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FRE 525 Environmental Economics and Policy
Course Outline
Class Time: Tuesday, Thursday 12:30 -1:50 PM
Room: MacMillan: 154
Description
In this course, we will build an analytical framework from simple economic principles. We will use it to define society’s
optimal pollution and preservation/exploitation of natural resources. We will then ask: can markets function effectively to
protect our environment or is government policy necessary? When it comes to the environment, the market often fails. What
can we do to improve it? Based on the type of resource, we will study policies to correct market failure. We will understand
the realities of government intervention and how government’s can do better in steering our environment.
Based on the economic framework developed, we will study in detail the economics of climate change, marine
resources, urban environmental issues including transportation and the environment, and energy.
What you will learn
! The critical role of property rights, institutions, and incentives in environmental problems
! The various sources of market failure in real-world environmental situations.
! The relative merits of different environmental policies—market-based or other regulatory solutions—in different
contexts.
Instructor
Sumeet Gulati
Phone: (604) 822-2144
Office: 341 MacMillan
Office Hours: Tuesday, Thursday 2:00 PM – 3:00 PM
Besides my office hours, email (sumeet.gulati@ubc.ca.) is the best way to get in touch with me.
Prerequisites
1) Intermediate microeconomic theory.
2) Basic differential and integral calculus.
3) Basic Regression Analysis.
Course Requirements
Students will take two exams: two midterms, and one final. The midterm will be held in class, lasting 80 minutes. The final
exam will be comprehensive (it shall cover all material taught in class), and will last two (or more) hours. You must take exams
at the scheduled times unless you have another exam at the same time, serious illness, or an emergency. You must validate
with documentation the reason(s) why you will be unable to take any exam. There shall be six assignments. The first two
assignments will problems based on material taught in class. The last four assignments will ask you to reuse your student blogs
to write about a policy issue as instructed.
Your grade shall be determined as follows
Exams and Problem Sets
First Midterm
Best 5 from 6 Problem Sets
Final Exam
Date
February 12th, 2015.
Assigned every two weeks.
To be announced.
Percent of Grade
30 percent
30 percent
35 percent
Class Participation
Contributions to class discussions.
5 percent
Your participation grade depends on your contribution to class discussions. All contribution is appreciated, even
questions asking me to clarify previously taught material. The sole aim of assigning a participation grade is to encourage active
learning for everyone. I will ascertain and assign this part.
The class twitter discussion: Almost everyday, I shall tweet links or commentary to news and blog posts via my twitter page:
https://twitter.com/sgulati. All material I consider relevant to this course will be marked with the hashtag: #mfre. You can
contribute in two ways: 1) by providing your thoughts, or links to information relevant to this course, or 2) by commenting on
what I, or your classmates, tweet.
Academic Dishonesty
Please review the UBC Calendar “Academic regulations” for the university policy on cheating, plagiarism, and other forms of
academic dishonesty. Academic dishonesty will be dealt with very seriously in this course.
Online Course Material
Available at Webct Connect: http://www.connect.ubc.ca. You are required to regularly login to your course page for FRE
525. Your syllabus, course-lecture slides, additional material, announcements, assignments, and grades are available.
Course Outline and Readings
How to use this course outline: This outline is a collection of papers, and topics commonly taught in the economics of the
environment. Wherever possible I provide a stable link to the paper. While some of these links will work anywhere, many of
them are digitally protected requiring a subscription. You can access this material by logging in through your account at the
UBC library, or on any computer connected via Ethernet on the UBC network. For some articles I do not provide a link, in
that case, please search for the article (if you search via the UBC library you will find access to its electronic version).
This outline is subject to change. I might add/replace material as the course proceeds.
1. Introduction to Environmental Economics (much of this material is for you to review yourself):
a. Fullerton, D. and R. Stavins (1998), “How do Economists Really Think About the Environment?” Discussion
paper 98-29, Resources for the Future, http://www.rff.org/documents/RFF-DP-98-29.pdf.
b. Material listed in part b. will not be covered in class. You are required to review it yourself. There is
course material on Connect for this section, please review your course slides up to and including the set of
slides titled: Mineral Economics. This material will not be taught in class. Students can supplement the
material on Connect by reading an undergraduate level environmental textbook of their choice. One
suggestion is: Keohane and Olmstead, “Markets and the Environment,” Island Press,
http://www.islandpress.com/ip/books/book/islandpress/M/bo5092233.html. You will be tested on the
following topics in your first midterm (see Table above for a date):
1. Economic Efficiency.
2. Externalities and Market Failure.
3. Benefit-cost analysis and its relationship with efficiency.
4. Dynamic/Intertemporal Efficiency.
5. Mineral Economics/The Extraction of Depletable Resources.
c. The economics of pollution control / Instrument choice in environmental policy.
