Course Objective: This
course will introduce students to the methods economists use to analyze issues
related to the environment. We
will discuss the positive and normative aspects of environmental economics,
techniques that are used to value the environment, and approaches -- such
as regulation and incentive-based programs -- that are used to control pollution.
This course is taught with the expectation that students have completed
Economics 201.
Office Hours: Office hours
will be held in Vollum 227 on Mondays, Wednesdays and Thursdays from 3:30-4:30pm.
Students who are unable to come during these times are encouraged to make
an appointment.
Text and Required Readings:
The principal text for this course is Environmental Economics by Charles D. Kolstad. In addition to the text, students are responsible for the required
readings and for additional readings that will occasionally be announced in
class. Students are expected
to contribute to class discussions by finding examples of current environmental
issues in the business, financial, and general press.
Evaluation: Evaluation
will be based on three homework assignments, a midterm exam, a comprehensive
final examination, participation in a group project or writing a 10-15 page
independent research paper, and class participation.
Every student should be prepared to contribute meaningfully to every
class session.
Collaboration: All work
submitted during this course is expected to reflect the effort of the individual
whose name appears on top of the assignment. You are encouraged to work with friends,
tutors and the instructor on problem sets. However, when the time comes to
write your assignment, it must be your work and should be written in words
that reflect your understanding of the material.
Citations: Citations should
be used when appropriate and should conform to the guidelines in the Citation Guide for Papers and Theses in Economics.
Materials on Reserve: The
following texts are on 2-hour reserve; other required readings are available
electronically. Readings marked
with a * are optional.
Easton, Thomas A. 2007. Taking
Sides: Clashing Views on Controversial Environmental Issues (12th
edition) Guilford, CT: McGraw Hill/Dushkin.
Kahn, Matthew E. 2006. Green
Cities: Urban Growth and the
Environment. Washington, D.C.: Brookings Institution Press.
Kolstad, Charles D. 2000. Environmental
Economics New York, New York: Oxford University
Press.
Lomborg, Bjorn. 2001. The Skeptical
Environmentalist: Measuring the Real State of the World. New York: Cambridge University Press.
I. Introduction
September 3
What is environmental economics
and how does it differ from natural resource economics and ecological economics?
What is the current state of the environment?
How can we use economics to analyze environmental issues?
Kolstad, Chapters 1 and 2 (to
page 14)
Lackey, Robert T. 2006. Axioms
of Ecological Policy. Fisheries. 31 (6): 286-290.
Lomborg, Bjorn. The Skeptical Environmentalist. Chapter 1.
Pimentel,
D. 2002. Skeptical
of the Skeptical Environmentalist.
September 5
What instruments are used to reduce
pollution? Why do some countries
rely on a regulatory approach while other countries use incentive-based approaches?
What role do institutions play in reducing pollution? Are existing programs effective? How do we determine if a program is effective?
Kolstad, Chapter 2 (page 14 to
end).
Helm, Dieter. 2003. The
Assessment: Climate-Change Policy. Oxford Review
of Economic Policy. 19(3): 349-361.
OECD/EEA
database on instruments used for environmental policy and natural resources
management
A. Welfare Economics
September 8
What is sustainability? How can society make choices that incorporate
its members' values?
Kolstad, Chapter 3
McMichael, A.J., C.D. Butler,
and Carl Folke. 2003. New
Visions for Addressing Sustainability. Science. (December
12)
Bailey, Ronald. 2002. Wilting Greens Reason (December).
Payne, Dinah M. and Cecily A. Raiborn. 2004. Sustainable Development: The Ethics Supports the Economics Journal of Business Ethics 2(2): 157-168.
Rifkin, Jeremy. 2005. The
European Dream: Building Sustainable
Development in a Globally Connected World.
*Kneese, Allen V. and William
D. Schulze " Ethics and Environmental Economics" In Handbook
of Natural Resource Economics, Vol. 1,
ed. A.V. Kneese and J. L. Sweeney. New York: Elsevier, 1985: 368-378.
