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Economic Externalities


A reading titled ‘Global Warming and Economic Externalities’ by Armon Rezai, Duncan K. Foley and Lance Taylor, that discusses greenhouse gases (GHG) as a negative externality in global markets. The reading discusses the effect of mitigation investments on the economic well being of current and future generations. It also demonstrates how equilibrium theory can correct negative externalities through the use of the Keynes-Ramsey growth model.

Students will learn about global warming, equity, and externalities. They will understand concepts such as ‘business-as-usual’ that influence market optimisation and impact climate change. Students will further learn about the market failure of climate change and the required mitigation investment to correct it.

Use this tool to help your students find answers to:

  1. What are negative externalities in economics?
  2. What are the negative externalities associated with climate change?
  3. How can mitigation investments correct negative externalities?
About Tool
Tool NameGlobal Warming and Economic Externalities
Topic(s) in DisciplineEconomic Externalities, Market Failure, Negative Externalities, Keynes-Ramsey Growth Model 
Climate TopicClimate Economics
Type of toolReading 
Grade LevelUndergraduate
Translation     –
Developed byArmon Rezai, Duncan K. Foley and Lance Taylor 
Hosted atResearch Gate
Computer SkillsBasic


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