September 2011
Abstract
The notion of global warming and acquiring the cogitation of climate change has been controversial over decades of scientific discoveries. Numerous findings have been documented theoretically to calculate the mass amounts of pollution and other toxic chemicals that evolve in the atmosphere. The need for resolution and instantaneous initiatives are imperative in the ecosystems, the economic structure, and humankind. Associated with global warming are the causes and effects of greenhouse gases (GHG).
The re-examination of global warming can be defined as one of the greatest most intricate tribulations of our generation. Scientists from around the globe have fashioned and collaborated on manifold beliefs of the magnitude and theories of climate change. Carbon emissions, one of the main constitutes of global warming, are deferred in regards to human consumption and unnecessary waste products. The life cycle of non-recycled matter is becoming an increasing popular debate. Engineering and re-harnessing those products to make them more “environmentally efficient” is the central theme in the reduction of global warming concerning climate change.
This paper is intended to inform the reader of the economic relevance and cost accounting systems of global warming in ways of structure and development in the unending juncture to solve this colossal global problem. This research report will create an understanding of the world of global warming and choice alternatives to mitigate the effects.
Keywords
Climate change, greenhouse gases, CO2, abrupt climate change, global warming
Literature Review
Economics of Abrupt Climate Change written by Charles Perrings describes the plight countries face from abrupt climatic changes. He theorized that countries have two courses of action- mitigation or adaptation. Since the environment can operate in many possible states, mitigation is the favored action. Mitigation involves actions that reduce the impact of the event without changing the likelihood that it will occur. Further, mitigation influences the probability of climate change, whereas, adaptation does not.
Global Temperature Change authored by James Hansen, et al contrasts business-as-usual (BAU) and alternative scenario (AS). Primarily, they contend that under the BAU model, if checks aren’t made to CO2 emissions, the earth may become a very different place. Further, they suggest that engineering fixes will not cure the current symptom – namely too much GHG/CO2 emissions.
Carbon Business Accounting: The Impact of Global Warming on the Cost and Management Accounting Profession written by Janek T. D. Ratnatunga et al describes the effect of greenhouse gases and the strategies that depict carbonization. Various cost management systems may provide useful specifically strategic cost management. The impact of this system will not only improve the environment quality of this generation but of future generations as well. It also describes how this management system affects management, marketing, finance, and more intricate areas of business.
Global Warming written by Debra Miller is a book that attempts to provide information on the causes of global warming, its current and possible future effects and possible solutions. It includes ways that people can change their personal habits to help mitigate global warming.
Introduction
Economic social factors are a direct result of global warming. Fossil fuels, a limited resource for energy sources, are dependent upon civilization. Public knowledge is increasingly a difficult challenge as to the extent of climate change and the effect it has on society. Reversing the global warming propensity may be the key as to altering the earth’s atmosphere. Changes in the earth’s climate is crucial in the understanding of how mankind adapts to its’ effects. Such alterations will create serious constraints on the world’s most defenseless countries.
“Profound moral issues demand a profound response from law” (Ralston, 2009). Climate change that is occurring is one of the most significant ethical predicaments of our time. This is why now is the time to realize the situation we face and treat it with careful analysis and immediate action. Climate change and the understanding of the circumstances involving global warming are critical pieces of environmental explanations that must not be overlooked or ignored. History has shown that over time, the earth is warming as a result of a diminishing ozone layer. “Global warming is now 0.6°C in the past three decades and 0.8°C in the past century. It is no longer correct to say ‘most global warming occurred before 1940.’” (Hansen, Sato, Ruedy, Lo, Lea & Medina-Elizade, 2006) Figure 1 highlights the ten warmest years on the globe using the deviation of temperature in Celsius and the 1961-1990 average global temperature of 14.00 °C (57.2°F)
Ten Warmest Global Years
Rank
Year
Deviation °C
1
2010
+0.54
2
2005
+0.52
3
1998
+0.50
4
2003
+0.49
5
2002
+0.48
6
2006
+0.46
7
2009
+0.46
8
2007
+0.45
9
2004
+0.45
10
2001
+0.42
Figure 1. Deviation from 1961-90 global average temperature, °C
Source: NOAA National Climatic Data Center
Methods, Analysis, Findings
The plan is to explore the alternative options that outweigh the risks of conformity in global warming. The Methods, Analysis & Findings will be portrayed in the following sections. Section I will portray in detail causes of global warming and the effects it produces from an economical standpoint. It will also cover problems associated with climate change in an ever-changing world. Section II will depict the free-market economy and elements linked to anthropogenic effects. Section III addresses the carbon business accounting and the impact it has on cost and revenues. It will also include new thinking strategies and ways of building the world as a cleaner, more viable place to live. Secttion IV seeks to illustrate solutions to the global warming dilemma and ways to arrive at those solutions.
