Final Syllabus. Course Description

Transcription

1 Environmental Economics and Policy Analysis Spring 2015 Copenhagen 3 Credits Faculty: David Possen & Nina Torm s: DIS Contacts: Susanne Goul Hovmand, Program Director for Global Economics, Will Sherman, Program Assistant for Global Economics, Class meetings: Monday and Thursday, , V Course Description This course introduces students to the understanding and application of economic theory and the tools of policy analysis in the context of modern environmental issues. The course introduces basic analytical concepts and relevant economic theory concerning market failures in order to understand the causes of many environmental problems. Moreover, we discuss specific environmental policy areas such as climate change, and look at various tools of economic policy analysis above all, the effect of alternative policies on firms and individuals. Learning Objectives The objectives of the course are (1) to give you a broad understanding of the causes and alternative solutions to modern environmental problems from an economic perspective, and (2) to apply insights derived from economic theory in designing and evaluating policy solutions to a variety of environmental issues. You will learn to understand the role of economics in environmental issues and in the formation of environmental policy. You will learn that economic objectives do not necessarily conflict with environmental goals, and that markets can be used to improve environmental quality. By the end of this course, you will be able to express an informed view on the role, contribution, and limitations of economic tools in providing policy guidance on environmental issues. Course Requirements This course presupposes at least one introductory economics course, preferably microeconomics. This means that you are expected to be comfortable handling basic supply and demand analysis both graphically and algebraically (i.e. with equations). If you are unsure you can fulfil this expectation, please contact one of the instructors as soon as possible. Readings Required reading assignments from course books will be made available online, along with (optional) supplementary articles. The course outline will be posted on DIS Forum, listing the required readings for each lecture. Check the course outline frequently for updates.

2 The assigned readings for each lecture should be read prior to the lecture. Students will often be randomly asked to answer questions about the assigned readings. Here is a suggestion: as you prepare for class, write down 2 or 3 things that strike you about the day s reading, such as some key findings, interesting arguments, etc. This will help you be prepared to answer questions in such instances. Sometimes, you will also be given specific questions to answer ahead of time, in order to focus your reading. You are also encouraged to participate actively in class by asking questions, making comments, sharing ideas, etc. Grading In addition to the readings and through active participation in class, a variety of small written and oral assignments will be used to develop your understanding of the tools of environmental economics and analytical skills in general. Preparation for and participation in these in-class assignments will also contribute to your participation grade. There will be one final closed book, in-class, written exam at the end of the course. The grading allocation will be as follows: Participation: 25% Homework/Assignments: 40% (2 x 20%) Final Exam: 35% Computer policy: Laptop computers are allowed in class ONLY for note-taking purposes. Any other use will have a negative impact on your final grade. Furthermore, any student violating this policy will not be allowed to continue using their laptop in class for the remainder of the semester. Academic Honesty: Plagiarism and Violating the Rules of an Assignment - DIS expects that students abide by the highest standards of intellectual honesty in all academic work. DIS assumes that all students do their own work and credit all work or thought taken from others. Academic dishonesty will result in a final course grade of F and can result in dismissal. The students home universities will be notified. DIS reserves the right to request that written student assignments be turned in electronic form for submission to plagiarism detection software. See the Academic Handbook for more information, or ask your instructor if you have questions. Attendance: You are expected to attend all DIS classes when scheduled. If you miss multiple classes, the Director of Teaching and Learning and Director of Student Affairs will be notified and they will follow up with you to make sure that all is well. Absences will jeopardize your grade and your standing at DIS. Allowances will be made in cases of illness, but in the case of multiple absences you will need to provide a doctor s note. Disability and Resource Statement: Any student who has a need for accommodation based on the impact of a disability should contact Sean Green () to coordinate this. In order to receive accommodations, students should inform the instructor of approved DIS accommodations within the first two weeks of classes.

