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Winter, 2010 Department of Econom ics, Queens University

Econ891 Environmental EconomicsProfessor Devon Garvie, 344 Dunning H all, 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) 20% Mid-term examination 30% Final examination 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 growthC. Nature of environmental assets

II. Welfare Economics and Market Failure (2 3 weeks)A. Review ofFirst Welfare TheoremB. Externalities and public goodsC. Solutions to the externality problem: Pigou v CoaseD. Breakdown of Coase Theorem

III. Environmental Policy (6 6 weeks)A. Modeling pollution mechanisms

B. Target-setting study of various pollutant types such as uniformly mixed and non-

uniformly mixed flow pollutants, stock pollutants, non-point sourcepollutants, multiple pollutants, etc.

C. Instrument design and instrument choice Criteria for instrument choice, command-and-control vs incentive-

based instruments, instrument choice problemD. Complications in regulatory design

Market power, uncertainty, hybrid instruments, inter-temporal, etc.

IV. 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

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Reading List* required readings

HAN Hanley, N., J. Shogren, and B. White. (2007) Environmental Economics In

Theory and Practice, 2 Edition. Oxford University Press.nd

KOL Kolstad, C. (2000) Environmental Economics. Oxford University Press.

MWG Mas-Colell, A., Whinston, M., and J. Green. (1995) Microeconomic Theory.

PERM Perman, R. et. al. (2003) Natural Resource and Environmental Economics, 3rd

Edition. Pearson Addison Wesley.

0. Overviews of Field

Dasgupta, P. (1996) Keynes Lecture onEconomics and the Environment.

Stavins, R. (2004) Environmental Economics. The New Palgrave Dictionary of

Economics, 2 Edition.nd

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, 17.

II. Welfare Economics and Market Failure1

A. Efficiency and Competitive Markets

KOL ch. 4.

PERM ch. 5.

A good graduate microeconomic theory text (like your ECON 810 text) will contain chapters1

related to material covered in section II and can be substituted for required text readings.

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B. Externalities and public goods

* MWG, ch. 11, 350354, 359364.

KOLch. 5, PERMch. 5.

C. Property Rights and the Coase Theorem

* Coase, R. (1960) The Problem of Social Cost. Journal of Law and Economics. 3,142.

* Coase, R. (1988) Notes on the Problem of Social Cost, Ch. 6 in The Firm, the

Market and the Law. University of Chicago Press. 157185.

* Demsetz, H. (1996) The core disagreement between Pigou, the profession, and Coase inthe analyses of the externality question. European Journal of Political Economy. 12,

4, 565

579.

* MWG, ch. 11, 368-369.

KOLch. 6.

Farrell, J. (1987) Information and the Coase Theorem. Journal of Economic

Perspectives. 1, 113129.

III. Environmental Policy

A. Modeling pollution mechanisms

* PERM, ch. 6.16.2.

B. Targets

* PERM, ch. 6.36.9.

KOLch. 9.

C. Instruments

* PERM, ch. 7.

HANchs. 4, 5, KOLchs. 7, 9.

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D. Complications in regulatory design

i. Market Power

* Baumol, W. and W. Oates. (1988) The theory of environmental policy. SecondEdition. Cambridge University Press. Ch. 6.

* Besanko, D. (1987) Performance versus design standards in the regulation of pollution.Journal of Public Economics. 34, 1944.

* Hahn, R. (1984) Market Power and Transferable Property Rights. Quarterly Journal

of Economics. 99, 75365.

ii. 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, 193208.

* MWGch. 11, 369372.

* PERMch. 8, 251261.

KOLch. 10.

iii. Intertemporal

Yates, A. and M. Cronshaw. (2001) Pollution Permit Markets with Intertemporal Tradingand Asymmetric Information. Journal of Environmental Economics andManagement. 42, 104118.

iv. Non-point source pollution TBA

v. Multipollutants

Montero, J. (2001) Multipollutant Markets. The Rand Journal of Economics. 32, 4,762774.

IV. Special Topics

To be determined ...

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