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The Externalities and Alternative Governance under Individual Carbon Consumption

Author: YangLiPing
Tutor: LiPing
School: Liaoning University
Course: Western Economics
Keywords: Individual carbon consumption Utility Consumption externality Welfare Governance
CLC: F205;F224
Type: PhD thesis
Year: 2011
Downloads: 90
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Abstract

To reduce CO2 emissions and achieve Low Carbon lives have become the common sense of all. The impact of carbon emissions on the lives of people is not only the problem of natural science, but also political and diplomatic issues, especially, the problem of economic development. In 2003, the British government published the White Energy Paper named of“Our Energy Future: Creating a Low Carbon Economy”. It firstly mentioned the concept of“Low Carbon Economy”, its purpose is to promote that the social economy develops to the direction of saving, efficiency and protecting nature through the governments supporting for greenhouse gas reduction technologies, energy conservation technologies, efficient energy technologies and renewable energy technologies. Although the concept of low-carbon economy has won the support among people, but to reduce carbon emissions is too difficult because it means to spend more production cost. Because of the unbalanced development of world economy, how to reduce energy-saving emission and how to clear the obligations for sustainable development assumed by all of the countries have gradually become a political issue. Therefore, to analyze individual carbon consumption behavior by economics theory and to research governance on individual carbon consumption have very important significance to implement the scientific outlook on development and promote the construction of ecological civilization.It is a very difficult task to analyze carbon consumption and carbon emissions with the basic theory of economics, and to put forward the method of carbon emissions reduction without affecting the economic development standing in the perspective of the government. Many scholars have done a lot of work in this field. However, most of them from the macro level considered the global ecological damage by the carbon emissions, the pollution control of key industries or enterprises, environmental taxes, the international carbon emissions trading and so on. They expounded on negative externalities of carbon emissions to the social economy and how to formulate the related policies. The focus of these studies is the entire economy and society, it is difficult to find the source for individual carbon consumption, influence factors, and it can not accurately reveal the basic characteristics of individual carbon consumption. This paper establishes utility model about individual carbon consumption by microeconomic analysis to analyze the causes and ways of the carbon consumption externalities and its influence on the welfare. Based on these, this paper studies the ways of alternative governance and the corresponding policy implementation. The main contents are as follows:1. To study the basic characteristics of the individual terminal carbon consumption. Various sources of carbon emissions are condensed in the final goods, and people transfer carbon emissions from production to consumption when they purchase goods. Therefore, carbon emissions in the production or the lives can be exhibited by individual terminal carbon consumption. This thesis begins with the analysis of the nature of carbon dioxide as a kind of public goods, and then the thesis determines the individual terminal carbon consumption as the research object and analyzes the effect of consumer behavior on carbon emission.2. To establish the model of individual carbon consumption and analyze the utility of individual carbon consumption. Taking into account fossil energy as the main cause of excessive carbon emissions, the thesis classifies all of consumption goods into high-carbon energy, low-carbon energy and the daily commodities based on principle of separability when the utility of individual carbon consumption is analyzed. Then it builds a standard individual carbon consumption model. Based on the model, the thesis analyzes the negative externalities to the producers and other consumers caused by excessive carbon consumption.3. To analyze the impact of individual carbon consumption on individual and social welfare. Excessive emissions of carbon consumption will increase the marginal cost of production. If the negative externalities of enterprise can be compensated by raising prices, the negative externalities can be transfered to the consumers. The thesis discusses the individual and social welfare changes caused by the commodity prices. Generally, the impact on individual welfare can be represented by consumer surplus and Hicks compensation; the impact on social welfare is more complex, theorists have not got the consensus about the measure of social welfare. Two-person model is built to analyze the impact of price changes on social welfare and the model is simulated.4. To study the ways of economic governance to the carbon consumption externalities. There are several approaches to correct the negative externalities, here two main types will be discussed: carbon emissions property and carbon taxes. Coase Theorem states that, regardless of who has the the initial carbon emissions property, in the case of clear property and zero transaction costs, the ultimate result of market balance is efficient. The initial allocation of carbon emissions property has always been the focus of international climate negotiations. In this thesis, the“cumulative emissions per capita carbon consumption”is put forward as the allocation principle of carbon emission rights in a country or region. By the study on the root causes of consumption externalities, another effective method is to impose carbon taxes, so the effect of social welfare of carbon taxes is discussed further. Then the thesis compares and summarizes the two governance methods for the operability and welfare losses.5. To deeply discuss the carbon consumption behavior. To build a low-carbon economy society, needs not only the economic governance, but also the further analysis of other factors to consumer behaviors. This thesis develops the neoclassical demand theory, analyzes the effect of the habits formation and ecological values on carbon consumption, and then puts forward the corresponding social governance: changing bad habits formation and the establishing ecological values, and based on it making the policy about how government guides carbon consumption.

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