Essay
Economic Analysis Essay
- Course
- Econ 1220
- Institution
- Langara College ( )
This is an economic analysis essay regarding how climate change affects Canada's economy. Also it talks about the supply and demand of the economy
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Economic AnalysisMarket failure has been attributed to climate change since the early 1990s as claimed by
Economists. The main disaster that causes market failure due to climate change is the
'greenhouse-gas externality'. “Greenhouse gas emissionsare a side-effect of economically
valuable activities.” (Bowen, 2014) In economics, market failure occurs when goods and
services are not distributed efficiently in the free market. In fact, greenhouse gas affects
global warming, which would bring a massive impact on climate change. And so, climate
change has turned the market into failure.
Climate change poses economic and ecological risks every single day that are not
mitigated. As a result, we pay the price for economic value every day. “The weather-related
disasters and catastrophic events which caused Canada's annual GDP growth has
increased by about 5 to 6 percent since 2010, in contrast to an average of 1 percent in
previous decades.” (Smith 2021) The weather has seriously affected Canada’s economy, as
well as the GDP, which has increased a lot in the last decades. “Without more ambitious
climate action, Canada's economy could contract by 6.9 percent annually by 2050. It is
estimated that G7 nations will suffer double the economic loss because of the Coronavirus
pandemic.” (Oxfam, 2021) During the pandemic, the GDP got a huge setback, even climate
change can double the loss of Corona Virus. According to the study by the Swiss Re
Institute global economy could see a 10% drop in GDP within 30 years if temperatures rise
by about 2.6 degrees Celsius, the scenario under current climate policies. Just a minor
temperature change could affect a lot in Canada’s economy, the consequence of climate
change cannot be ignored as all the facts mentioned above, Canada’s economy was hit hard
by the massive impact caused by climate change.
The culprit of market failure - climate change is led by “higher temperatures, extreme
weather, drought, increasing levels of carbon dioxide and sea-level rise”. (Cho, 2018). As
weather-related disasters pose a threat to commodities and raw materials, prices may rise,
also these disasters could bring an enormous impact on crop harvest and the supply of
goods. Thus, let’s create a scenario to analyze the situation of climate change affecting the
economic market. After the effect of climate change, the production of goods has been
affected, which the supply has to go down and the demand has come up, in figure 1, we can
see the graph has shown the effects of the agricultural goods. Figure 2 shows the condition
of how an inelastic supply causes long production and the shortage of supply.
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