GLOBAL CLIMATE CHANGE AND PROBLEMS THAT OCCUR
In the late 19th century, Swedish chemist Svante Arrhenius noticed that gases occurred because of human activities, such as burning fossil fuels to drive their daily life. Oil and coal are two major energy sources that drive the world’s economy, power plants and industry. Combined with the elimination of forested lands for further development and the awakening of the industrial revolution, this activity generated a large amount of GHG emission. It is difficult to reduce the carbon dioxide (CO2) rate in the earth’s atmosphere because of the industrial and human growth the world witnessed over the past two centuries. (Algeria Review 2010)
Earth’s temperature is interrelated to the occurrence of the GHG. These gases permit sunlight to invade the atmosphere without restraint. Devoid of these gases to catch the heat, Earth would be drastically cooler and human life would be non-existent. GHG occur naturally and assists in the earth to heal itself. However, due to human production of GHG puts an excess amount into the atmosphere. As a result, severe natural phenomena occur. Types of GHG consist of carbon dioxide, methane, and nitrous oxide. In the late 20th century, scientists have revealed an augmented concentration of GHG which have been related to global warming. This rising temperature of the Earth’s surface is much to blame for climate change whether it is mostly produced by human activity or environmental factors. The United Nations Framework Convention on Climate Change declares that urbanized nations are accountable for the principal share of global GHG emissions.
Other causes include natural disasters such as floods, droughts, volcanic eruptions, and hurricanes. The rapid-melting of polar ice caps and glaciers, expanding sea levels, obliteration of animal habitats, altering wind patterns, and ocean currents all play a vital role in global warming. It is expected that, due in part to GHG, there will be a more active hydrological cycle with more precipitation. (Senior, Jones, Lowe, Durman & Hudson, 2002) This implies an increase in the number of frequency of high precipitation events. While these events are of concern, the actual concern lies within the elevated sea-levels and wave surges that could affect the world’s coastal land.
Changes in the weather condition also affect agriculture yields. Many farmers abandon their farm and opted to work in the cities. As a result, this affected the local food supply, the biological diversity and the expansion of diseases. (Miller, 2008)
Furthermore, the world would require a 60-80 percent reduction in emissions if global warming were to be at a steady rate and would take years for atmospheric absorption of carbon dioxide to alleviate (Victor, Morgan, Apt, Steinbruner, & Ricke, 2009). When carbon dioxide is discharged into the atmosphere, the gas is confined there for 100 plus years. With anthropogenic effects, Earth becomes a greenhouse in itself.
According to Alan Robock, the difficulty in reversing the effects of global climate change is the political aspect for example and accentuating state proceedings through improvement treaties and carbon trading programs.
The Intergovernmental Panel on Climate Change (IPCC) is a worldwide organization consisting of scientists who research various aspects of climate change and how climate change affects the way of life for human life, geography, and our ecosystems. According to the IPCC, human life is the main course of action in causing the Earth’s atmosphere to produce the large amount of GHG which disassemble the balance of Earth’s energy. Fossil fuel is directly related to this concept. Shifting these GHG will result in the warming and/or cooling of the planet Earth.
Third world countries are among world’s poorest nations that endure the direct effects of global warming. The IPCC states that it is the “inequities in health status and access to adequate food, clean water, and other resources” (Intergovernmental Panel on Climate Change, 2002). The rising of the planet’s temperature can produce infectious disease patterns around the world. The environmental change conveyed the exposure of many new diseases and the return of old diseases taking place in these third world countries. The IPCC warned the increase in the earth’s temperature create “the infectious disease vectors” that means normal treatable diseases can be transformed into harmful, untreatable diseases. (Miller, 2008)
Another issue that arises is the ethical concerns. According to Stephen Gardiner (2008), “we cannot get very far in discussing why global climate change is a problem without invoking ethical considerations.” This concept refers to the moral concern of human beings and the relationship that have with the environment. Geoengineering theories have articulated the need for man to create advanced technology so as to prevail over natural occurrences. Debate on ethical policies and procedures are among the many obstacles to overcome with geoengineering.
