Module Code and Title:        DEV203 Environmental Economics

Programme:                          BA in Development Economics

Credit Value:                          12

Module Tutor:                        Tshering Lhamo Dukpa

General objective: This module focuses on economic causes of environmental problems. It examines the role of various economic institutions, incentives, instruments and policies on environment. It aims to develop necessary skills for the valuation of environmental quality, quantification of environmental damages and evaluation of environmental projects.

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

1. Explain the nature of relationship between environment and economics.
2. Analyse the market for environment.
3. Explain the factors leading to market failure.
4. Evaluate the environmental decisions made by economic agents.
5. Analyse the impact of risk and uncertainty on environmental decisions.
6. Apply basic tools of environment accounting.
7. Evaluate the regulatory framework for environmental issues.
8. Analyse the policy response to various environmental issues.
9. Identify the channels of impact on trade and environment.

Learning and Teaching Approach: 

Assessment Approach:

Each student will complete two assignments (10 marks each), one before midterm, covering Unit II, and one after midterm, covering Unit IV. Each assignment should have a maximum limit of 750-850 words. 

2    Adequacy of references used

4    Defining the concepts

3    Use of appropriate analytical tools

8    Analysis and findings

3    Conclusion

A group of 4-6 students will analyse data on locally relevant environment issues. The analysis will be presented for a duration 20 minutes and 5 min Q&A.

1    Situation analysis

2    Methodology of group work

6    Discussion on findings in the joint report

4    Peer review of individual reports 

2    Presentation (individually marked)

Students will complete individual essays on any of the recent issues covered in units V and VI. Word limit: 1000-1200 words.

1    Logical flow of thoughts

7    Ability to comprehend relevant issues in the debate

3    Evidence based arguments

2    Language skills (use of technical terminology and grammatically correct)

1    Subtleness of conclusion

1    Structure of the Essay

Students will take a written exam of 1.5-hr duration covering topics up to the mid-point of the semester. The exam will comprise structured questions like MCQ, fill-in-the-blanks, matching, definition, as well as open-ended essay questions.

Students will take a written exam of 2.5-hr duration encompassing all the subject matter covered in the semester. This assessment is comprehensive and summative in nature, and will comprise structured questions like MCQ, fill-in-the-blanks, matching, definition, as well as open-ended essay questions.

Overview of assessment approaches and weighting

Pre-requisites: None

Subject matter:

1. Unit I: Introduction
   1. The Environment and Economics, Environmental and Ecological Economics
   2. Normative and Positive Economic Analysis, Basic Optimist Model
   3. Quality of Environment: Air and Water Pollution, Toxic Chemicals, Environmental Regulation, Cost of Environmental Protection, Changing perspectives on environment
   4. Resource, environment and economic development 
2. Unit II: Market for Environment
   1. Social Choice for Environmental Protection: Individual Preferences for Environmental Protection, Social Choice from Individual Values: Utility functions and Voting, Social Welfare Function
   2. Efficiency and Markets: Pareto Efficiency, Efficiency in Exchange and Production, Efficiency With and Without Market, and Exchange, Two Welfare Theorem, Consumer and Producer Surplus
   3. Market Failure: Open Access, Externalities, Efficient Provision of Public Goods and Bad, Market Provision for Public Goods, Pricing of Public Goods
   4. Making Decisions about Environmental Programs: Cost and Benefit Analysis, Role of Secondary Markets, Multiple Time Periods, Cost and Effectiveness Analysis, Multi Criteria Analysis
   5. Valuing The Environment: Intentions of Valuing the environment, Externalities and Valuation, Methods of Valuation: Total Economic Value, Contingent Valuation, Surrogate Techniques 
   6. Demand for Environmental Goods: Willingness to Pay and Accept, Marginal Willingness to Pay and Accept, Types of Environmental Goods, Revealed Preferences and Restricted Demand
   7. Hedonic Price Methods: Pollution and Land Price, Rents and Wages, Hedonistic Price Theory 
   8. Household Production and constructed Markets
3. Unit III: Ecological Economics and Environmental Accounting
   1. Basic concepts of Ecological Economics, Green Economy, Principles of Green Economy 
   2. National Income and Environment Accounting: Objectives, Managing Environmental Information, Framework of Environmental Accounting; Green Accounting: Objectives, Forms of Green Accounting, Green GDP
4. Unit IV: Regulation
   1. Regulating Pollution; Rationale, Political Economy of Regulation, Prescriptive Regulations and Economic Incentives, Spatial and Temporal Complications, Property Rights
   2. Regulating Polluters with Unknown Costs, Audits, Enforcement and Moral Hazard, Voluntary Actions and Agreements
5. Unit V: Policy response
   1. Global Framework on Sustainable Development: SDGs, Rio +20 
   2. Climate Change Policy: UN Climate Action, Montreal and Kyoto Protocols 
   3. Trade and Environment: FTAs and Environment, Trans-boundary Pollution, 
6. Unit VI: Environmental Risks, Uncertainty, and Transboundary Issues
   1. Risk and Uncertainty: Difference between Environment Risk and Uncertainty, Subjective and Objective Assessments of Risks, Choices under Risk, Value of Risk Reduction, Insurability of Risk, Role of Liabilities 
   2. International and Interregional Competition
   3. Environment, Growth and Development

Reading List:

Essential Reading

Callan, S. J. & Thomas, J. M. (2013). Environment Economics and Management: Theory, Policy and Applications. South-western Cengage Learning

Harris, J. & Roach, B. (2018). Environmental and Natural Resource Economics: A Contemporary Approach. Routledge.

Kolstad, C. (2011). Intermediate Environmental Economics. Oxford University Press. 

Stavins, R. N., ed. (2012). Economics of the Environment: Selected Reading List. W.W. Norton.

Additional Reading

Perman, R., James, Y. M., McGilvray & Common, M. (2012). Natural Resource and Environmental Economics. Pearson Education. 

Amazon. The Inconvenient Truth (Video). https://www.amazon.com/Inconvenient-Truth-Al-Gore/dp/B000ICL3KG

Date: June 2022