Economics of Environmental Policy - Lecture Notes | PPA 723, Exams of Introduction to Public Administration

Download Economics of Environmental Policy - Lecture Notes | PPA 723 and more Exams Introduction to Public Administration in PDF only on Docsity! PA 777 The Economics of Environmental Policy Spring 2009 David Popp Office Hours: 426 Eggers Hall Monday 10:00-11:30 office ph: 443-2482 Tuesday 10:00-noon dcpopp@maxwell.syr.edu or by appointment Course Description: This course provides an introduction into the principles of environmental economics, with a focus on policy applications. The principal problem in any economics course is how to best allocate scarce resources. This holds true for environmental economics as well. However, environmental resources differ from other goods that economists study in that there is usually no market for them. Thus, government policies are needed to maintain and improve environmental quality. The course begins by examining how economic incentives lead to environmental problems, and discussing various options for dealing with these problems. Because economic analysis requires information on both costs and benefits, we next discuss methods for valuing the benefits of environmental amenities. The course continues with applications to various policy issues, including the environment in developing countries, international issues, and energy. We conclude with a discussion of the political economy of environmental issues. Goals of the course: The main objective of this course is for you to learn how to think critically about issues relating to environmental economics. Upon completion of this course, you should be able to explain the economic rationale for government involvement in environmental issues, and be able to discuss what the impact of such involvement will be. In particular, it is hoped that the class will provide you with a better understanding of current issues relating to the environment. Accomplishing these goals requires not only a mastery of the theory of environmental economics, but also an ability to apply these theories to real world issues. As such, much of the content of the course will apply the basic tools of environmental economics to current event issues. Learning to apply economics to the real world takes practice. The assignments for this class are designed to get you thinking and writing using economic analysis. In addition, classroom discussion plays an important role in developing the skills to apply economic theory to the real world. Active participation in discussions, both in class and via e-mail (discussed below) is vital to success in this course. For this reason, class participation will count towards ten percent of your course grade. Don’t be afraid to participate because you feel what you have to say isn’t important or may not be correct. Many of the things we will discuss in this class have no right answers. Your opinions matter! The class participation grade will consist of two components: participation in general class discussions and participation in discussions on the class e-mail discussion list. I will occasionally use the list to post follow-up questions to topics discussed in class. Prerequisites: The prerequisite for this course is PPA 723, Managerial Economics for Public Administrators, or an equivalent course in microeconomics. If you have any questions about whether or not you have taken an appropriate course, please see me as soon as possible. Environmental Economics p. 2 of 11 Class Home Page: The home page for this class is: http:// classes.maxwell.syr.edu/ppa777 You can also connect to the home page through my personal home page, which can be found at: http://faculty.maxwell.syr.edu/dcpopp/index.html The web site includes information about assignments and links to other useful economic sites. These links may be particularly useful as you work on your research paper. E-mail: All students in the class are required to have an e-mail account and to check e-mail regularly. An e-mail discussion list will be set up for the