The Effect of Climate Change on the Economy

Floods in Asia, extremely hot summers in Europe and hurricanes everywhere are just some of the results of climate change.

One way of slowing down climate change is to reduce CO2 emissions. For Claudia Kempfert, from the German Institute for Economic Research in Berlin, there is just one way to achieve this: emissions trading.

"Emissions trading means that all countries get emissions right and can sell and buy them on a global market. And this is a cost-effective way -- all different kind of nations can participate."

Mutual benefits

The benefit of such a system is that C02 emissions can be restricted by each country in the scheme. But to install such a system, a price for CO2 has to be set, so the current value can be determined.

Negotiation is also needed -- especially with growing economies such as China or India, which are contributing increasingly to the world's greenhouse gases as their fast-growing economies cause a rise in energy consumption.

Kempfert explained how the system could benefit all countries -- whether they had high or low emissions. "If the system is fair, China and other Asian countries can sell emission permits and make gains. The US and Europe can then buy emission permits."

Kempfert added that the US and China, which have refused to sign international agreements have to take more action to decrease their emissions.

Energy agencies

Some governments have turned to energy agencies to find solutions for reducing their C02 emissions.

The Berlin Energy Agency is a public-private partnership between the Federal State of Berlin, the KfW-Bank and the energy supplier Vattenfall Europe. The agency advises Berlin on how to find solutions for energy saving in their public buildings.

Michael Geißler, the Managing Director of the Berlin Energy Agency explained that the idea was "to bring energy saving services from the private sector into these (public) facilities to bring about a reduction in energy demand."

His agency has been responsible for 1300 public buildings in Berlin for ten years and their efforts have borne fruit.

"The guaranteed total savings given by private bodies is more than 10 million euros –- this means more than 25 percent of the existing former energy costs are now guaranteed as a saving."

The reduction of CO2 emissions and the implementation of a world-wide-reduction system will be the main focus at the upcoming Climate Change Conference on the Indonesian island of Bali in December.