Explain how the overuse of common access resources can lead to negative externalities.

Discuss the view that the best way to reduce the threat to sustainability, arising from the burning of fossil fuels, is for the government to provide subsidies to firms that produce energy through renewable sources.

Answers may include:

• definitions of common access resources and negative externalities
• diagram to show negative externalities arising from overconsumption (depletion of common access resources) or production (environmental degradation as a by-product of production activities)
• explanation that overuse of common access resources can lead to environmental damage or resource depletion, which are forms of market failure, leading to negative externalities of production or consumption
• examples of how overuse of common access resources leads to negative externalities such as over-fishing, open-cast mining and deforestation.

Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part A.

Answers may include:

• definition of subsidies and sustainability
• diagram(s) to show the impact of subsidies on the market for renewable energy and the market for fossil fuels
• explanation that subsidies reduce the costs of production for renewable energy firms and the price of renewable energy to consumers, which reduces the demand for energy produced by burning fossil fuels. This creates greater sustainability in the energy market
• examples of subsidies on the market for renewable energy such as solar power and wind farms
• synthesis or evaluation (discuss).

Discussion may include: alternative policies that could be used instead of subsidies, consideration of the impact of subsidies on different stakeholder groups, negative effects on the fossil fuel industry. It could also consider the short-term costs of subsidies and the long-term benefits on sustainability.

Marks should be allocated according to the Paper 1 markbands for May 2013 forward, part B.