Sustainable Development, Trade, and the Environment EEC345 Fall 2012 Emi Uchida (This version: September 5, 2012)

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1 Sustainable Development, Trade, and the Environment EEC345 Fall 2012 Emi Uchida (This version: September 5, 2012) The world has become much richer in the past century as many countries have achieved unprecedented rates of economic growth. Part of the economic growth has been due to globalization as demonstrated by increasing trade. However, with economic growth and globalization, we also are challenged with degradation of natural resources and the environment. In addition, there remain many poor countries and, even in richer countries, many poor people. Evidence has shown that the poor people disproportionately rely on natural resources for their livelihood. What are the linkages between environment and poverty? Is degrading environment inevitably a consequence of economic growth? How do policies for economic growth, including trade policies, affect the environment? Are there ways to achieve sustainable development? Why is it that even when solutions are available the rural poor do not adopt them? What are some innovative solutions that would give the right incentives to achieve both economic development and environmental goals? The course begins with descriptions of economic development and environmental issues at local, regional and global scale. We will then focus on livelihoods of people engaged in agriculture, forestry, and fisheries to understand the challenges they face in both poverty alleviation and conservation. We will examine alternative policies, markets, and other institutions to address both issues and seek to understand how they shape individual decision making. The course will conclude by examining the relationship between economic growth and the environment the macro scale (i.e., nations). By the end of the course, you will be familiar with new active areas of research in the nexus of development and environmental economics. We will try to make sense of the current affairs policy debates on strategies that address climate change and poverty such as REDD+; effectiveness of innovative market-based schemes to address poverty such as microcredit schemes in South Asia; and unintended consequences of national parks and other conservation strategies in Latin America and Africa. You will also be learning concepts and tools in development and environmental economics. The intention is to address a subset of the most pressing environmental issues facing developing economies and to teach the vocabulary and analytical tools that will aid in understanding and describing these complex ideas. I am sure that for most students this will be a course of new ideas. Make no doubt about it: students will be required to use economics--language and concepts--to understand class room discussions and current events, and to explain observed patterns of development and environment in the world and economic activity of people in developing regions. Along the way, you also will have opportunities to strengthen your presentation and data analysis skills, which are transferable across many types of jobs. Course Details Class: Instructor: Office Hours: Tuesdays and Thursdays 11:00-12:15 pm Swan 305 Emi Uchida, Assistant Professor Office: Coastal Institute (Kingston), Room emi@uri.edu Phone: Thursdays 2:00pm 3:00pm (or by appointment) 1

2 Prerequisites: The course formally requires that you have had at least an introductory course in microeconomics (such as EEC105 or 205 or ECN201.) I will assume that you are familiar with basic concepts from consumer and producer economics (production functions, utility, cost curves, diminishing marginal product, etc.) The course will be issue-oriented but will make rigorous use of the tools and techniques of applied economic analysis. Course Materials: Class Website: (i) Required and optional readings available from Sakai (ii) Some handouts and additional readings will be distributed in class. (iii) Clicker (ResponseCard) (Channel 57) Sakai (Lecture slides/readings/assignments/ etc.) Requirements: 1. Assignments I will give about 10 short assignments which will add up to 30% of your total grade. I will give specific instructions to each assignment. 2. Group Consulting Project You will be assigned into groups of five students to work on a case study based on an actual environmental/poverty setting using real data which I collected. The project will involve multiple stages, each of which will be evaluated by your peers, me, or both. The points you obtain for each stage of the project will add up to 30% of the total grade. The specifics will be announced later in the semester. 3. Digital Exchange You will be corresponding digitally with student(s) in Africa to mutually exchange ideas about connections between the nature and livelihoods. You will be asked to write a short essay or make a short video, and exchange ideas with student(s) in Tanzania. 4. Final Exam: Thursday, December 20 th, 11:30AM-2:30PM The exam will be based on all reading materials and lectures. Makeup exam will not be given. If you have an approved university excuse (e.g., illness with a physician s note; death in the family; etc.) for missing the final exam on the specified date, you should notify the instructor by phone ( ) or (emi@uri.edu) or the Department of Environmental and Natural Resource Economics ( ) as soon as possible. 5. Class Participation Your participation grade will be participation in class using clickers plus my subjective evaluation of your participation in class discussions. This provides you with an opportunity to demonstrate your understanding in addition to regular class assignments. Grading: Assignments 30% Group Consulting Project 30% Digital Exchange 10% Final 20% Class Participation 10% 2

