Global Warming Policy: Some Economic Implications

Policy Reports | Global Warming

No. 224
Saturday, May 01, 1999
by Stephen P. A. Brown

The Rationale for Restrictions on the Use of Fossil Fuels

"Nature contributes more than nine-tenths of all CO2 that enters the atmosphere."

Nature contributes more than nine-tenths of all CO2 that enters the atmosphere.7 The principal way people contribute to atmospheric CO2 is through the consumption of carbon-based fuels. These fuels include petroleum products, natural gas, coal and wood. Jointly, the first three are often identified as "fossil fuels."

Deforestation, as trees are cut down for economic purposes, also contributes to increased levels of atmospheric CO2. Scientists estimate that the world's forests remove about one-third of the current CO2 emissions from fossil fuels. Thus large reductions in the world's forests could significantly increase the atmospheric levels of CO2, although recent reductions have had little effect on atmospheric CO2 in comparison with the effects from fossil fuel consumption.

The call for government action on global warming has arisen from the concern that increasing consumption of carbon-based fuels will boost levels of atmospheric CO2 and that the resulting warmer temperatures will harm humans and the environment. Individually, consumers lack incentives to consider the global side effects of increased fuel consumption. Collectively, individual actions could be contributing to greater emissions of CO2 than are desirable from the perspective of human well-being, environmental health and economic efficiency.

To some extent, the divergence between individual and global interests could be seen in the Kyoto debates. The representatives of each country jockeyed for advantage and criticized the others for not doing enough. The debate has been exacerbated by the fact that reducing energy consumption on a global scale yields gains for energy-importing countries, which will benefit from lower fuel prices and be able to shift some of the costs of conservation to the energy-exporting countries.

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