class, to which you should subscribe. Information on how to subscribe is included below. Participation in a class e-mail discussion list makes up part of your class participation grade. In addition, I will occasionally make announcements about assignments and class material via the discussion list. Not subscribing is not an appropriate excuse for missing these announcements. E-mail discussion group: I have set up an e-mail discussion group for the class. All students are expected to subscribe to the mailing list. You may use this list for any class related activities, such as asking questions, continuing discussions from class, and instigating new discussions. I will use the list to keep you informed about assignments, answer questions, and instigate discussion. When messages are sent to the list, all students subscribed to the list will get the message. To subscribe to the list, send an e-mail to listserv@listserv.syr.edu with the following message: SUB EnviEcon Jan Smith Note that this is all that need be in the body of the message, and that it must be typed in exactly as written, except, of course, that you should replace your name for Jan Smith. When you sign up, you will receive a message with detailed instructions for participating in the mailing list. This message will ask that you reply, so as to confirm that you intended to join the list. It is important that you remember to reply, or else you will not be added to the list! A couple of technical notes: E-mails sent to the list are sent to EVERYONE who subscribes to the list. If you want to send a personal e-mail to a specific class member (or to me), use their e-mail address, not the list's address. The list is a good place to ask questions about class materials, because everyone can see the answer. It is not the way to let me know that you are going to miss class on Monday. For that you should send an e-mail to me personally. Also, I am considered the owner of this list. If you experience any problems, please e-mail me directly. My e-mail address is dcpopp@maxwell.syr.edu. Environmental Economics p. 5 of 11 Course Outline I. Introduction January 12 – What is Environmental Economics? Reading: Field, Chapter 1 “The ethics gap,” The Economist, December 2, 2000, p. 78. Fullerton, Don and Robert N. Stavins, “How Economists See the Environment,” Nature, vol. 395, 1998, reprinted in Readings. Vascellaro, Jessica E., “Green Groups See Potent Tool in Economics,” The Wall Street Journal, August 23, 2005. January 14 – Scarcity: The Key Problem in Economics Reading: Field, Chapter 2 Lomborg, Bjorn, “The truth about the environment,” The Economist, August 4, 2001, pp. 63-65. II. Tools of Economic Analysis January 21 – Market Failures Reading: Field, Chapter 3 (review: optional) Field, Chapter 4 Hardin, Garrett, “The Tragedy of The Commons,” Science, vol. 162, 1968, pp. 1243-1248, reprinted in Readings. “A rising tide,” The Economist, September 20, 2008, pp. 97-98. “Commons sense,” The Economist, August 2, 2008, p. 76. January 26 – Modeling Pollution Reading: Field, Chapter 5 III. Government Intervention in Environmental Policy January 28 – Should the Government Intervene? Reading: Field, Chapters 9 & 10 Coase, Ronald, “The Problem of Social Cost,” The Journal of Law and Economics, vol. 3., October 1960, pp. 1-44, reprinted in Readings. Broder, John M., “Los Angeles Groups Agree to Airport Growth, for a Price,” The New York Times, December 17, 2004, A22. Egan, Timothy, “Oregon’s Property Rights Law Kicks In, Easing Rigid Rules,” The New York Times, July 25, 2006, p. A14. February 2 – Command and Control Policies for the Environment: The Case of Water Reading: Field, Chapters 11 &14 Stavins, Robert N. (2006), “Vintage-Differentiated Environmental Regulation,” Stanford Environmental Law Journal, 25(1), 29-63. Environmental Economics p. 6 of 11 February 4 & 9 – Emissions Fees and Subsidies Reading: Field, Chapter 12 Fullerton, Don, Andrew Leicester, and Stephen Smith (2008), “Environmental Taxes,” NBER Working Paper #14197 (sec. 1-4 required, 5-8 