B. Efficiency
September 12
What do economists mean by the
term "efficiency"? Should
economic policy be efficient? How
do we determine if policies are efficient?
Kolstad, Chapter 4 (to page 64)
September 15
What is benefit-cost analysis?
What are some criticisms of this technique?
What alternative approaches can be used to evaluate environmental policies?
Kolstad, Chapter 4 (page 68 to
end)
Gayer, Ted and Robert W. Hahn.
2005. Designing
Environmental Policy: Lessons
from the Regulation of Mercury Emissions. AEI-Brookings Joint Center for Regulatory
Studies Regulatory Analysis 05-01.
The Economist. 2005. The
Regulators' Best Friend? (April 2): 72.
Heinzerlin, Lisa and Frank Ackerman.
2002. Pricing
the Priceless: Cost-Benefit Analysis
of Environmental Protection. Georgetown Environmental Law and Policy
Institute: Georgetown University Law Center.
*Kelman, Steven. Cost-Benefit
Analysis: An Ethical Critique. Pages 129-136 in Glickman, Theodore S. and
Michael Gough (eds.). 1990. Readings
in Risk Washington, D.C.: Resources for
the Future.
*Butters, Gerard et al. Reply
to Steven Kelman. Pages 136-137 in Glickman, Theodore S. and Michael Gough
(eds.). 1990. Readings in
Risk Washington, D.C.: Resources for the Future.
*Hahn, Robert W. and Patrick M.
Dudley. 2007. How Well Does the U.S. Government Do Benefit-Cost Analysis?
Review of Environmental Economics and Policy 1(2) 192-211.
*Hanley, Nick and Clive L. Spash. 1993. Cost-Benefit Analysis and the Environment. Brookfield, Vermont: Edward Elgar Publishing Co.
*Pearce, David W., Giles Atkinson,
and Susana Mourato. 2006. Cost-Benefit Analysis and the Environment:
Recent Developments. Paris: Organization for Economic Co-operation and
Development.
*Portney, Paul R. and John P.
Weyant (eds.). 1999. Discounting and Intergenerational Equity Washington, D.C.: Resources for the Future.
September 19
C. Externalities and Property
Rights
What are externalities? How can we internalize externalities?
What is the Coase theorem and how can it be applied?
Kolstad, Chapter 5
Kolstad, Chapter 6
Coase, Ronald H. 1960. The
Problem of Social Cost. Journal of Law and Economics
(October): 1-44.
III. Controlling Pollution
September 29 and October 1
A. Pigouvian Fees
What is a Pigouvian fee? How should the fee be set? Does a fee on emissions have the same
effect as a subsidy for pollution abatement?
Kolstad, Chapter 7
Leape, Jonathan.
2006. The
London Congestion Charge. Journal of Economic Perspectives 20(4): 157-176.
B. Regulation
October 3
What are the reasons for government
intervention? What are the advantages
and disadvantages of a command and control approach? Are regulations efficient? Cost-effective?
Kolstad, Chapter 8
Knickerbocker, Brad. 2003. How
Economics May Reshape Green Policy Christian Science Monitor (October 3).
C. Marketable Permits
What is the theoretical basis
for a marketable permit approach? What
are some practical challenges in using marketable permits? How have permits been used to reduce greenhouse
gas emissions?
Kolstad, Chapter 9
October 10, 13 and 15
Goodell,
Jeff. 2006. Capital Pollution Solution?
The New York Times (July 30).
The Economist. 2006. Emissions
Offsets: Upset About Offsets (August 5): 53.
The
Economist. 2006. Soot,
Smoke and Mirrors (November 18): 54.
Smith, Kevin. 2006. Obscenity
of Carbon Trading BBC News (November
11).
*Pizer, William A. 2006. The Evolution
of a Global Climate Change Agreement American Economic Review 96(2): 26-30.
*Nordhaus, William D. 2006. After
Kyoto: Alternative Mechanisms
to Control Global Warming. American Economic Review 96 (2): 31-34.
*Olmstead, Shiela M. and Robert N. Stavins. 2006. An International Policy Architecture for the Post-Kyoto Era. American Economic Review 96(2): 35-38.