3 Environmental Economics Lecture Outline Session Date 1 Thursday, August 20 2 Monday, August 24 3 Wednesday, August 26 4 Thursday, August 27 Topics & Instructor(s) Brief introduction to the course Personal introductions you ll get to know us, and we ll get to know you Team formation Team reflection exercise: (i) What is the economy? (ii) What is the environment? (iii) How do/should they interact? Syllabus Q & A Social Event after class Instructors: Nina Torm and David Possen First homework assignment published on Forum Environmental economics and/vs. ecological economics Discussion: Fullerton and Stavins four myths about how economists treat environmental issues We ll watch and discuss the Ecological Economics CRASH COURSE video by Prof. Jon Erickson (University of Vermont) you can take a look here: FIELD STUDY Windmill tour, Avedøre Holme, Hvidovre Instructors: Nina Torm and David Possen; guest lecture by Erik Frølund-Thomsen, chairman, Hvidovre Vindmøllelaug Basic supply and demand theory: a discussion designed to bring those with little background in econ onto the same page as those with more Introduction to the concept of scarcity Readings to be read prior to the session (all readings are found on Forum) No advance reading! Fullerton and Stavins, How Economists See the Environment, Nature 395 (October 1, 1998), pp Harris, appendix to ch. 3, pp

4 5 Monday, August 31 6 Thursday, September 03 September Monday, September 14 8 Thursday, September 17 Introduction to externalities Internalizing externalities: the case of pollution Pigovian tax (the polluter pays principle ) The need to value the environment: how? Introduction to valuation methods Marginal abatement and damage cost curves Aggregating MAC curves Total costs Instructor: Nina Torm Core Course Week No Class Efficient level of emissions Enforcement of costs Equimarginal principle Instructor: Nina Torm Cost/Benefit Analysis Discounting Willingness to pay/accept Instructor: Nina Torm Harris, ch. 3, pp Thomas Helbling, Externalities: Prices Do Not Capture All Costs (International Monetary Fund website, posted March 28, 2012) (3 pages) TEEB Report, ch. 5, pages 14 and 25 Field, chapter 5, pp McKinsey and Company (2008), Greenhouse gas abatement opportunities in Sweden, report Field, chapter 5, pp Field, chapter 6 (pp ), chapter 7 (pp ) and chapter 8 9 Monday, September Thursday, September 24 Policy evaluatrion criteria Incentive compatibility Principal-Agent problem Instructor: Nina Torm Command & Control policy approach Uniform standards Perverse incentives Field, chapter 9 Siebert, chapter 8 Field, chapter 11 September 26- October 04 Instructor: Nina Torm Long Tour/Break week 1

5 11 Monday, October 5 Taxes & Subsidies Deposit-refund system Double dividend Field, chapter Thursday, October 8 Instructor: Nina Torm Topic: Guest lecture on valuation methods Lundhede et al. (2014) Jacobsen and Thorsen (2010) 13 Monday, October Thursday, October 15 Instructors: Guest lecturer Jette Bredahl Jacobsen, University of Copenhagen; David Possen & Nina Torm First homework assignment due on Forum Voluntary agreements and differences to traditional regulation Incentives Negotiation and cooperation Topic: Pigovian taxation The Polluter Pays Principle Croci, The economics of environmental voluntary agreements, Handbook of Environmental Voluntary Agreements. Harris, ch. 3, pp October Long tour/ Break week 2 15 Monday, October Wednesday, October 28 The Ronald Coase revolution, Part 1 The relationship between private and social costs Why transaction costs matter Second homework assignment published on Forum FIELD STUDY European Environmental Agency (EEA) Instructors: Nina Torm and David Possen R. H. Coase, The Problem of Social Cost, The Journal of Law & Economics 3 (October 1960) 1-44, sections I-VII (pp. 1-28) James Surowiecki, Climate Trades, The New Yorker (October 13, 2014) (1 page)

6 17 Thursday, October Monday, November 2 19 Thursday, November 5 The Ronald Coase revolution, Part 2 The Coase theorem: beyond Pigovian tax A right to pollute? Cap-and-trade as a Coasian solution to carbon emissions Cap & Trade policy instruments Emissions trading game Guest lecture on green taxation Instructors: Holger Jensen (Danish Energy association) and David Possen R. H. Coase, The Problem of Social Cost, The Journal of Law & Economics 3 (October 1960) 1-44, sections VIII-X (pp ) Harris, ch. 3, pp Field, chapter 13 Field, chapter 12 Norden Report on "The Use of Economic Instruments" pp (up until and including section 2.4.2) November Travel Break 20 Monday, November Thursday, November Monday, November 23 The Tragedy of the Commons Common-property resources and/vs. public goods What to do? The case of fisheries management The Prisoner s Dilemma Applications to policy negotiations on climate change mitigation we will watch and discuss the IPCC s recent video on this, which you can find here: Prisoner s Dilemma Game! Topic: Climate change & mitigation: conventional views and proposed policy measures Harris, ch. 4, pp Harris, ch. 14, pp M. O. Jackson, A Brief Introduction to the Basics of Game Theory, section 1 (pp. 1-13) Playing Games With the Planet, The Economist (September 27, 2007) (3 pages) Bill McKibben, Global Warming s Terrifying New Math, Rolling Stone (July 19, 2012) (9 pages) United Nations Environment Programme, The Emissions Gap Report 2013: A UNEP Synthesis Report, Chapters 4-6 (pp )

