Module Code and Title: EEC201 Environmental Economics

Programme(s): BSc Environmental Management

Credit Value: 12

Module Tutor(s): GP Sharma (Coordinator)

Jesse Montes

Leishipem Khamrang

Radhika Chhetri

General objective(s) of the module:

Environmental economics deals with the analysis of the rational development and use of scarce resources. This module will convey the principles underlying the efficient allocations of all resources regardless of how well markets ration their development and use. The module examines the pervasiveness of market failures for environmental goods and the effectiveness of different techniques and policies attempting to correct these failures or to mitigate their negative consequences. This module is a systematic introduction to an economic way of thinking about the environment, which does not assume a background in economics.

Learning outcomes – Upon successful completion of the module, students will be able to:

• Explain the importance of environmental economics in the present local and global context.

• Discuss the major principles of environmental economics.

• Explain how resource use is coordinated in ideal markets and planned economies.

• Highlight the barriers to ideal signalling and incentives in real markets and real government planning.

• Describe economic tools for dealing with natural resource issues.

• Discuss the importance of trade, development, and jobs for effective implementation of environmental economic initiatives.

• Analyse the relationships between population, technology, and scarcity.

• Summarize how market mechanisms can reduce pollution.

• Discuss the methods of valuing ecosystems.

• Point out the possible reasons for coordination failures and the limitations of market signalling and incentives.

• Discuss the relationship of resource scarcity to social coordination system failures.

• Explain the economics of pollution control and management.

• Describe the economics of biodiversity loss and possible preventative measures.

Learning and teaching approaches used:

The module will be conducted over 15 teaching weeks as follows:

• 3 hrs/wk lecture & discussions.

• 1 hr/wk tutorial including debates and panel discussions.

• 4 hrs/wk outside of class, on average, for independent study including data collection for discussion in class and a small-scale group-led discussion or debate.

Assessment:

Semester-End Examination (SE):40%

Continuous Assessment (CA): 60%

Pre-requisite knowledge: ENV101 Introduction to the Environment

Subject matter:

1. Importance and concepts of environmental economics

1. History of environmental economics and its importance

2. Basics concepts of economics

1. Supply and demand

2. Laws of supply and demand; elasticity

3. Unlimited wants and competition

4. Types of resources

5. Reasons for coordination failure

6. Problem of setting boundaries

7. Concept of payment for environment services, green accounting, and tax

2. Scarcity and social coordination systems

1. Scarcity and need for social coordination

2. Property rights and other rules and incentives

3. Social coordination tasks

4. Market valuation and gain from market exchange

5. Market incentives and valuation over time

6. Valuation in planning; incentives

3. Methods of valuing ecosystems: definitions, uses and limitations

1. Cost-benefit analysis

2. Cost effectiveness analysis

3. Hedonic pricing technique

4. Contingent valuation

5. Travel costs

6. Opportunity costs

7. Multiplier effects

4. Reasons for coordination failures: Limitation of market signalling and incentives

1. Common pool resources

1. Issues with property rights and incentives

2. Existence and scale of problems

3. Market signals and overharvesting

4. Local solutions; common property arrangements

5. Non-rival and non-excludable goods: dependence of non-excludability on non-rivalry; decentralized production of non-rival and excludable goods

6. Search for market solutions

2. High cost of markets

1. Missing markets and externalities

2. Non-market feedback mechanisms

3. Cost of specifying property rights

4. A market solution for acid rain: an example

5. Scope and limitation of markets

3. Limitations of government signalling and incentives

1. Cost-benefit analysis of environmental changes

2. Valuing the environment and decision-making over time

3. Monitoring changes in economic-environmental systems

5. Local environmental problems

1. Social coordination under uncertainty

2. Social coordination in waste management and recycling

3. Economics of pollution control

4. Management of common pool resources

6. Worldwide problems and uncertainty

1. Economics of global pollution

1. ozone depletion

2. climate change

2. Economics of biodiversity significance, loss, and preservation measures

Essential Readings:

1. Hanley, N., Shogren, F.J. and White, B. (2012). Introduction to Environmental Economics, 2^nd Ed. Oxford University Press, Great Britain.

2. Tietenberg, T. (2006). Environmental and Natural Resource Economics, 5^th Ed., Published by Pearson Addison-Wiesley. Boston.

3. Wills, I. (2007). Economics and the Environment: A signalling and Incentive Approach, 2^nd Ed. Allen and Unwin, Australia.

4. Wright, R. T, and Boorse, D.F, (2011). Environmental Science – Towards a Sustainable Future, 11^th Edition, PHI Learning Private Limited, New Delhi.

Additional Readings:

1. Common, M. and Stagl, S. (2005). Ecological Economics: An introduction. Cambridge University Press. isbn-10 0-521-01670-3

2. Curkovic, S (2012), Sustainable Development - Authoritative and Leading Edge Content for Environmental Management. InTech, Croatia. (eBook).

3. Haab, T. C. (editor) and Whitehead J C. (2014). Environmental and Natural Resource Economics. Greenwood.

4. Pearce, D.W. and Pearce, C. (2001). The Value of Ecosystems. Convention of Biodiversity, Montreal. http://www.cbd.int/doc/publications/cbd-ts-04.pdf

5. Quarrie, J. (1992). Earth Summit ’92, The United Nations Conference on Environment and Development. Rio de Janerio., Regency Press, London.

Date last updated: May 30, 2015