Aim and program of the course
This course aims at providing students with the methodological skills that are necessary to understand the origins of contemporary environmental problems, and to identify the appropriate policies to solve them. During the course, the most recent developments and debates in environmental and natural resource economics are addressed to students.
Environmental economics studies the complex interrelations between economics and the environment. The starting point of the analysis is the recognition that, in several cases, markets do not provide the right amount of environmental protection, and that some government intervention is frequently needed to balance different social needs. In a world where human pressure and economic activities stress the environment by exploiting fisheries, forests, minerals, energy sources, and other environmental resources, it is increasingly important to study how economic tools can be used to develop sustainable environmental approaches and policies.
During the course, a selection of specific topics of environmental economics will be treated at a basic-intermediate level:
WEEK 1. The sources of environmental problems: property rights and externalities This part of the course introduces the general conceptual framework used to approach environmental problems. After an examination of the relationship between human actions, as manifested through the economic system, and the environmental system (intended both as a source of resources and as a sink), some of the most commonly used criteria for judging the desirability of the outcomes of this relationship are discussed. The manner in which producers and consumers use environmental resources depends on the property rights governing those resources. It will be shown that environmental problems can arise from violations of the conditions defining an efficient property rights structure.
WEEK 2. Pollution: efficient targets and policy responses
The problem of pollution is a major concern of environmental economics. On the basis of the mechanisms through which pollution damages the environment, different targets and policies can be identified. Methods of attaining pollution targets are considered also in contexts characterized by limited information, uncertainty, non-perfectly competitive markets, irreversibility. Since many environmental problems spill over national boundaries, particular attention is devoted also to international cooperation and agreements.
WEEK 3. Climate change issues
Climate change is widely recognized as the major environmental problem the planet is facing. This part of the course provides an overview of the history of the international policy negotiations, with a specific focus on Carbon Markets, Carbon Finance and the Kyoto Mechanisms (Emissions trading - the European Union Emission Trading Scheme, the Clean Development Mechanism and the Joint Implementation).
WEEK 4. Dynamic efficiency and sustainable development
The discussion on the main criteria that are relevant to identify environmental problems is the focus of this part of the course. Besides the two concepts of efficiency (static and dynamic efficiency), other equity arguments are analyzed, with particular reference to the allocation of a depletable resource over time.
WEEK 5. Energy issues
Energy is the life-blood that drives our economy. World primary energy demand is expected to increase dramatically in the next 25 years. Most of this demand will come from developing countries, especially India and China. Meeting this demand will not be easy in a global energy system constrained by geopolitical insecurities, scarcities of energy supply and use, and growing regulatory pressures to reduce carbon emissions from the burning of fossil fuels. This part of the course will be devoted to the analysis of energy markets, by considering our dependence from fossil fuels but also problems emerging in the transition to other sources (non-conventional sources – shale gas and oil; uranium; renewables).
WEEK 6. Waste management and policies
Inefficiencies in waste production and disposal decisions depend on wrong individual incentives (of producers and consumers). After an examination of waste problems, this lecture will review the recent economic literature on extrinsic and intrinsic motivations for individual behaviors.
At the end of the course, students are expected to be able to:
- identify and explain the main environmental problems, as well as the related economic determinants
- Describe the main available environmental policy tools, and identify the suitable ones for specific environmental objective
- Classify environmental issues and related policy tools according to their features in terms of efficiency, equity, capability of boosting technical change, feasibility
- Discuss the climate change problem and the specific challenges that climate change implies at an international level
- Describe the main economic drivers behind energy consumption, and the role it plays in creating the need for environmental intervention
- Address the main features of the waste problem, and discuss the possible policy solutions.
The final assessment will be based on:
- 60%: final written exam
- 20% middle term essay
- 15% participation to class experiments
- 5% attendance
Tietenberg, T. H., & Lewis, L. (2016). Environmental and natural resource economics, Routledge, 8th edition.
Additional specific references and notes will be provided during the course.