Preservation of the environment and all living things are crucial on the quality of life. Lack
of scientific knowledge leads to inefficiencies and “cost-effective measures to prevent environmental
degradation” and harm to future generations (Ralston, 2009).
FREE MARKET ECONOMY
Global climate change is frequently the consequence of a collapse of the free market. The
cost of goods sold (COGS) do not precisely imitate the cost of production. These costs are called negative externalities, such as pollution. Negative externalities are actions of products that impose negative side effects on the third party. They are a result of costs that are acquired by one who is not a party to the contract. To achieve economic efficiency in the free market, individuals that are acting on their own concern will cumulate with all of the other individual choices. Some economists believe that property should be completely allocated. After property is transferred from the public sector to the private sector, the free market will then be able to function proficiently. In order for the free market to be free, there cannot be any economic intervention and regulation by the state. The free-market economy exists to make it “more free” and to limit government intervention. Advocates of the free market recommend that the market will function to capitalize on the value of the reserve. Utilization of goods such as air, water, and climate change, are not allocated in the market. They are free entities accessible to life and non-life on planet earth. When these entities suffer as a result of human activity of pollution, a cost factor must be considered. For example, a power plant that burns toxic pollutants into the air may not consider the harmful effects as they are primarily concerned with speed of production. More than ever, it is essential that businesses as well as global organizations reevaluate and restructure their daily regimen to provide society with cleaner water, cleaner non-chemical producing air, and a healthier environment. (Brown, 2010)
The free market should include a combination of mitigation and adaptation. Mitigation is the view that presupposes “anthropogenic emissions of GHSs are a significant part of the explanation for abrupt climate change, and that reducing the concentration of GHGs will affect the likelihood of such change taking place.” (Perrings, 2003). Adaptation is implementing defensive actions to reduce the cost or effect of climate change. Examples include construction of coastal defenses from a higher sea level, relocating human populations and strengthening of infrastructure. Figure 2 summarizes the marginal damage cost of carbon emissions.
Discount Rate
Mitigation plus adaptation
Mitigation only
3%
+4 to +9
+40 to +50
5%
-7 to +15
+20 to +37
Figure 2. The marginal damage cost of carbon emissions under gradual warming with and without adaptation
Source: Charles Perrings. The economics of abrupt climate change.
Made man effects resulting from human activates contrasted to those taking place in biophysical environments lacking human influence is known as anthropogenic effects. Debates have been constant as far as promoting anthropocentric viewpoints of human interests as opposed to the egocentrism viewpoint of species preservation, animal rights, and biodiversity. In Figure 3, the graph displays the amount of atmospheric concentration and anthropogenic emissions of carbon dioxide. As indicated, the amounts of the x and y variable are increasing at an extraordinary rate. The volume of emission polluting the atmosphere is overwhelming and now is the time to take action to reduce CO2 and GHG releases. The atmospheric concentrations and well as the anthropogenic emissions are causing massive problems that have been a major controversial issue for decades.
Figure 3 Trends in Atmospheric Concentrations and Anthropogenic Emissions of Carbon Dioxide
Source: Oak Ridge National Laboratory, Carbon Dioxide Information Analysis Center, http://cd/ac.esd.oml.gov/.
CARBON BUSINESS ACCOUNTING
The distance a product travels to reach its final destination for usage is referred to as carbonization. The more the product travels, the more emissions are produced due to transportation. It is recommended that the person buys the product from the original source as fewer emissions will be used. According to a recent study in Australia, bottled water imported from Europe uses roughly 80kg of carbon dioxide emissions when transported to Australia. This is a prime example of why it is imperative to buy direct from the source rather than buying imported goods and services.
Current industries producing the most CO2 are transportation and power generating. This trend isn’t expected to change in the future. Instead, the world’s growth will demand more energy. As shown in Figure 4, it will be important that future power generation choose sources which produce the least amount of CO2.