7 23 Thursday, November 26 Climate change & mitigation: the world according to Bjørn Lomborg We will watch & discuss Lomborg s appearance on Letterman (April 12, 2011), which you can find here: Bjørn Lomborg, The Real State of the World, in The Skeptical Environmentalist (Cambridge, 2001), pp Jonathan Ledgard, Bjorn Lomborg is the World s Most Optimistic Statistician, Strategy+Business 38 (Spring 2005) (7 pages) 24 Monday, November Thursday, December 3 Second homework assignment due on Forum Recap of temporal discounting Lomborg vs. Peter Singer on discounting the future We will watch & discuss Lomborg s reply to Raymond Pierrehumbert, December 1, 2010, which you can find here: Debate: What discount rate is appropriate, given the scope and potential impact of climate change? Course wrap-up Q&A for exam preparation Mark Lynas, Natural Bjorn Killer, The Ecologist 33:2 (March 2003), pp Cass R. Sunstein and David A. Weisbach, Climate Change and Discounting the Future: A Guide for the Perplexed, working paper (Harvard Law School), sections I and II (pp. 1-12) Peter Singer, Does Helping the Planet Hurt the Poor? Wall Street Journal (January 22, 2011) (4 pages) Bjørn Lomborg, Does Helping the Planet Hurt the Poor? Wall Street Journal (January 22, 2011) (4 pages) Instructors: Nina Torm and David Possen Schedule is subject to change if necessary with as much notice as possible. Textbooks (these readings will be posted online, no physical copy) Field: Barry C. Field and Martha K. Field (2006), Environmental Economics: An Introduction, 4 th Edition, McGraw-Hill Irwin, Harris: Jonathan M. Harris (2005), Environmental and Natural Resource Economics: A Contemporary Approach, Second Edition, Houghton Mifflin, Articles/Reports Coase, R. H. (1960), The Problem of Social Cost, The Journal of Law & Economics 3: Croci, E. (2005), The economics of environmental voluntary agreements, Handbook of Environmental Voluntary Agreements, 3-30 pp, Springer. The Economist (2007), Playing Games with the Planet, 3 pp.

8 Environmental Protection Agency, Ireland (2012): Hydraulic Fracturing or Fracking : A Short Summary of Current Knowledge and Potential Environmental Impacts Fullerton, D. and Stavins R. (1998), How Economists See the Environment, Nature 395: Helbling, T. (2012), Externalities: Prices Do Not Capture All Costs. International Monetary Fund, 3 pp. IPCC Climate Change report (2014), Mitigation of Climate Change - Summary for Policy Makers. Jackson, M.O. (2011), A Brief Introduction to the Basics of Game Theory, Stanford University. Kitzing, L. and Mitchell, C. (2014), Achieving energy transitions: Which RES policies are best applied when? Conference paper. Ledgard, J. (2005), Bjorn Lomborg is the World s Most Optimistic Statistician, Strategy+Business 38, 7 pp. Lynas, Mark (2003). Natural Bjorn Killer, The Ecologist 33:2, pp McKibben, Bill (2012), Global Warming s Terrifying New Math, 9 pp. McKinsey and Company (2008), Greenhouse gas abatement opportunities in Sweden, report Singer, Peter, and Lomborg, Bjørn (2011), Does Helping the Planet Hurt the Poor? point-counterpoint in Wall Street Journal, 8 pp. total. Sunstein, Cass R, and Weisbach, David A. (2008), Climate Change and Discounting the Future: A Guide for the Perplexed, working paper (Harvard Law School), sections I and II, pp Surowiecki, James (2014), Climate Trades, The New Yorker (October 13), 1 page.