Introduction to Environmental Economics and Policy

CEP357

(Spring 2005/2006)

Instructor:
Doc. Ing. Petr Šauer, CSc.
Head of Department of Environmental Economics
University of Economics Prague
W. Churchilla 4, 130 67 Prague 3
Tutorial hours: Tuesdays 10.00-12.00, Room 332 NB,
E-mail: sauer@vse.cz

1. Fundamental information about the content of the course; discussion about the economic dimension of environmental problems (scarcity of nature goods, public and private nature goods, externalities etc.).

   Turner, Pearce, Bateman (1993): Introduction, Chapters 1 and 5

2. Ethics, values, environmental values, implications for actions of individuals in the markets and in political systems, implications of environmental policies.

   Class exercise: comparison of human values of university students from approximately 8 states all over the World and values of the current group (a questionnaire distributed at the class); discussion about human value priorities and their importance for individual's behavior both in the economic system and in the political system.

   Turner, Pearce, Bateman (1993): Chapter 2
   

3. Analytical evaluation of single environmental factors and an evaluation of the total quality of the environment in a region: the difference between a state and the quality of the environment; finding the "points of orientation" on the half-straight-line of the changed state of the environment for the evaluation; using multicriteria analyses for the evaluation.

   Class exercise (case): expert evaluation of total quality of living in a city, where ecological factors are included; a computer simulation of a possibility of a consensus between different value oriented participants, discussion of public choice problems in the field, etc.).

   Sauer P.: Multicriteria evaluation of quality of living in a city, lecture notes and teaching case study (distributed at the lecture)

4. Explanation of basic terms such as economic damage due to environmental degradation, control costs (environmental protection costs), environmental burden of the economy, sustainable economy etc.

   Class exercise: small "brainstorming" on finding examples of both the damage and control costs.

   Šauer P.: Some Macroeconomic Consequences of Environmental Problems, Syllabus CESP (distributed at the lectures)
   Turner, Pearce, Bateman (1993): Chapter 4
   

5. Economic damage from environmental degradation: main approaches to quantification both the damage and benefits from environmental protection projects.

   Class exercise: real and hypothetical market of a selected private good; valuation without and with additional ecological (ethical) information given to the consumer. Class exercise: simplified cost-benefit analyses - the benefits evaluation based on a contingent valuation. (Class lab economic experiment: hedonic pricing of environmental quality of family houses building sites.)

   Turner, Pearce, Bateman (1993): Chapter 8
   Readings: Knetch J.L., Davis R.K.: Comparison of Methods for Recreation Evaluation

6. Environmental capital investment: introduction to the theory of net and gross environmental capital investment; efficiency of environmental protection spending from both private and public point of view; possible approaches to quantification of environmental effects for setting priorities of funding from public financial sources; the role of cost-benefit and cost-effectiveness analyses and problems of discounting are also discussed in this block.

   Small numerical illustrations of polluter's decision-making and of a public authority decision-making
   

   Turner, Pearce, Bateman (1993): Chapter 7
   

7. Basic microeconomic views on environmental problems: models of optimal behavior of single polluters; environmental problems and market equilibrium of private goods.

   Simple numerical illustration: optimal pollution on a microeconomic level. Reminding the exercise from the block No.6.

   Turner, Pearce, Bateman (1993): Chapter 5
   

8. Basic types of tools of environmental policy, conditions upon which they work, their advantages and disadvantages, the role of government; command-and control approach, market-based incentives, negotiation between polluters and sufferers and an authority and polluters, tradable pollution permits.

   Small class exercise: economic advantage of economic tools. Small class lab economic experiment: coasian theory based negotiation.

   Turner, Pearce, Bateman (1993): Chapters 10, 11, 12, 13 and 14
   Readings:
   Coase, R.: The Problem of Social Cost Randall A.: Coasian Externality Theory in a Policy Context

9. Pollution permits trading as a market-based tool of environmental policy.

   Class lab experiment: pollution permit trading in a hypothetical region

   Turner, Pearce, Bateman (1993): Chapter 13
   Readings: Readings: Tietenberg T.: Transferable Discharge Permits and the Control of Stationary Source Air Pollution: A Survay and Synthesis

10. Environmental fees, environmental subsidies and environmental policy tool mix.

    Computer simulation on a model: a teaching case study, which illustrates and gives an opportunity to discuss more topics mentioned above (microeconomic problems, some macroeconomic aspects, ecological contribution discussion and some political consequences).

