Course description
The issues of sustainable development recently have received increased attention as the doubts are arising on whether the current pace of economic development will affect future generations. The core questions asked are related to the issues of environmental degradation, usage of natural resources and, in close relation to that, usage of various types of energy. Economics is seen as one of the major sciences in providing important tools for finding solutions to the above-mentioned issues. This course aims at presenting the key theories economists rely upon in their policy suggestions about environment, natural resources development and in analyzing energy markets.

The first part of the course deals with the big question: how can we make each and every one care about the environment in the most efficient way. Before that we need to understand why environmental problems came to being in the first place, and this is where externalities come into play, and property rights assignment as a solution. Next important issue is how to measure the value clean environment brings – several approaches will be discussed including cost-benefit analysis. Then the course turns towards different solutions to environmental problems offered by economics: taxes, subsidies, rationing, and, most interestingly – creation of new markets. Each of these suggestions has its own merits and problems, but the choice often depends not only on what is optimal economically, but on what is optimal politically, and this is an important dimension of the choices to be made.

The second and third parts of the course discuss one of the biggest sources of environmental degradation – namely, natural resources, and first of all – non-renewable natural resources used for energy production. The second part deals with natural resources in general – how should they be treated in economic theories, and how they differ from the standard factors of production – labour and capital. Both renewable and non-renewable resources are discussed as well as the relevant public choices about production and growth levels accounting for potential environmental problems.

The third part of the course deals with the markets for specific natural resources – non-renewable natural resources used in production of energy. This part of the course relates different types of market structure with markets for different energy-producing natural resources (oil, gas, coal) and then provides an in-depth analysis of the evolution of the two major modern energy markets – oil and gas ones. Analysis includes several stages of energy market development illustrating the evolution of contracts, pricing mechanisms, market organization etc. An important part of energy market development is investment both financial and capital, and the changing structures and incentives for investment decisions related to energy markets make an important part of the course.

Learning outcomes
By the end of this course, students should be able to:
• explain the sources of environmental problems (externalities);
• discuss pros and cons of different methods of valuing clean and sustainable environment;
• critically discuss different economic tools for solving environmental problems;
• discuss the political aspect of the choices related to solving environmental problems;
• explain the problem of intertemporal choice in defining the levels of production of natural resources;
• distinguish between renewable and non-renewable natural resources and explain the differences is makes for the economic theory;
• explain changes in the energy markets in terms of supply and demand interaction and a suitable market structure;
• explain and evaluate expected effectiveness of policy response of governments to changes in energy markets;
• explain interrelations between financial markets and energy markets using relevant information;
• the development logic of the major trends in oil and gas markets;
• the major financial tools used on the energy markets, their relevance for investment decisions and market development;
• problems related to investments in energy markets, mechanisms of investment protection.

Key topics
• Economics of market allocation;
• Property rights, externalities, and environmental problems;
• Cost-benefit analysis and environmental decision-making;
• Valuing the environment;
• Economics of pollution control;
• Climate change;
• Economic vs political choices in solving environmental problems;
• Natural resources in production
   o renewable vs non-renewable;
   o intertemporal choices of the level of production;
• Sustainable development;
• Energy markets
   o market structures and their relevance to various energy markets;
   o evolution of oil and gas markets;
   o importance of financing for the development of energy markets.

Prerequisites
This course has no prerequisites. However, some basic mathematics, algebra, and graphing will be used.

Evaluation
News discussions 10%
In-class participation 10%
Home assignments 30%
Mid-term exam 20%
Final exam 30%

Each week the students will be given an assignment to find news relevant for the energy markets and environmental issues. Each student should present (not more than 3 minutes) a piece of news at the beginning of each class and explain briefly how this piece of news is related to the course contents. Presentations of news will be followed by brief in-class discussions relating presentations to the material studied during the class. Each student might be asked to comment on the material presented, using the material from the previous classes. An active in-class participation is essential. It is important to be ready to answer questions and discuss assigned readings as well as material used in the classroom and to provide feedback on other students’ news reports.
Home assignments: there will be small written assignments every week to test the understanding and check the progress of the students; some assignment might be in the form of summarizing the key points from the core readings.
Mid-term exam will contain a number of open questions covering the studied material in order to check the understanding and progress in the middle of the course.
Final exam will consist of several open questions and problems covering the material of the whole course.

Suggested literature
Core texts:
Dahl C. International Energy Markets: Understanding Pricing, Policies and Profits - Tulsa, OK USA : PennWell Corporation, 2015.
Barrett S., 2003. The theory of international environmental agreements, Handbook of Environmental Economics, volume 3, chapter 28, Eds. K.-G. Mäler and J. R. Vincent.
Tietenberg T., Lewis L. Environmental and Natural Resource Economics, 10th ed. Pearson Education, 2015.

Additional reading
Frankel J.A. (2010) ‘The Natural Resource Curse: a Survey’, NBER, WP 15836.
Polterovich V., Popov V., Tonis A. (2010) ‘Resource abundance: a curse or blessing?’, DESA WP #93.
Rosser A. (2006) ‘The Political Economy of the Resource Curse: a Literature Survey’, IDS, WP 268.
Harris J., Roach B. Environmental and natural resource economics: a contemporary approach. 3rd ed. Routledge, 2015
Dickel R. et al. (2007) Putting A Price on Energy: International Pricing Mechanisms for Oil and Gas. Brussels, Energy Charter Secretariat.
Managi S., Kuriyama K. Environmental Economics, Routledge, 2017.
Hackett S.C. Environmental and natural resources economics: theory, policy, and the sustainable society. 3rd ed. 2006, M.E. Sharpe.

Further readings will be suggested during classes. Obligatory readings will vary between 40 and 50 pages per week.