Peter J Wilcoxen > PAI 777 Economics of Environmental Policy

Course Outline

The course will cover most of the topics below but emphasis will vary from semester to semester depending on the interests of the class.  Where applicable, key readings from the textbook by Callan and Thomas [C&T], the Stavins anthology [S] and the EPA Guidelines [EPA] are listed as well.  C&T readings that are portions of chapters are indicated by subheadings rather than page numbers to accommodate different editions of the book.  The chapter numbers and subheadings below match the 4th edition; if you use a different edition and can't easily match your book to this list, please let me know.  

Foundations

Characteristics of Environmental Problems
  • Externalities
  • Point Sources vs. Non-point Sources
  • Stationary vs. Mobile Sources
  • Stock vs. Flow Pollutants
  • Common Property
  • Stock vs. Flow Resources
  • Renewable Resources
  • Exhaustible Resources
  • Prisoner's Dilemma

  • [C&T] Chapter 1.
  • [S] Hardin, "The Tragedy of the Commons".
Microeconomic Principles
  • Individual Demand, Willingness to Pay and Marginal Benefits [web]
  • Individual Supply, Willingness to Accept and Marginal Costs [web]
  • Market Demand, Supply and Equilibrium
  • Consumer Surplus [web]
  • Producer Surplus [web]
  • Gains from Trade and Social Surplus
  • Pareto Efficiency [web]
  • Deadweight Loss
  • Compensating and Equivalent Variation
  • Present Value [web]
  • Decision Trees
  • Expected Value [web]
  • [C&T] Chapter 2 .

Base Models: Single Source, Single Period Externalities

One Pollutant, One Period, No Uncertainty
  • Marginal Social Surplus, MSS [web]
  • Marginal Social Cost, MSC
  • Negotiation and Coase
  • Strict Liability
  • Moral Hazard
  • Pigouvian Taxes
  • Quotas or Permits
  • Disposal Externalities and Recycling
  • Deposit-Refund Systems
  • Curbside Recycling
  • Take-Back Laws
  • Positive Externalities
  • Marginal Social Benefit, MSB [web]
  • Subsidies

  • [C&T] Chapter 3 from "Environmental Problems: Externalities" to the end.
  • [S] Coase, "The Problem of Social Cost".
One Resource, One Period, No Uncertainty
  • Common Property
  • Property Rights and Ownership
  • Efficient Allocation
  • Quotas
  • Permits

Extensions and Refinements

Multiple Periods
  • Present Value
  • Discounting
  • Marginal Extraction Cost (MEC)
  • Resource Royalties
  • Arbitrage
  • Hotelling's Theorem [web]
  • Backstop Resources
  • Permit Systems with Banking and Borrowing
  • Technology Forcing Regulation
  • Credibility and Time-Consistency

  • [C&T] Chapter 9 through "Reservations about the Use of Benefit-Cost Analysis".
  • [S] Goulder & Stavins, "An Eye on the Future".
  • Optional: [EPA] Chapter 6 (for a detailed discussion of the discounting debate).
Uncertainty
  • Expected Value
  • Fair Insurance
  • Exploration
  • Grade Distribution Curve
  • Proven Reserves
  • Marginal Discovery Cost (MDC)
  • Expected Utility
  • Option Value
  • Risk Aversion
  • Risk Premium
  • Perceptions of Risk
  • Loss Aversion
General Equilibrium
  • Pollution in General Equilibrium
  • Green Tax Reform
  • Rebound and Jevon's Paradox

Multiple Sources

Uniformly Mixed Pollutants
  • Marginal Benefit and Marginal Cost of Abatement
  • Minimizing the Cost of Abatement across Sources [web]
  • Taxes and Subsidies
  • Quotas
  • Tradable Permits
  • Distributional Effects of Alternative Policies
  • Taxes and Permits Under Uncertainty [web]
  • Hybrid Policies
  • Technology Standards
  • Performance Standards
  • Information Disclosure Policies
  • Monopoly Polluters
  • Monitoring and Enforcement

  • [C&T] Chapters 4, 5.
  • [EPA] Chapter 4.
Geography Dispersed Pollutants
  • Non-uniformly Mixed Pollutants
  • Transboundary Pollution
  • Local vs. National Policies
  • Median Voter Model
  • Non-convexities and Multiple Equilibria

  • [S] Dasgupta, et al. "Confronting the Environmental Kuznets Curve"

Measuring Environmental Benefits

  • Damage Function
  • Averting Expenditure
  • Risk Assessment
  • Threshold Pollutants
  • Dose-Response Function
  • Value of a Statistical Life (VSL)
  • Value of a Statistical Life Year (VSLY)
  • Value of Mortality Risk (VMR)
  • Hedonic Pricing
  • Travel Cost Method
  • Option Demand
  • Existence Value
  • Contingent Valuation
  • Embedding Bias

  • [C&T] Chapters 6,7.
  • [S] Portney, "The Contingent Valuation Debate".
  • [S] Viscusi, "The Value of Life in Legal Contexts".
  • Optional [EPA] Chapter 7 (for additional depth valuation methods).

Environmental Public Goods

  • Rival and Non-Rival Goods [web]
  • Exclusive Goods
  • Club Goods
  • Pure Public Goods
  • Congestible Goods [web]
  • The NIMBY Problem
  • Environmental Amenities
  • Irreversibility

Environmental Policy in Practice

Air Quality in the US
  • National Ambient Air Quality Standards (NAAQS)
  • SO2 Allowance Trading

  • [C&T] Chapter 9 "US Government Support for Benefit-Cost Analysis" through end.
  • [C&T] Chapters 10,12.
  • [S] Stavins, "What can We Learn from the Grand Policy Experiment? Lessons from SO2 Allowance Trading"
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Peter J Wilcoxen, The Maxwell School, Syracuse University
 Revised 01/11/2016