optional). Millock, Katrin and Thomas Sterner (2004), “NOX Emissions in France and Sweden: Advanced Fee Schemes versus Regulation,” chapter 5 in Choosing Environmental Policy: Comparing Instruments and Outcomes in the United States and Europe, Winston Harrington, Richard D. Morgenstern, and Thomas Sterner, eds., Resources for the Future Press: Washington, DC, pp. 117-132. Hanson, Craig and David Sandalow (2006), “Greening the Tax Code,” Tax Reform and the Environment, The Brookings Institution. “Mountains for the centuries,” The Economist, February 3, 2007, p. 35. *Parry, Ian W.H., Margaret Walls and Winston Harrington, (2007), “Automobile Externalities and Policies,” Journal of Economic Literature, 45(2), 373-399. February 11 – Tradable Permits: theory Reading: Field, Chapter 13 Bell, Ruth Greenspan, “Are Market-Based Instruments the Right First Choice for Countries in Transition?” Resources, Winter 2002, pp. 10-14. February 16 – Permit Trading Policy in Practice Reading: Field, Chapter 15 Schmalensee, Richard et al., “An Interim Evaluation of Sulfur Dioxide Emissions Trading,” Journal of Economic Perspectives, vol. 12, Summer 1998, pp. 53-68. Stavins, Robert N., “What Can We Learn From the Grand Policy Experiment? Lessons From SO2 Allowance Trading,” Journal of Economic Perspectives, vol. 12, Summer 1998, pp. 69-88, reprinted in Readings. Sandel, Michael J., “It’s Immoral to Buy the Right to Pollute,” The New York Times, December 15, 1997, reprinted in Readings. Barringer, Felicity, “A Plan to Curb Farm-to-Watershed Pollution of Chesapeake Bay,” The New York Times, April 13, 2007, p. A10. Barringer, Felicity and Kate Galbraith, “States Aim to Cut Gases By Making Polluters Pay,” The New York Times, September 16, 2008, A17, A26. Mufson, Steven, “Europe’s Problems Color U.S. Plans to Curb Carbon Gases,” Washington Post, April 9, 2007, p. A1. “Selling hot air,” The Economist, September 9, 2006, pp. S17-S19. “Trading thin air,” The Economist, June 2, 2007, p. S8-S12. *Ellerman, A. Denny and Barbara K. Buchner (2007), “The European Union Emissions Trading Scheme: Origins, Allocation, and Early Results,” Review of Environmental Economics and Policy, 1(1), 66-87. February 18 – Dealing with Risk: Toxins in the Ecosystem Reading: Field, Chapter 16 Pindyck, Robert S. (2007), “Uncertainty in Environmental Economics,” Review of Environmental Economics and Policy, 1(1), 45-65. “Brownfield sites: Muck-spreaders,” The Economist, April 21, 2001, 26-27. “Tax or Trade,” The Economist, February 16, 2002, p. 72. Take home quiz 1 handed out in class on Wednesday, February 18. Due in Class Monday, February 23. Environmental Economics p. 7 of 11 February 23 – Voluntary Environmental Compliance Reading: Lyon, Thomas P. and John W. Maxwell (2002), “‘Voluntary’ Approaches to Environmental Regulation,” chapter 4 in Economic Institutions and Environmental Policy, Maurizio Franzini and Antonio Nicita, eds., Ashgate Publishing: Aldershot, Hampshire, England. Daley, Beth, “Not as green as they claim to be,” Boston Globe, May 14, 2008. Revkin, Andrew C., “Buying Carbon-Neutral,” The New York Times, April 29, 2007. “Eco-warriors at the gate,” The Economist, March 3, 2007, p. 67-68. February 25 – Federalism and Environmental Policy Reading: “Federalism and Environmental Protection: Case Studies for Drinking Water and Ground-Level Ozone,” Congressional Budget Office, November 1997. Adler, Jonathan H., “The Fable of Federal Environmental Regulation: Reconsidering the Federal Role in Environmental Protection,” Case Western Reserve Law Review, 2004, vol. 55, pp. 93-113. Barringer, Felicity, “California, Taking Big Gamble, Tries to Curb Greenhouse Gases,” The New York Times, September 15, 2006, p. A1, A20-A21. *Bushnell, James, Carla Peterman, and Catherine Wolfram (2007), “Local Solutions to Global Problems: Climate Change Policies and Regulatory Jurisdiction,” Review of Environmental Economics and Policy, 2(2), 175-193. Environmental Economics p. 10 of 11 VII. International Issues April 6 – International Agreements Reading: Field, Chapter 21 