Coase Theorem and Climate Change
The Coase Theorem, stated simply, is the idea that the most efficient way to use resources is to assign ownership; it does not matter who is the owner. The Coase Theorem is applicable in many areas of our life today, such as the hot topic of climate change. Climate change is becoming an increasingly difficult issue to tackle because global warming affects everyone on the planet, but many people are not willing to accept that it is their responsibility. In other words: people feel that they have a responsibility to have clean air, and also that they have a right to pollute air.
Right now, Paris is holding a gathering of political leaders intending to tackle climate change, and we are increasingly realizing just how difficult it will be to transition the entire world to a clean energy system. According to The New York Times, “The analysts… presumed that developed countries would not be willing to make big changes in their way of life… and that poor countries would keep striving to reach higher standards of living, requiring more energy.” In other words, no one is willing to take responsibility for the consequences of pollution: there is no ownership. This is a difficult situation because we all share the same air, and it would be virtually impossible to assign or divide ownership of the air. This can also be seen as the tragedy of the commons.
Sources:
http://www.nytimes.com/2015/12/01/science/beyond-paris-climate-change-talks.html?ref=world
http://www.env-econ.net/2006/01/what_is_the_coa.html