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The Oxford Handbook of International Climate Change Law edited by Carlarne, Cinnamon P; Gray, Kevin R; Tarasofsky, Richard (24th March 2016)

Part I Introduction, Ch.4 Economics and International Climate Change Law

Navraj Singh Ghaleigh

From: The Oxford Handbook of International Climate Change Law

Edited By: Cinnamon P. Carlarne, Kevin R. Gray, Richard Tarasofsky

Subject(s):
Regional trade — Climate change — Environmental disputes — Pollution

This chapter presents an economic analysis of climate change and international climate change law. From an economic perspective, the environment becomes a scarce resource which must be allocated between competing ends. The economics of climate change draws mainly on the two foundational insights of economics. The first is that the free exchange of goods tends to move resources to their highest valued use, in which case the allocation of resources is said to be ‘Pareto-efficient’. The second is that economic agents respond to incentives. Economic agents are rational utility maximizers, meaning that they will undertake those actions which raise their level of utility. The chapter examines economist Ronald Coase’s article The Problem of Social Cost, which deals with externalities, the cost or benefit that affects a party who did not choose to incur that cost or benefit, and applies it to pollution and emissions trading.

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