3 How to get the most out of this course You should do the assignments, which will often be discussed on the day when they are due. Doing the reading assignments before each class will also help. This will help you become familiar with new vocabulary and concepts so that you can follow the lecture more easily, as you will have some idea of what s coming. In some assignments, you will be asked to discuss the materials you have read with a group in the next class. You should then reread the book after each lecture and compare it with your notes; this will let you pick up on material that you may have missed or not understood clearly, and will help put it into your long-term memory. Submitting Assignments The submission method will be specified for each assignment. I will ask you to submit some assignments using Dropbox in Sakai. Occasionally I also will ask you to submit a hard copy of your assignment in the beginning of the class. In either case, I will not accept assignments by . Late Assignment Policy I do not expect to have a problem with late assignments but in case problems come up, let me state my policy here. Out of fairness to all, I will not make exceptions to these policies. All assignments are due at the beginning of each class. After that, late assignments lose 10 percent of the grade for every day the assignment is late. Cheating Have respect for yourself and your fellow students and don t do it. I will deal with cheating according to the University regulations. Cheating includes getting or giving help during exam. Students suspected of cheating during tests may be asked to change seats or hand in their tests and leave. Plagiarism is also a form of cheating; this is copying or quoting information directly from a source without giving proper credit. Clickers TurningPoint is the University of Rhode Island campus standard for student response systems. As part of this class I require the student to bring a TurningPoint clicker. The purpose of this clicker is so that I can do in-class polling, take attendance, get feedback about what is being discussed, and testing. You may purchase a Turning Technologies Response Card from the URI Bookstore. Alternatively, you may purchase a Turning Technologies Response Card online directly from Turning Technologies at when prompted, the URI code is 4URI. Most ResponseCard devices (RF, RF LCD, XR and NXT) will be acceptable in this course. Please register your device within Sakai. From Sakai s course site, click on Turning Technologies on the left and then Register ResponseCard or device. The device ID is a six or seven digit/character combination located underneath the barcode on your clicker. You must select the option just this course even if you are using it for multiple classes. You can still register your device to other classes. Do not register through Turning Technology s website. Please bring your clicker or ResponseWare device to every class. As an alternative to a clicker, you may purchase a ResponseWare Web license, which is compatible with any internet browser. Turning Technologies has also developed a ResponseWare app for the Apple iphone, ipod touch, BlackBerry smartphone, Windows Mobile devices, Laptops or Desktops, and more. You may purchase the ResponseWare license from and when prompted, the URI code is 4URI. If you plan on using ResponseWare, please notify the instructor by the end of the second week of class.. If your professor cannot provide you with the answer, contact the Turning Technologies student intern: Sarah Yang or the URI ITS Help Desk ( ). 3

4 Course Outline PART I: WHAT IS SUSTAINABLE DEVELOPMENT? [1.5 weeks] A. Introduction: Current state of the environment and poverty B. What is sustainable development? C. Global efforts toward sustainable development:: Who are the stakeholders? PART II: MICRO-LEVEL PERSPECIVE ON POVERTY AND ENVIRONMENTAL LINKAGES: POLICIES, MARKETS, AND INSTITUTIONS [7 weeks] A. Poverty & environment linkages: Concepts, framework, and application[1 week] B. Environmental Policies and Market-based Approaches Payments for Ecosystem Services & REDD+ [1 week] Protected area and integrated natural resource management [1 week] Common property resources and determinants of cooperation [1 week] C. Institutions, contracts, and market failure Theoretical Framework [1 week] D. Development Policies and Alternative Approaches to Address Market Failure Microfinance Institutions [1 week} Mitigation and Adaptation Strategies to Climate Change: Weather-indexed Insurance to Cope with Risk [1 week] Networks and Associations for Rural Enterprise [1 week] PART III: ECONOMIC GROWTH AND THE ENVIRONMENT: THE MACRO PERSPECTIVE [2 Weeks] A. Sources of Modern Growth & Measurements of Sustainable Development B. Does natural resource hinder economic development? The Resource Curse C. Environmental Kuznets Curve GROUP PRESENTATIONS: December 4 th and 6 th FINAL EXAM: Thursday, December 20, :30AM-2:30PM 4