Future Source of Electricity Generation
Year
Coal
(MT)
Hydro
(Billion units)
Nuclear
(Billion units)
Total Capacity
(Mega Watts)
2003-04
318
75
18
131,424
2006-07
366
100
26
149,806
2011-12
455
179
59
206,757
2016-17
574
226
110
276,143
2021-22
678
283
206
368,592
2026-27
885
400
301
480,694
2031-32
1096
500
441
627,088
Figure 4. Future trends in power generation
Source: Ministry of Power, Government of India
By the year 2050, it has been reported that if companies take a stand immediately to reduce the amount of carbon dioxide in the atmosphere from factories, plants, warehouses, etc., the gross domestic product (GDP) will increase to $1.8 trillion and add more than 250,000 jobs to the United States economy. China, on the other hand, has affirmed that the state of the economy takes priority over the battle in reducing carbon emissions. This will have an effect on China’s businesses as well as placing more carbon emission into their country.
Carbonization has both positive and negative effects toward the economy. Corporations that produce low amounts of carbon can pass on their carbon costs. They are also able to gain windfall profits which consist of income that is unexpected. Firms that produce large amounts of carbon are not able to pass on their carbon costs.
Carbon cost management is a division of the onward development of environmental cost accounting. Cost is calculated based on the goods that are accessible to sale in product costing. When a good or service is produced it does not necessarily mean that is in product form. It will become waste and will eventually end up in the landfill. Labor costs and the energy used to create products also build up carbon dioxide emissions.
Overhead Costs are another significant factor to take into consideration. Electricity, water, and heat are all components in concluding how waste should be measured. If the overhead rate is allocated out, products that may have been low cost to produce suddenly become of high cost depending on the life of the product. Waste management and the various ways to dispose of material are significant. Expenses are incurred as a result. Recycling is another way to save the environment. Utilizing cost benefit analysis can help reduce recycling expenses. Researching cost efficiency benefits are also useful when it comes to overhead costs.
“Carbon thinking” seems to be one of the new and improved ways of thinking in terms of global climate change. This new method will be invaluable and necessitate innovative resources and administration practices if the accounting is to continue at the head of as long as appropriate information for resolution are decided the ways of carbon thinking. Modern applications will be able to assess the whole-of-life costs regarding goods and services. Strategic management accounting will also help to balance out business departments such as marketing and pricing. It will be predominantly useful relating to whole-of-life costs from carbon emissions. Table 1 shows the whole-of-life impact of carbon emission efficiencies on costs and revenues. It demonstrates the environmental impacts the effects on human consumption as well as targeting the economic status.
Businesses should benefit off of carbon business accounting and utilize that technique in their daily work. This will influence the businesses performance, approach, as well as cost. In order for businesses to use this method, it is vital that they have a well developed understanding of accounting, demand and supply costs, as well as cost management in order for this process to be successful.
SOLUTIONS
Solutions to broaden the horizon in stipulations of understanding climate change will also be pertinent to the fundamental theories of abatement of global warming. The contestation over anthropogenic effects will be an extended vicinity of how the relationships between the allocations of climate change and the compulsory regulations are presided in the elucidation of global warming.
There are many different and vast approaches to taking on this issue of global climate change and ways in which to help others attain knowledge of saving and protecting planet earth from unwanted and harmful chemicals making it safe and clean for future generations. Some pedestrian examples are:
Changing to energy efficient light bulbs
Turning the lights when not in use and during the day
Drying clothes on a clothesline instead of using a dryer
Insulating residential & commercial properties to cut costs
Geoengineering projects are an ambitious alternative. These projects can vary across at least three dimensions: design, scope and probable consequences of reducing CO2 gases in the atmosphere. Shane Ralston describes six methods of geoengineering to reduce CO2. (Ralston, 2009) These methods cannot eliminate the GHG / CO2 issues, but help to mitigate their overall effect on the planet. Their implementation would depend on their respective costs and technical difficulty, ranging from vey easy (Method Five) to very difficult (Method Four).
Method One: Solar shields
This method involves creating satellites or solar shelters to orbit the earth. These satellites are armed with reflective plates to divert the sun’s light. This method estimates an 8% reduction of the sun’s light from reaching the earth’s surface.
