W inter, 2010

Department of Economics, Queens University

Econ891 Environmental Economics

Professor Devon Garvie, 344 Dunning Hall, 533-2286 Office hours: Thursday 11:30am - 1pm or by appointment Course web site: http://qed.econ.queensu.ca/pub/faculty/garvie/econ891/891Home.html

Course evaluation (subject to change if class size very small)

Three assignments (two with policy memos) Mid-term examination Final examination 20% 30% 50%

Course in brief (tentative times)

I. Economy and Environment (1 week) A. Interlinkages between economy and environment B. Laws of Thermodynamics, material balance and economic growth C. Nature of environmental assets Welfare Economics and Market Failure (2 3 weeks) A. Review of First Welfare Theorem B. Externalities and public goods C. Solutions to the externality problem: Pigou v Coase D. Breakdown of Coase Theorem Environmental Policy (6 6 weeks) A. Modeling pollution mechanisms B. Target-setting study of various pollutant types such as uniformly mixed and nonuniformly mixed flow pollutants, stock pollutants, non-point source pollutants, multiple pollutants, etc. C. Instrument design and instrument choice Criteria for instrument choice, command-and-control vs incentivebased instruments, instrument choice problem D. Complications in regulatory design Market power, uncertainty, hybrid instruments, inter-temporal, etc. Special Topics (1 2 weeks) If time permits, we will cover one or two topics of special interest to the class such as: Valuing the Environment: theory and measurement methodologies International Environmental Agreements Inter-temporal welfare economics: environmental discounting and ECBA

II.

III.

IV.

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Reading List
* HAN required readings Hanley, N., J. Shogren, and B. White. (2007) Environmental Economics In Theory and Practice, 2nd Edition. Oxford University Press. Kolstad, C. (2000) Environmental Economics. Oxford University Press. Mas-Colell, A., Whinston, M., and J. Green. (1995) Microeconomic Theory. Perman, R. et. al. (2003) Natural Resource and Environmental Economics, 3rd Edition. Pearson Addison Wesley.

KOL MWG PERM

0.

Overviews of Field
Dasgupta, P. (1996) Keynes Lecture on Economics and the Environment. Stavins, R. (2004) Environmental Economics. The New Palgrave Dictionary of Economics, 2nd Edition. Maler, K. and J. Vincent. (2005) Handbook of Environmental Economics.

I.

Economy and Environment

HAN ch. 1.

Dasgupta, P. (2008) Nature in Economics, Environmental and Resource Economics. 39, 1!7.

II.
A.

Welfare Economics and Market Failure 1

Efficiency and Competitive Markets KOL ch. 4. PERM ch. 5.

A good graduate microeconomic theory text (like your ECON 810 text) will contain chapters related to material covered in section II and can be substituted for required text readings. Page 2

B. *

Externalities and public goods MWG, ch. 11, 350!354, 359!364. KOL ch. 5, PERM ch. 5.

C. *

Property Rights and the Coase Theorem Coase, R. (1960) The Problem of Social Cost. Journal of Law and Economics. 3, 1!42. Coase, R. (1988) Notes on the Problem of Social Cost, Ch. 6 in The Firm, the Market and the Law. University of Chicago Press. 157!185. Demsetz, H. (1996) The core disagreement between Pigou, the profession, and Coase in the analyses of the externality question. European Journal of Political Economy. 12, 4, 565!579. MWG, ch. 11, 368-369. KOL ch. 6. Farrell, J. (1987) Information and the Coase Theorem. Journal of Economic Perspectives. 1, 113!129.

III. Environmental Policy

A. * B. * Modeling pollution mechanisms PERM, ch. 6.1!6.2. Targets PERM, ch. 6.3!6.9. KOL ch. 9. C. * Instruments PERM, ch. 7. HAN chs. 4, 5, KOL chs. 7, 9.

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D. i. *

Complications in regulatory design Market Power Baumol, W. and W. Oates. (1988) The theory of environmental policy. Second Edition. Cambridge University Press. Ch. 6. Besanko, D. (1987) Performance versus design standards in the regulation of pollution. Journal of Public Economics. 34, 19!44. Hahn, R. (1984) Market Power and Transferable Property Rights. Quarterly Journal of Economics. 99, 753!65. Uncertainty Weitzman, M. (1974) Prices vs. Quantities. Review of Economic Studies. 41, 4, 477!491. Roberts, M. and M. Spence. (1976) Effluent charges and Licenses Under Uncertainty. Journal of Public Economics. 5, 193!208. MWG ch. 11, 369!372. PERM ch. 8, 251!261. KOL ch. 10.

ii. *

* *

iii.

Intertemporal Yates, A. and M. Cronshaw. (2001) Pollution Permit Markets with Intertemporal Trading and Asymmetric Information. Journal of Environmental Economics and Management. 42, 104!118.

iv. v.

Non-point source pollution TBA Multipollutants Montero, J. (2001) Multipollutant Markets. The Rand Journal of Economics. 32, 4, 762!774.

IV.

Special Topics
To be determined ... Page 4