Prerequisites: Introductory microeconomics, knowledge of differential calculus
Professor Eric Neumayer
Environmental economics is a comparatively young, but by now well-established, branch of economics, which has attracted more and more students. In successfully applying standard microeconomic analysis to the field of the natural environment and sustainable development, economists have challenged many erroneous, but strongly held, preconceptions of policy makers and environmentalists alike. For example, the course will show that the efficient level of environmental pollution is, in general, not zero and that there is no risk of running out of fossil fuel non-renewable resources any time soon. Conversely, however, policy makers fail to understand the fundamental drivers behind renewable resource extinction (particularly species loss), are over-optimistic when it comes to the environmental consequences of economic growth and insufficiently grasp the obstacles toward achieving strong multilateral agreements for solving international and global environmental problems.
This course aims to provide students with a sound knowledge and understanding of the major fundamental results of environmental economics. Diagrams are widely used throughout the course, but some basic knowledge of partial differential calculus (i.e., taking derivatives of functions) is indispensable for the class exercises. Two exams are based on a combination of problem-solving exercises and essay-type questions.
The topics covered will include:
Environmental externalities and the theory of market failure
Economics of pollution control (the efficient level of environmental pollution, taxes, tradeable permits, command-and-control)
Economics of natural resource use (non-renewable resources such as oil, gas and metals as well as renewable resources such as fish and forests)
Economics of sustainable development (including the measurement of sustainable development and the effect of economic growth on the environment)
Valuation of environmental resources (including cost-benefit analysis)
Economics of international environmental problems (including the impact of trade and investment liberalization on the environment)
Economics of climate change (including the analytical controversy among environmental economists and a focus on the Kyoto Protocol as the only global agreement on reducing greenhouse gas emissions).
B. C. Field and M. K. Field, Environmental Economics: An Introduction, (6th edition), McGraw-Hill.(2012).
Lectures: 36 hours Classes: 12 hours
Assessment: Two written examinations