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[Ambassador report] Free Report:The Economics behind Sustainability

by Keitaro Hanzawa | 22-11-2020 16:36 Comments 2 Comments recommendations 0 recommendations




There are always two sides to the “green-story”: the technology and the policies. 

Today, I will discuss the policies behind the world’s biggest economies and how they uniquely incentivize both private and public sectors to adopt or shift towards carbon neutrality. 


It is a fact that the market and the environment have conflicting interests. Presently, the most economically feasible option, generally, will create the most negative externalities on the environment in the form of carbon emissions.  Therefore, governments around the world have to actively promote the environmental aspect in order to remediate these externalities. 


Firstly, we need to discuss, Marketable Permit Systems or trading programs as a form of economic incentive. These come in two forms, Emission Reduction Credits and the Cap and Trade Model. The Cap and trade model is a system that has a set allowance in terms of carbon emissions. This allowance is equivalent to a certain number of permits distributed to a collective of businesses. These businesses can only pollute as much as their allowance is depending on the number of permits they own. Companies who achieve lower levels of carbon emissions than their allowance can see their permits to other polluters. Thus, companies are inclined to stay below their maximum cap to amass financial gain. Emission Reduction credits is a similar economic model to Cap and Trade, but lacking the maximum cap aspect. In my opinion these Permit-based systems are a very cost effective policy that appears to be very effective in curbing carbon emissions. Furthermore, they also give firms the “flexibility to reduce their own emissions or purchase permits”(EPA.gov) which means governments are not simply casting away these polluting firms. 


Another discussion point are the general incentives that governments can distribute to consumers. In Japan, as part of the 25% CO2 reduction goal in 2011, the government distributed, nationwide gift cars, certificates, and eco-products, to citizens in Japan, in order to spread awareness about global warming and encourage “Economic rejuvenation.” As a result 45.5 million people in Japan, are now exposed to greener technology. Conversely, governments can subsidize the firms themselves. One such way governments can achieve this is by investing in the Research and Development of new green-technologies within firms. A prominent example of this strategy can be seen in the United Kingdom where the Department for Business and Energy made a “142.9m investment in green projects” with specific resources being allocated for technologies that improved carbon sequestration methods. 


Overall, I believe that there are a multitude of ways in which to approach green-economic policies. Though there are debates as to the effectiveness of these policies, I have no doubt that they will continue to exist and prosper as economics will play a larger role in the transition to a cleaner future economy.



Works Cited:


“Economic Incentives.” EPA, Environmental Protection Agency, 7 July 2020, www.epa.gov/environmental-economics/economic-incentives.


Farrell, Stephen. “£500m Government Investment in Green Technology.” Insider Media Ltd, 10 Sept. 2019, www.insidermedia.com/news/national/500m-government-investment-in-green-technology.


2 Comments

SJ Mentor

  • SJ Mentor says :
    Hello Keitaro!
    It's your SJ mentor.

    Thank you for sharing your informative report with us.
    Part of permit-based emission reduction systems are performing as carbon emission trading.
    But I think Cap must be exist not to raise carbon emission by firms.
    As time flies the urgency will increase due to intensifying climate change.
    Here in Korea, governments subsidize customers when buying energy efficient home appliances.
    As you said, there are many ways to approach green economic policies.
    It is desirable to apply appropriate method to the circumstances of each country.
    Hope things are fine with you.

    Best regards,
    SJ mentor.
    Posted 07-12-2020 07:55

Mun WooJooMentor

  • Mun WooJooMentor says :
    Hello Keitaro,
    this is your mentor WooJoo.

    Warm greetings from South Korea.
    Thank you for sharing such an interesting report.
    I think that the Cap and Trade model perfectly shows what the role of governments, or any other restrictive organization, is,
    and a good example of business.
    We know that zero emission would be the best, but it is hard to change the market that dramatic in a short period.
    Through such model, and well compliance, I believe that we can bring back our green world.
    Also, distributing such items seems a good idea, because it can encourage the participation of citizens and enhance their awareness as the same time.

    Keep sharing

    Regards,
    WooJoo
    Posted 29-11-2020 22:21

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