MA ECONOMICS-PART 2 SEMESTER-4

MADE BY: AAFREEN SHAH

DEVELOPMENTAL ECONOMICS ( INTERNALS): 20 MARKS

Q1) WRITE SHORT NOTES ON:

A) GLOBAL WARMING AND CLIMATE CHANGE

MEANING: Global warming and climate change refer to an increase in average global temperatures. Natural events and human activities are believed to be contributing to an increase in average global temperatures. This is caused primarily by increases in “greenhouse” gases such as Carbon Dioxide (CO2).A warming planet thus leads to a change in climate.

DEFINITION: Global warming is defined as an increase in the average temperature of the Earth’s atmosphere, especially a sustained increase significant enough to cause changes in the global climate.

The main Indicators of climate change:

As explained by the US agency, the National Oceanic and Atmospheric Administration (NOAA), there are 7 indicators that would be expected to increase in a warming world (and they are), and 3 indicators would be expected to decrease (and they are):- Rise in tropospheric temperature, Rise in humidity, Rise in temperature over oceans, Rise in sea surface temperature, Rise in ocean heat content, Rise in sea level, Rise in temperature over land, Fall in sea ice, Fall in snow cover, Fall in glaciers.

Green house effect:

The term greenhouse is used in conjunction with the phenomenon known as the greenhouse effect.

Energy from the sun drives the earth’s weather and climate, and heats the earth’s surface;

In turn, the earth radiates energy back into space; Some atmospheric gases (water vapor, carbon dioxide, and other gases) trap some of

the outgoing energy, retaining heat somewhat like the glass panels of a greenhouse; These gases are therefore known as greenhouse gases; The greenhouse effect is the rise in temperature on Earth as certain gases in the

atmosphere trap energy.

Six main greenhouse gases are:

carbon dioxide (CO2), methane (CH4) (which is 20 times as potent a greenhouse gas as carbon dioxide) and nitrous oxide (N2O),

plus three fluorinated industrial gases: hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6). Water vapor is also considered a greenhouse gas. The Greenhouse Effect causes the atmosphere to retain heat

Rise in temperature:

Our Earth is warming. Earth's average temperature has risen by 1.5°F over the past century, and is projected to rise another 0.5 to 8.6°F over the next hundred years. Small changes in the average temperature of the planet can translate to large and potentially dangerous shifts in climate and weather.

The evidence is clear. Rising global temperatures have been accompanied by changes in weather and climate. Many places have seen changes in rainfall, resulting in more floods, droughts, or intense rain, as well as more frequent and severe heat waves. The planet's oceans and glaciers have also experienced some big changes - oceans are warming and becoming more acidic, ice caps are melting, and sea levels are rising. As these and other changes become more pronounced in the coming decades, they will likely present challenges to our society and our environment.

Humans are largely responsible for recent climate change:Over the past century, human activities have released large amounts of carbon dioxide and other greenhouse gases into the atmosphere. The majority of greenhouse gases come from burning fossil fuels to produce energy, although deforestation, industrial processes, and some agricultural practices also emit gases into the atmosphere.

Greenhouse gases act like a blanket around Earth, trapping energy in the atmosphere and causing it to warm. This phenomenon is called the greenhouse effect and is natural and necessary to support life on Earth. However, the buildup of greenhouse gases can change Earth's climate and result in dangerous effects to human health and welfare and to ecosystems.The choices we make today will affect the amount of greenhouse gases we put in the atmosphere in the near future and for years to come.

Impacts of global warming on climate of India: The effect of global warming on the climate of India has led to climate disasters as per some experts. India is a disaster prone area, with the statistics of 27 out of 35 states being disaster prone, with foods being the most frequent disasters. The process of global warming has led to an increase in the frequency and intensity of these climatic disasters .According to surveys, in the year 2007-2008, India ranked the third highest in the world regarding the number of significant disasters, with 18 such events in one year, resulting in the death of 1103 people due to these catastrophes.

The anticipated increase in precipitation, the melting of glaciers and expanding seas have the power to influence the Indian climate negatively, with an increase in incidence of floods, hurricanes, and storms .Global warming may also pose a significant threat to the food security situation in India.

According to the The Indira Gandhi Institute of Development Research, if the process of global warming continues to increase, resulting climatic disasters would cause a decrease in India’s GDP to decline by about 9%, with a decrease by 40% of the production of the major crops. A temperature increase of 2° C in India is projected to displace seven million people, with a submersion of the major cities of India like Mumbai and Chennai.

B) KUZNET’S ENVIROMENTAL CURVE:

o Environmental Kuznets Curve: The application of Kuznets Curve in Environmental studies

o The ‘environmental Kuznets curve’ (EKC) refers to an inverted-U-shaped relationship between some pollutant level and per capita income, i.e., the environmental quality deteriorates at early stages of economic growth and subsequently improves at a later stage.

o The environmental Kuznets curve is a hypothesized relationship between environmental quality and economic development: various indicators of environmental degradation tend to get worse as modern economic growth occurs until average income reaches a certain point over the course of development.

o The EKC is named for Simon Kuznets, who hypothesized that income inequality first rises and then falls as economic development proceeds. Emissions of various pollutants, such as carbon dioxide, sulphur, and nitrogen oxides,are tightly coupled to the use of energy.

o Hence, the EKC is a model of the relationship among energy use, economic growth, and the environment.

o Some forms of pollution appear first to worsen and later to improve as countries’ incomes

grow. The world’s poorest and richest countries have relatively clean environments, while middle-income countries are the most polluted. Because of its resemblance to the pattern of inequality and income described by Simon Kuznets (1955), this pattern of pollution and income has been labelled an ‘environmental Kuznets curve’ (EKC).

IMPLICATION

o Grossman and Krueger (1995) and the World Bank (1992) first popularized this idea, using a simple empirical approach. They regress data on ambient air and water quality in cities worldwide on a polynomial in GDP per capita and other city and country characteristics. They then plot the fitted values of pollution levels as a function of GDP per capita, and demonstrate that many of the plots appear inverse-U-shaped, first rising and then falling. The peaks of these predicted pollution-income paths vary across pollutants, but ‘in most cases they come before a country reaches a per capita income of $8000’ in 1985 dollars (Grossman and Kruger, 1995, p. 353).

o In the years since these original observations were made, researchers have examined a wide variety of pollutants for evidence of the EKC pattern, including automotive lead emissions, deforestation, greenhouse gas emissions, toxic waste, and indoor air pollution.

o Some investigators have experimented with different econometric approaches, including higher-order polynomials, fixed and random effects, splines, semi- and non-parametric techniques, and different patterns of interactions and exponents.

o Others have studied different groups of jurisdictions and different time periods and have added control variables, including measures of corruption, democratic freedoms, international trade openness, and even income inequality (bringing the subject full circle back to Kuznets’s original idea).

Formally, in the majority of studies, the basic EKC equation that is estimated is of the following form:

Eit = (α + βiFi) + δYit + φ(Yit)2 + kt + εit

o The environmental Kuznets curve (EKC) is a conceptual model that suggests that a country's pollution concentrations rise with development and industrialization up to a turning point, after which they fall again as the country uses its increased affluence to reduce pollution concentrations, suggesting that the cleaner environment in developed countries comes at the expense of a dirtier environment in developing countries.

o In this sense, the EKC is potentially a reflection of the Pollution Haven Hypothesis, because one of the factors that may drive the increase in environmental degradation seen in pre-industrial economies is an influx of waste from post-industrial economies.

o This same transfer of polluting firms through trade and foreign investment could lead to the decrease in environmental degradation seen in downward-sloping section of the EKC, which models post-industrial (service) economies.