*Ferraro, Paul J. and Agnes Kiss.
Direct Payments to Conserve Biodiversity. Science (November 29, 2002): 1718.
*Hahn and Hester. 1989. Marketable
Permits: Lessons for Theory and Practice. Ecology Law Quarterly 16: 361-406.
*Tietenberg,
Tom. 2003.
The Tradable-Permits Approach to Protecting the Commons: Lessons for Climate Change. Oxford Review of Economic
Policy 19 (3): 400-419.
D. Regulation Under Uncertainty
October
27, 29 and 31
How can regulation be effective
if information is imperfect? How
can pollution levels be monitored and enforced?
Kolstad, Chapters 10 and 11
Kolstad, Chapter 12
F. International/Interregional
Competition
November 7 and 10
What is the relationship between
income and environmental quality? Will
free trade result in environmental degradation?
Kolstad, Chapter 13
Kahn, Matthew E. 2006. Green
Cities: Urban Growth and the
Environment. Washington, D.C.: Brookings Institution Press. Chapters 3 and
4.
*Bhagwati,
Jagdish. 1993. The Case for Free Trade. Scientific American
(November) 42-49.
*Daly, Herman
E. 1993. The Perils of Free Trade. Scientific American
(November) 50-57.
Environmental
Performance Index
*Copeland, Brian R. and M. Scott
Taylor. 2004. Trade, Growth, and the Environment. Journal of Economic Literature
XLII (March): 7-71.
G. Economy-Wide Effects of
Environmental Regulations
Do environmental regulations reduce
growth? Can the quality of the
environment be integrated into traditional measures of output?
Kolstad, Chapter 14
The Economist. 2005.
Are
You Being Served? (April 23): 76-78.
Kahn, Matthew E. 2006. Green
Cities: Urban Growth and the
Environment. Washington, D.C.: Brookings Institution Press. Chapters 2 and
5.
IV. Economic
Valuation
A. Introduction
November 17
Sagoff, Mark. Can We Put a Price
on Nature's Services? Pages 16-23 in Taking Sides: Clashing Views
on Controversial Environmental Issues
(9th edition).
Abromovitz,
Janet N. Putting a Value on Nature's "Free" Services.
Gatto and DeLeo.
Pricing Biodiversity and Ecosystem Services: The Never-Ending Story. Pages 41-52 in Taking Sides: Clashing Views on Controversial
Environmental Issues (12th
edition).
Morrison How Much is Clean Water Worth? Pages 36-40 in Taking Sides: Clashing Views on Controversial Environmental Issues (12th edition)
Costanza,
Robert and Ralph d'Arge. 1997.
The Value of the World's Ecosystem Services and Natural Capital. Nature 387: 253-260.
November 19 and 21
Kolstad, Chapter 15
B. Hedonic Price Method
Can we use market transactions
to infer how people value goods that are not explicitly traded on a market?
How robust/controversial is this technique?
What are some of its limitations?
Kolstad, Chapter 16
Mahan, B.L.,
S. Polasky, and R. M. Adams. 2000. Valuing
Urban Wetlands: A Property Price Approach Land Economics
76(1): 100-113.
Pyndyck
R. S. and D. L. Rubenfeld. 2005. Appendix: The Basics of Regression. In Microeconomics (6th edition) Upper Saddle River, NJ: Pearson/Prentice
Hall.
Kennedy,
Peter. 1998. A
Guide to Econometrics [electronic resource] Cambridge, Mass.: MIT Press.
*Lutzenhiser, Margot and Noelwah
R. Netusil. 2001. The Effect of Open Spaces on a Home's Sale Price. Contemporary
Economic Policy 19 (3) 291-298.
C. Defensive Expenditures and
the Travel Cost Method
November 26
Kolstad, Chapter 17 (to page 34)
Abdalla, Charles W., Brian A. Roach, and Donald J. Epp. 1992. Valuing Environmental Quality Changes Using Averting Expenditures: An Application to Groundwater Contamination Land Economics 68(2): 163-169.