate the relationship between a country's GDP per capita and its per capita municipal waste generation. Municipal waste was collected from OECD website. It is defined as waste collected and treated by or for municipalities. It covers waste from households, including bulky waste, similar waste from commerce and trade, office buildings, institutions and small businesses, as well as yard and garden waste, street sweepings, the contents of litter containers, and market cleansing waste if managed as household waste. The definition excludes waste from municipal sewage networks and treatment, as well as, waste from construction and demolition activities. This indicator is measured in thousand tonnes and in kilograms per capita. Nominal GDP for 2013 and 2014. World Development Indicators, The World Bank. GDP at purchaser's prices is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. It is calculated without making deductions for depreciation of fabricated assets or for depletion and degradation of natural resources. Data are in current U.S. dollars. a. What conclusion can you draw from your analysis? b. How would you define Municipal Waste according to the sources of environmental damage and the scope of Environmental Damage? Explain your answer. Country GDP2013 GDP2014 Waste 2013 Waste 2014 Austria 428.456 437.123 579.224 568.332 Belgium 524.97 534.672 436.851 424.33 Czech Republic 208.796 205.658 307.137 309.8 Denmark 335.878 340.806 790.214 795.114 Finland 268.281 271.165 492.932 481.222 France 2,807.31 2,846.89 518.373 509.295 Germany 3,731.43 3,859.55 614.665 631.562 Hungary 133.424 137.104 378.081 385.553 Iceland 15.33 16.693 517.897 536.953 Israel 290.551 303.771 608.649 610.721 Italy 2,137.62 2,147.95 483.39 482.793 Japan 4,919.56 4,616.34 352.517 349.094 Korea 1,304.47 1,416.95 354.164 361.316 Luxembourg 60.15 62.395 623.315 633.345 Netherlands 853.806 866.354 526.052 525.756 New Zealand 184.752 198.118 604.223 649.924 Norway 522.349 500.244 495.661 423.485 Poland 526.031 546.644 296.799 271.577 Portugal 224.983 230.012 439.688 452.119 Slovak Republic 97.743 99.971 303.666 319.978 Slovenia 48.005 49.506 414.445 432.528 Spain 1,393.48 1,406.86 454.663 448.441 Sweden 579.526 570.137 450.163 437.851 Switzerland 685.871 712.05 711.903 743.784 Turkey 821.918 806.108 406.55 406.097 United Kingdom 2,680.12 2,945.15 488.477 489.096 United States 16,768.05 17,418.93 730.969 735.348 Modeling the Market Approach: Private Goods 5. Suppose the market for organically grown wheat is modeled through the following functions: P = 10 + 0.5Qs and P = 22 - 2.5Qd, where Qs and Qd are in millions of bushels, and P is price per bushel. a. Find the market equilibrium price and quantity. b. Determine the value of producer surplus and consumer surplus. Modeling the Market Approach: Public Goods 6. Assume two neighbors who live next to a pond. Both neighbors get together to determine how each of them value a large deck overseeing the pond. After some economic analysis, they arrive to the following demand estimates: Qa = 160 - 20Pa Qb = 60 - 5Pb where Q is the size of the deck to be built and P is the price for inputs and labor. a. Based on these estimates, determine the market demand (assuming these are the only two households living next to the pond) for this public good, the deck overlooking the pond. b. If the market supply for pond decks were P = 6 + 0.15Q, what would be the optimal provision of this public good? c. Which neighbor is more likely to build the pond? Explain your answer. Modeling the Market Approach: Externalities 7. Consider the case of a positive consumption externality. Suppose throughout this exercise that demand and supply curves are linear, that demand curves are equal to marginal willingness to pay curves and that the additional social benefit from each consumption unit is k and is constant as consumption increases. Demand and supply are given by: Xd = a Xs + B The Social Marginal Benefit curve is given by: SMB =(A+k)-ax a. Derive the competitive equilibrium price and output level. b. What is the optimal output level? 8. Consider the following scenario represented below. a. Calculate the CS, PS, the externality cost, and overall surplus in the absence of the tax. Then calculate these again under the tax, taking into account the tax revenue raised. Calculating the various triangles, we get the results as outlines in the table below. When calculating the external costs, it is easiest to simply subtract the area under the supply curve from the area under the SMC curve.) b. What is the DWL from not having the Piguvian tax? Efficient Pigouvian Tax Market Equilibrium 1200 1000 800 Demond 600 500 "Supply SMC b 400 333 e 250 200 h i o 500 666 Quantity Modeling the Market Approach: Property Rights 9. Your task is to propose a policy initiative to reduce urban runoff, using the assignment of property rights according to the Coase Theorem. Assume that the major polluters are parking lots and the major party affected are recreational parks around the city. Describe your proposal in detail. Make sure to include the following: a. Who should be assigned property rights? b. How these rights are to be defined and distributed? c. How should a price be determined? 10. The reason people end up in court is that they are confused about who has "what property rights" and this ambiguity is making difficult for they to come up with the optimal solution to the problem on their own. True or False: While it might not matter for efficiency, which way the judge rules, the parties care about the outcome of his ruling.

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