Method Two: Carbon sequestration
This method captures and stores the CO2 in deep underground vaults. These vaults are found one hundred miles under the earth’s surface. By storing CO2 underground, it effectively takes it out of the atmosphere, thus reducing the CO2 pollution.
Method Three: Ocean fertilization
This method involves depositing iron fillings into the world’s oceans. Oceans are generally void of iron. This would support the growth of phytoplankton. Phytoplankton, which need CO2 and sunlight to grow, could reduce the amount of CO2 in the atmosphere.
Method Four: Engineered weather
This method involves removing hydrochloric acid from the oceans and neutralizing the acids with volcanic rocks. This process accelerates natural chemical weathering and transfers CO2 found in the atmosphere to the oceans.
Method Five: Forest Plantations
This method involves the replanting of trees worldwide. Trees (and plants) are nature’s best consumers of CO2. It is estimated that one tree can absorb one ton of CO2. The digestion of CO2 by tress produces oxygen, which is what humans need to live.
Method Six: Reflective building roofs
This method involves painting the roof tops white. The light colored roofs can then reflect the sun’s light back to the atmosphere. This would reduce the amount of heat on the earth’s surface and thus cooling the temperature.
Discussion
Changing human consumption is most likely the leading factor in reversing the effects of global warming. In an effort to change consumption, the first step is education. Knowledge of global warming is essential due to lack of necessary resources. If humans did not consume as much as we do and learned more about the effects of global warming, the world would be in much better shape and there would be less talk on climate change. It is relevant to make the public and private sector fully aware of the effects of global climate change.
Successfully managing carbon cost can also reduce the amount of CO2 put forth into the atmosphere. In addition, efficiently business operations will reduce CO2/GHG. Figure 5 highlights the pre- and post-sale environmental impact.
The Whole-of-Life Impact of Carbon Emission Efficiencies on Costs and Revenues
Areas of Cost Reduction via Carbon Management
Presale Environmental Impact
Postsale Environmental Impact
Raw Material
Production waste
Landfill waste
Human input
Wasted time on rejects and recovery
Time to separate recyclable materials
Traditional Overhead Expenses
All have some aspect of carbon emission. Find techniques to reduce the amount of emission pollution as applicable.
Electricity
Rental
Marketing
Transportation
Administration
Depreciation
After-sale Service Costs
Environmental Overhead
Regulatory Cost
Meeting emission standards
Costs of environmental pollution
Waste Management
Production waste
Landfill waste
Recycling
Reduced by efficient layout in production
Amortization of Design Costs
Carbon Credits
Cost or profit item
Purchase of carbon credit
Financing Costs
Stock Holding Costs
Capital Costs, insurance, administration
Warranty returns
Figure 5. Examples of carbon emission affecting businesses.
Source: T. Buggey Journal of Positive Behavior Interventions, Summer 2007
Countries will try to find the new energies to substitute the old resources. In order to extend the use of the carbon-based energy, governments will turn with interest to the renewable energy, which may be less expensive than the carbon-based energy or it may reduce the amount of carbon being put into the environment. These renewable energies include bio-power, hydropower, wind power, solar energy and waste energy. (Gharpure, 2009)
Future power from renewable energy sources
Source / System
Estimated Potential
Cumulative Achievements
Bio-power
16,881 MW
542 MW
Wind power
45,195 MW
7230 MW
Small hydro power
5,000MW
2013 MW
Waste energy
2,700 MW
43 MW
Solar energy
2 MW
Total
84,776 MW
10,467 MW
Figure 6. Trend of renewable power generation
Source: Ministry of Power, Government of India
Successful reduction of CO2 / GHG is essential to piece of the pie to reduce the increase in the global temperature. The 20th century average temperature was 12.7 Celsius. Figure 7 indicates the increase in global temperature since 1980. This increase conveniently corresponds to a similar increase in CO2 emissions, as shown in Figure 8.
Figure 7. Using 12.7 Celsius as a baseline, the actual yearly temperature change.
Figure 8. Carbon dioxide emissions globally since 1980.
Future Research
Reducing global warming is a complex issue. It involves not only reducing the amount of CO2 produced, but finding suitable cleaner energy sources. Future research could include:
Future energy sources and their mega-watt replacement | cost
Cost analysis of the geoengineering methods and their success at reducing GHG
References
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