Why GHG emissions are considered a market failure?1 pointThey are caused by market power concentration of transnational companies. They cause informational asymmetries between supply and demand side for goods. They are caused by behavioural biases of the consumers choosing polluting products. They constitute negative externalities which imply costs to the society that are not currently being considered.

Greenhouse gas (GHG) emissions are considered a market failure primarily because they constitute negative externalities. Here's a step-by-step explanation:

1. Negative Externalities: An externality is a cost or benefit that affects a party who did not choose to incur that cost or benefit. GHG emissions are an example of a negative externality because they cause harm to the environment and to public health, costs that are not paid by those who produce the emissions (e.g., factories, cars, etc.).

2. Market Failure: In a perfectly competitive market, the price of a good or service reflects all costs and benefits associated with its production and consumption. However, when negative externalities like GHG emissions are present, these costs are not reflected in the market price. This means that the market price is too low and more of the good or service is produced and consumed than is socially optimal. This is what is meant by a "market failure."

3. Other Factors: While the main reason GHG emissions are considered a market failure is due to them being a negative externality, other factors can also contribute. For example, market power concentration can lead to overproduction and thus more emissions. Informational asymmetries can mean consumers are not fully aware of the environmental impact of their consumption choices. Behavioural biases can also lead consumers to choose more polluting products.

In conclusion, GHG emissions are considered a market failure because they impose costs on society that are not reflected in the market price of goods and services, leading to overproduction and overconsumption.