Bhagwati, Jagdish, “The Case for Free Trade,” Scientific American, November 1993, pp. 42-49. Daly, Herman E., “The Perils of Free Trade,” Scientific American, November 1993, pp. 50-57. Esty, Daniel C., “Bridging the Trade-Environment Divide,” Journal of Economic Perspectives, vol. 15, Summer 2001, pp. 113-130. “Atmospheric pressure,” The Economist, April 19, 2003, p. 64. “Emissions suspicions,” The Economist, June 21, 2008, 88. “The standard question,” The Economist, January 15, 2000, p. 79. April 8 – Global Warming Reading: Field, Chapter 20, pp. 430-447 McKibbin, Warwick J. and Peter J. Wilcoxen, “The Role of Economics in Climate Change Policy,” Journal of Economic Perspectives, vol. 16, Spring 2002, pp. 107-129, reprinted in Readings. Pizer, William A., “The Evolution of a Global Climate Change Agreement,” American Economic Review, 96(2), May 2006, pp. 26-30. Shelling, Thomas C., “The Cost of Global Warming: Facing the Tradeoffs,” Foreign Affairs, vol. 76, Nov./Dec. 1997, reprinted in Readings. Gelling, Peter and Andrew C. Rivkin, “Climate Talks Take On Added Urgency After Report,” The New York Times, December 3, 2007, p. A3. Lohr, Steve, “The Cost of an Overheated Planet,” The New York Times, December 12, 2006, C1, C5. Revkin, Andrew C., “Reports From Four Fronts in the War on Warming,” The New York Times, April 3, 2007. “Adapt or die,” The Economist, September 13, 2008, 67-68. “Dismal calculations,” The Economist, September 9, 2006, pp. S14-S17. “Melting Asia,” The Economist, June 7, 2008, 29-32. April 13 – Climate Policy Simulation Environmental Economics p. 11 of 11 VII. Energy and the Environment April 15 – Energy and the Environment Reading: Perloff, Jeffrey M., “Exhaustible Resources,” Microeconomics: Fourth Edition, pp. 562-568. Mouawad, Jad, “Rising Global Demand for Oil Provoking New Energy Crisis,” The New York Times, November 9, 2007, p. A1, A24. Mouawad, Jad, “Oil Innovations Pump New Life Into Old Wells,” The New York Times, March 5, 2007, p. A1, A11. Varian, Hal R., “The Rapidly Changing Signs at the Gas Station Show Markets at Work,” The New York Times, August 24, 2006, p. C3. “Shock treatment,” The Economist, November 17, 2007, p. 92. “Steady as she goes,” The Economist, April 22, 2006, pp. 65-67. April 20 & 22 – Alternative Energy Technologies Reading: Holdren, John P. (2006), “The Energy Innovation Imperative: Addressing Oil Dependence, Climate Change, and Other 21st Century Energy Challenges,” innovations, pp. 3-23. Jaffe, Adam B., Richard G. Newell, and Robert N. Stavins, “Technology Policy for Energy and the Environment,” in Adam B. Jaffe, Josh Lerner, and Scott Stern, eds., Innovation Policy and the Economy, vol 4, MIT Press: Cambridge, MA, pp. 35-68, 2004. Kammen, Daniel M. and Gregory F. Nemet (2005), “Reversing the Incredible Shrinking Energy R&D Budget,” Issues in Science and Technology, 22(1), 84-88. Lander, Mark, “Solar Valley Rises in an Overcast Land,” The New York Times, May 16, 2008, C1, C7. Mouawad, Jad, “A Refinery Clears the Air to Grow Roses,” The New York Times, June 30, 2006, pp. C1, C4. Revkin, Andrew C., “Budgets Falling in Race to Fight Global Warming,” The New York Times, October 30, 2006, pp. A1, A14. Wald, Matthew L., “The Carbon Calculus,” The New York Times, November 7, 2007, p. H1, H11. “Evaluating the Role of Prices and R&D in Reducing Carbon Dioxide Emissions,” Congressional Budget Office, September 2006. “Dirty king coal,” The Economist, June 2, 2007, pp. S22-S24. “Sunlit uplands,” The Economist, June 2, 2007, pp. S16-S20. “The elusive negawatt,” The Economist, May 10, 2008, 78-80. “Where to start,” The Economist, September 9, 2006, pp. S23-S24. VII. Political Economy April 27 – The Political Economy of Environmental Policy Reading: Adler, Jonathan H., “Rent Seeking Behind the Green Curtain,” CATO Regulation. Shogren, Jason F., “A Political Economy in an Ecological Web,” Environmental and Resource Economics, vol. 11, 1998, pp. 557-570. RESEARCH PAPERS DUE IN CLASS MONDAY, APRIL 27 TAKE HOME FINAL EXAM WILL BE AVAILABLE TO SIGN OUT DURING EXAM WEEK