ENVIRONMENTAL ECONOMICS

Program

Updated A.Y. 2017-2018

Aim and program of the course: This course aims at providing students with the analytical tools and methodological skills that are necessary to understand the origins of 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. 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 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 are presented at an intermediate-advanced level: 1. The sources of environmental problems: property rights, externalities and the Tragedy of the Commons This part of the course introduces the general conceptual framework used to approach environmental problems. The way in which producers and consumers use environmental resources depends on the property rights governing those resources. It will be shown that in several cases environmental problems arise from violations of the characteristics, which define an efficient property rights structure. 2. Pollution: efficient targets and policy responses The problem of pollution is a major concern of environmental economics. Depending on 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, irreversibilities. 3. Climate change issues Climate change is recognized as the major environmental problem facing the planet. This part of the course provides an overview of international policy negotiations, the role of Carbon Markets, Carbon Finance and the Kyoto Mechanisms (Emissions trading - the European Union Emission Trading Scheme, the Clean Development Mechanism and the Joint Implementation). 4. Energy issues This part of the course will be devoted to the analysis of energy markets, by considering problems related to the dependence on fossil fuels but also issues emerging in the transition towards alternative sources (non-conventional hydrocarbons – shale gas and oil; uranium; renewables). 5. Waste management and policies Inefficiencies in waste production and disposal decisions depend on wrong individual incentives (of both producers and consumers). Traditional policy instruments (i.e. taxes, subsidies, fines, etc.) can affect individual choices, but, in several cases, alternative, behavioral policy instruments may be more effective. This part of the course will review some of the most recent scientific papers dealing with extrinsic and intrinsic motivations for individual behaviors, the emergence of social norms, and the role of behavioral instruments. SUGGESTED READINGS: Perman, R. et al. (2011), “Natural resource and environmental economics”, Fourth Edition, Pearson; Xepapadeas A. (1997), “Advanced principles in environmental policy”, Edward Elgar Pub. Further readings (slides, reports and journal articles) will be available on the course website. Learning Outcome Knowledge and Understanding The course provides students with the knowledge and theoretical basis needed to understand and analyze environmental policy issues. In particular, the lectures provide students with: - the ability to describe environmental problems related to the growth and development of modern economic systems; - a detailed understanding of the theoretical framework that analyzes the interaction between economic and environmental system, of the concepts of efficiency (static and dynamic) in using natural resources, as well as the concepts of environmental sustainability and equity; - the ability to understand problems related to climate change, opportunities and limits of the international cooperation, the relative merits and drawbacks of the main policy instruments (command-and-control and incentive-based instruments), the role of behavioral policy instruments; - understanding of the main issues related to energy demand and supply, waste management problems and policy responses; - knowledge of mathematical and statistical analyses applied to environmental issues. Applying Knowledge and Understanding The concepts acquired during the course will help students to understand more clearly problems related to climate change, sustainable development and the optimal use of natural resources, to critically discuss the concepts of efficiency (static and dynamic), to evaluate and manage environmental damages, to critically discuss and make proposals concerning the sources of local pollution and waste problems. Knowledge and skills developed during the lectures will enable students to identify the advantages and limitations of the various policy instruments and to formulate concrete policy proposals to tackle environmental problems.