5 Course Materials * indicates readings that are required for this course. Additional reading materials will be distributed in class. PART I: WHAT IS SUSTAINABLE DEVELOPMENT? [1.5 weeks] A. Introduction: Current state of the environment and poverty B. What is sustainable development? *Toman, Michael A. (1992) The difficulty in defining sustainability. In Oates, Ed. The RFF Reader in Environmental and Resource Policy, Second Edition. Washington, D.C.: Resources for the Future. Pp C. Global efforts toward sustainable development:: Who are the stakeholders? TED Africa: The Next Chapter ( PART II: MICRO-LEVEL PERSPECIVE ON POVERTY AND ENVIRONMENTAL LINKAGES: POLICIES, MARKETS, AND INSTITUTIONS [7 weeks] A. Poverty & environment linkages: Concepts, framework, and application[1 week] *World Bank (2008) Poverty and the Environment: Understanding Linkages at the Household Level, Chapters 1 and 2 (Pp. 1-25) *Barrett, C., A. Travis, and P. Dasgupta On biodiversity conservation and poverty traps. Proceedings of the National Academy of Sciences 108(34): *McNally, C, E Uchida, and A Gold. (2011)The effect of a protected area on the tradeoffs between short-run and long-run benefits from mangrove ecosystems. PNAS 108(34): B. Environmental Policies and Market-based Approaches Payments for Ecosystem Services & REDD+ [1 week] *Can payments for environmental services help reduce poverty? An exploration of the issues and the evidence to date from Latin America. World Development 33 (2): World Bank s website for Payments for Environmental Services Protected area and integrated natural resource management [1 week] *Ferrarro, P, M Hanauer and K Sims. (2011) Conditions associated with protected area success in conservation and poverty reduction PNAS 108(34): *Lewis, D, S Bell, J Fay, K Bothi, L Gatere, M Kabila, M Mukamba, E Matokwani, M Mushimbalume, C Moraru, J Lehmann, J Lassoie, D Wolfe, D Lee, L Buck, and A Travis. Community Markets for Conservation (COMACO) links biodiversity conservation with sustainable improvements in livelihoods and food production. PNAS 197(34): (also see Community Markets for Conservation (COMACO) Common property resources and determinants of cooperation [1 week] 5

6 C. Institutions, contracts, and market failure Theoretical Framework [1 week] *Binswanger, H. and M. Rosenzweig. "Behavioral and Material Determinants of Production Relations in Agriculture," Journal of Development Studies 22, pp only D. Development Policies and Alternative Approaches to Address Market Failure Microfinance Institutions [1 week} *Armendariz, B and J Morduch. Rethinking Banking, in The Economics of Microfinance, 2 nd Ed. Pp Mitigation and Adaptation Strategies to Climate Change: Weather-indexed Insurance to Cope with Risk [1 week] *Barnett, B, C. B. Barrett, and J. R. Skees Poverty traps and index-based risk transfer products. World Development 36(10): *Chantarat, S, C Barrett, T Janvilisri, S Mudsri, C Niratisayakul and P Poonswad. Index insurance for pro-poor conservation of hornbills in Thailand. PNAS 108(34: Networks and Associations for Rural Enterprise [1 week] *World Resources Institute Ch. 3 Connecting Rural Enterprises: Networks and Associations. In Roots of Resilience - Growing the Wealth of the Poor. Washington, D.C. (Pp only required) roots-of-resilience PART III: ECONOMIC GROWTH AND THE ENVIRONMENT: THE MACRO PERSPECTIVE [2 Weeks] A. Sources of Modern Growth & Measurements of Sustainable Development *Solow, Robert An almost practical step toward sustainability. In Oates, Ed. The RFF Reader in Environmental and Resource Policy, Second Edition. Washington, D.C.: Resources for the Future. Pp *World Bank (2011) The Changing Wealth of Nations: Measuring Sustainable Development for the New Millennium. B. Does natural resource hinder economic development? The Resource Curse *Brunnschweiler, C.N. and E. H. Bulte Linking natural resources to slow growth and more conflict. Science 320: C. Environmental Kuznets Curve *Carson, Richard T. The Environmental Kuznets Curve: Seeking empirical regularity and theoretical structure. Review of Environmental Economics and Policy 4(1): GROUP PRESENTATIONS: December 4 th and 6 th FINAL EXAM: Thursday, December 20, :30AM-2:30PM 6