Super-rich get ‘double dividend’ from causes and costs of climate crisis, report finds
Real-world example for IB, A-Level, AP and IGCSE Economics essays: Externalities and the environment, Wages and income inequality, Market power and competition policy
What happened
A report by Oxfam finds that the world's richest people profit both from the polluting activities that drive the climate crisis and from its catastrophic consequences, a so-called 'double dividend'.
The economics
Climate pollution is a classic negative externality: emitters do not bear the full social cost, which falls on wider groups. The report adds that wealthy investors can earn returns from disaster recovery, concentrating wealth further, widening inequality and weakening incentives to act on climate.
Evaluation
This shows markets alone struggle to correct externalities, but the report focuses on the very richest and gives no scale for the recovery market or other actors; short-run gains conflict with long-run climate stability.
Practice question
Using the example of the rich profiting from the climate crisis, discuss the link between negative externalities and income inequality, and evaluate the likely effects of government intervention.
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Where it fits in the syllabus
- Externalities and the environment: Costs or benefits that fall on third parties without being priced, such as pollution and carbon emissions.
- Wages and income inequality: How labour markets set wages, and how income and wealth are shared across people.
- Market power and competition policy: When a few firms control a market they can raise prices; governments use antitrust and regulation to protect competition.
- IB Economics: Government Intervention and Market Failure, Aggregate Demand and Supply
- A-Level Economics: Market Failure, Government Microeconomic Intervention
- AP Microeconomics: Market Failure and the Role of Government, Factor Markets and Income Distribution, Monopoly, Oligopoly and Monopolistic Competition
- IGCSE Economics: Government Intervention, The Allocation of Resources, Business Economics