Climate change, and society’s response to it, presents risks that could impact our monetary and financial stability objectives. Financial and economic risks can arise from events such as floods and droughts, e.g. insurance firms facing higher claims. Risks can also arise in the transition to a low-carbon economy, like changes in government policy and technology. what can be done to mitigate those risks?
With the acceleration of the pace of industrialization in the world, the uncontrolled growth of greenhouse gases(Carbon dioxide and methane) emissions has caused more and more damage to the earth’s ozone layer, which has led to more and more problems in the world’s climate, and important for us to find out a solution to stop this issue of climate change.
One of the keyways to solve this environmental problem is to internalize the negative external cost to ensure that those who create externalities include us when making decisions. ‘Making the polluter pay’ is one of the common approaches to adjust for externalities. The UK government imposes a landfill tax on the local rubbish authorities to increase the private cost of production. This ought to reduce demand and output for the goods and services that are creating negative externalities so that the market equilibrium will shift to Q2P2 where the social efficiency is. The UK currently has a shortage of land for burying the waste and the landfill site. The external cost of the landfill is the huge amount of methane released into the air which is 20 times more polluting than CO2 at each one of the landfill-site. The tax had a base rate of £7-per-tonne in 2002 rising to £80 in 2014. There are arguments that the revenues from pollution taxes should be used to reduce the extra externalities made by landfill, to protect or enhance our environment. For instance, these tax revenues can be transferred to subsidies and directly giving to the researches for new technology for reducing pollution, such as project turning methane into hydrogen. Methane with hydrogen can become a cleaner energy-natural gas that can be used for cooking and heating, meanwhile reducing methane emission. Therefore, by giving subsidy to research in new technology and this shifts the market equilibrium to Q0 and gets to the point where the market equilibrium is socially efficient and therefore reduces pollution.
To further reduce the pollution, it is important that individuals; we and businesses create less waste and a smaller carbon footprint in the first place. Meanwhile, Governments should make more effort to tell people to, re-use products and recycle more. More information and Posters, such as contents about ‘pollutions/hazards to us/climate change’ should be made to warn people to pollute less. For example, in China, the ‘’Center for Environment Education and Communications of Ministry of Ecology and Environment’ teaches people about national environmental laws, regulations, and policies and organize a variety of environmental protection theme activities for student and the society. Governments should also be planning a ‘’green GDP’’ mode of which main job is to reduce carbon emission and guide people to have a ‘’low-carbon life’’.
So as one of the humans in all 7.7Billions population, I strongly encourage Governments to take action and start the change. Governments, households, and firms need to work towards the same target of reducing pollution and fix the externalities we have made before it’s too late.
Andy Kot, Year 13.