    Readings:
    Baumol W.J., Oates W.E.: The Use of Standart and Prices for Protection of the Environment
    Šauer P., Fiala, P., Dvořák, A.: Model for Support of Decision making in Environmental Policy - Negotiation between Authority and Polluters, Prague Economic Papers 1998, No.2.

11. Basic macroeconomic view on environmental problems: views on optimal environmental quality in some territory - static and dynamic model; discussion about the degree of optimism and pessimism about economic growth; other macroeconomic consequences of environmental and economic policy decisions.

    Simple numerical illustration: an optimal environmental quality on the macroeconomic level. Class exercise: small "brainstorming" on finding possible macroeconomic impacts of the environmental policy decisions.

    Šauer P.: Some Macroeconomic Consequences of Environmental Problems, Syllabus CESP (distributed at the lectures)
    Turner, Pearce, Bateman (1993): Chapter 3

12. Introduction into the theory of Renewable and Non-renewable resources

    Turner, Pearce, Bateman (1993): Chapters 15 and 16

There are three groups of topics of student presentations:

1. Czech and Middle Europe environmental problems (air pollution, water pollution, waste disposal problems, comparison of East-West situation in selected area, selected natural resources problems, selected environmental problems in towns etc.)
   
2. International and global environmental problems (trans-boundary emission problems, tropical deforestation, climate changes (greenhouse effect, global warming), ozone layer problem, biological diversity problems etc.)
   
3. Other (according individual interests of students - for instance: Environmental problems in developing countries; ethics, human values and the environment etc.)

Exam conditions:

3 written exams		- max 60 points
	(3x about 4 questions, average 5 points each)
Student presentation	- max 10 points
Attendance		- max 20 points (one point for a lecture)
Oral final exam		- max 10 points
TOTAL 			- max 100 points

Grading scale:

93 - 100%  A  (Excellent)
85 -  92%  B  (Very Good)
77 -  84%  C  (Average)
69 -  76%  D  (Below Average)
61 -  68%  E  (Failure)
55 -  60%  Fx (Fail - possible to retake the exam)
54% - less F  (Fail)

Literature

Readings (available from the CESP library):
Environmental Economics and Policy (Selected Classical Readings), Edited by: Šauer P., Livingston M., ETP, Nakladatelství a vydavatelství litomyšlského semináře, Prague-Greeley-Bratislava 1996

Recommended textbook:
Turner, R.K., Pearce D., Bateman I.: Environmental Economics, Harvester Wheatsheaf, 1993

Alternative textbooks recommended:
Kolstad, Ch. D. : Environmental Economics, Oxford University Press 2000
Siebert, H.: Economics of the Environment: Theory and Policy. Springer 1998
Pearce D.W., Turner R.K.: Economics of Natural Resources and the Environment, The Johns Hopkins University Press, Baltimore 1991
Tietenberg T.: Environmental and Natural Resource Economics, HarperCollins Publishers, New York, 1996.

Another literature (mostly available from the CESP library in English):
Environmental Yearbook of the Czech Republic (since 1991)
Prague Environment 1998. Institute of Municipal Informatics of the City of Prague 1999
State Environmental Policy. Ministry of the Environment of the Czech Republic, Prague 1999, 2001, 2003
Report on the Environment in the Czech Republic. Ministry of the Environment of the Czech Republic.

Useful link for searching for literature in the field:
www.env.cebin.cz
see pages of the Department of Environmental Economics for other useful links.

Useful addresses for searching for literature:
Library of the Ministry of the Environment and Library of the Czech Ecological Institute (both located in the same building): Vršovická (street) 65, Praha 10 - Vrsovice

Library CERGE and Economic Institute of the Czech Academy of Science, Politických vězňů 9, Praha 1