THE ECONOMICS BEHIND THE TRADING OF EMISSIONS
Introduction
‘The main policy tool advocated by economists to reduce emissions in a cost-effective fashion
is carbon pricing.’ (Dietz, Bowen, et al. 2018, blz. 467). There has already been much
research on climate change (Dietz, Bowen, et al. 2018), its effects on the economy, and
possible measures (Wysokińska, 2016).
As stated, carbon pricing is considered a good solution. There has been research on
how to implement it (Pérez Henríquez, 2012), but not yet are the effects of carbon pricing on
the economy studied.
In this study, we will look into the effects carbon pricing can have on different
economies, whereas we will examine the international economy, the European one, and will
compare the Dutch economy with the Bangladesh one to determine the different consequences
between a wealthy and a third-world country.
Lana van Duijnhoven
student nr. 7653085 1
, THE ECONOMICS BEHIND THE TRADING OF EMISSIONS
Literature Review
In ‘The Economics of 1.5 ͦC Climate Change’ (Dietz, Bowen, et al. 2018) a cost-benefit
approach to the global warming of 1.5 ͦC is investigated compared to a warming of 2 ͦC.
Concluded is there are multiple discussions about the methodology of the research, after that
several benefits of a warming of 0.5 ͦC less are enumerated. Lastly, thoughts are given to the
calculation of the costs which are done by use of energy systems models, although they are
criticized multiple times.
However, this paper doesn’t go in depth on how to achieve the maximum of a global
warming of 1.5 ͦC, that’s where the article ‘The “New” Environmental Policy of The
European Union: A Path To Development Of A Circular Economy And Mitigation Of The
Negative Effects Of Climate Change’ (Wysokińska, 2016) comes around. This study dives
into how the European Union uses politics to set up a circular economy. The strive is to keep
up the current economic growth while setting up a sustainable economy. This can be achieved
by implementing sustainable technologies within production. The study doesn’t say much
about carbon pricing, but instead focuses on decreasing waste and pollution. They discuss the
fund the EU has set up in which high-polluters pay for environmental damage, organized by
paying fees.
Although Wysokińska’s study covers a lot on the subject of measures for climate change,
there is quite a gap where you could introduce carbon pricing as a practical fill-in. One of the
obstacles to why renewable technologies are slowly adapted in the regular market is that
market prices don’t reflect a good’s costs and benefits properly (Wysokińska, 2016). In this
case, carbon pricing would ensure extensive costs are included correctly and will guarantee
the right price for the good.
Lana van Duijnhoven
student nr. 7653085 2
Introduction
‘The main policy tool advocated by economists to reduce emissions in a cost-effective fashion
is carbon pricing.’ (Dietz, Bowen, et al. 2018, blz. 467). There has already been much
research on climate change (Dietz, Bowen, et al. 2018), its effects on the economy, and
possible measures (Wysokińska, 2016).
As stated, carbon pricing is considered a good solution. There has been research on
how to implement it (Pérez Henríquez, 2012), but not yet are the effects of carbon pricing on
the economy studied.
In this study, we will look into the effects carbon pricing can have on different
economies, whereas we will examine the international economy, the European one, and will
compare the Dutch economy with the Bangladesh one to determine the different consequences
between a wealthy and a third-world country.
Lana van Duijnhoven
student nr. 7653085 1
, THE ECONOMICS BEHIND THE TRADING OF EMISSIONS
Literature Review
In ‘The Economics of 1.5 ͦC Climate Change’ (Dietz, Bowen, et al. 2018) a cost-benefit
approach to the global warming of 1.5 ͦC is investigated compared to a warming of 2 ͦC.
Concluded is there are multiple discussions about the methodology of the research, after that
several benefits of a warming of 0.5 ͦC less are enumerated. Lastly, thoughts are given to the
calculation of the costs which are done by use of energy systems models, although they are
criticized multiple times.
However, this paper doesn’t go in depth on how to achieve the maximum of a global
warming of 1.5 ͦC, that’s where the article ‘The “New” Environmental Policy of The
European Union: A Path To Development Of A Circular Economy And Mitigation Of The
Negative Effects Of Climate Change’ (Wysokińska, 2016) comes around. This study dives
into how the European Union uses politics to set up a circular economy. The strive is to keep
up the current economic growth while setting up a sustainable economy. This can be achieved
by implementing sustainable technologies within production. The study doesn’t say much
about carbon pricing, but instead focuses on decreasing waste and pollution. They discuss the
fund the EU has set up in which high-polluters pay for environmental damage, organized by
paying fees.
Although Wysokińska’s study covers a lot on the subject of measures for climate change,
there is quite a gap where you could introduce carbon pricing as a practical fill-in. One of the
obstacles to why renewable technologies are slowly adapted in the regular market is that
market prices don’t reflect a good’s costs and benefits properly (Wysokińska, 2016). In this
case, carbon pricing would ensure extensive costs are included correctly and will guarantee
the right price for the good.
Lana van Duijnhoven
student nr. 7653085 2
