A002545 - ENVIRONMENTAL ECONOMICS

The course consists of four components: (i) foundations; (ii) the economics of pollution control; (iii) international environmental problems & cooperation; (iv) project appraisal and evaluation.

PART I deals with the foundations of environmental (and resource) economics. In particular, it outlines the fundamental characteristics of an economic approach to environmental analysis, discusses the economy-environment interdependence, and examines the ethical underpinnings of environmental economics. It ends with a comprehensive review of the theory of welfare economics, and provides the fundamental economic tools that will be used throughout the course.

PART II covers what is usually thought to be “environmental economics”; that is, the analysis of pollution. We deal here with pollution targets and methods of attaining them (i.e., pollution control instruments). We are careful to pay proper attention to the relative strengths and weaknesses of alternative methods, especially in the presence of uncertainty. The analysis is supported by both theoretical arguments and empirical examples.

Many environmental problems spill over national boundaries, and can only be successfully dealt with by means of international cooperation. This is the focus of PART III. A central feature of this component is our use of game theoretic concepts and tools to study the extent and evolution of international environmental cooperation. Insights from the theory are then used to analyze the success and challenges of cooperation over specific issues, with an emphasis on climate change.

The last component (Part IV) is concerned with the principles and practice of project appraisal. We provide here an overview of commonly used evaluation methods, examine their theoretical underpinnings and provide examples of application. We conclude with a discussion of the insights that the field of behavioural economics brings to the analysis and evaluation of environmental problems.