1. Material in Connect: course slides titled “The Economics of Pollution Control” and “Ambient
Standards.”
2. Lawrence H. Goulder and Ian W. H. Parry (2008),“Instrument Choice in Environmental Policy,” Rev
Environ Econ Policy 2(2): 152-174 doi:10.1093/reep/ren005. Available online at
http://reep.oxfordjournals.org/content/2/2/152.abstract.
2. Marine Resources/Open Access Resources.
a. Course Material on Connect.
b. Brown G. (2000) “Renewable natural resource management and use without markets”, Journal of Economic
Literature, 38, 875-914.
Economics of Fisheries
c. Conrad, J.M. (1995), “Bioeconomic models of the fishery”, Handbook of Environmental Economics, (D. Bromley,
ed.) Oxford, Blackwell, 405-432
d. Gordon, H.S. (1954), “The economic theory of a common property resource: the fishery”, Journal of Political
Economy, 62, 124-142
Policy Problems
e. Turner M.A., (1997), “Quota-induced discarding in heterogeneous fisheries” Journal of Environmental Economics
and Management, 33, 186-195
3. The Economics of Climate Change.
a. Some basic issues: Class material on Connect.
b. Symposium: The Economics of Climate Change: The Stern Review and Its Critics. This is a symposium of
four papers online at: http://reep.oxfordjournals.org/content/2/1.toc. Individual papers are:
1. Robert Mendelsohn (2008), “Is the Stern Review an Economic Analysis?” Rev Environ Econ
Policy 2(1): 45-60 doi:10.1093/reep/rem023
2. Thomas Sterner and U. Martin Persson (2008), “An Even Sterner Review: Introducing Relative
Prices into the Discounting Debate,” Rev Environ Econ Policy, 2(1): 61-76 doi:10.1093/reep/rem024.
3. John P. Weyant (2008), “A Critique of the Stern Review's Mitigation Cost Analyses and Integrated
Assessment,” Rev Environ Econ Policy 2(1): 77-93 doi:10.1093/reep/rem022.
4. Simon Dietz and Nicholas Stern (2008), “Why Economic Analysis Supports Strong Action on
Climate Change: A Response to theStern Review's Critics,” Rev Environ Econ Policy 2(1): 94113 doi:10.1093/reep/ren001.
c. Evaluating Policy: An Example of Taxes versus Cap and Trade for Climate Policy
1. Aldy, J. E., E. Ley, and I. W. H. Parry (July 2008), “A Tax-Based Approach to Slowing Global
Climate Change,” Resources for the Future Discussion Paper, RFF DP 08-26.
2. Olewiler, N. (November 2008), “A Cap and Trade System for Reducing Greenhouse Gas Emissions
in BC,” Pacific Institute for Climate Solutions, Victoria, BC.
4. The Urban Environment.
a. Kuminoff N. V., V. Kerry Smith, and C. Timmins (Dec 2013), “The New Economics of Equilibrium Sorting
and Policy Evaluation Using Housing Markets,” Journal of Economic Literature, 51(4).
b. Glaeser E. L., and M. E. Kahn (May 2010), “The greeness of cities: Carbon dioxide emissions and urban
development,” Journal of Urban Economics, 67(3), 404-418.
c. Gilles Duranton and Matthew A. Turner (October 2011), The fundamental law of road congestion: Evidence
from the US, American Economic Review, 101(6):2616-52.
5. Transportation and the Environment.
a. Overview
1. Alex Anas and Robin Lindsey (2011), “Reducing Urban Road Transportation Externalities: Road
Pricing in Theory and in Practice,” Rev Environ Econ Policy 5(1): 66-88 doi:10.1093/reep/req019
2. Stef Proost and Kurt Van Dender (2011), “What Long-Term Road Transport Future? Trends and
Policy Options,” Rev Environ Econ Policy 5(1): 44-65 doi:10.1093/reep/req022
3. Werner Antweiler and Sumeet Gulati (December 2012), “Environmental Tax Policies Towards
Transportation in British Columbia” Canadian Tax Journal, 20(12).
4. Werner Antweiler and Sumeet Gulati (August 2013) “Market-Based Policies for Green Motoring in
Canada,” Canadian Public Policy, 39 (2).
b. Gasoline Prices/Taxes:
1. Christopher R. Knittel (Winter 2012), “Reducing Petroleum Consumption from Transportation,”
Journal of Economic Perspectives, 26(1).
2. Busse, Meghan, Christopher R. Knittel and Florian Zettelmeyer (2011). “Pain at the Pump: The
Differential Effect of Gasoline Prices on New and Used Automobile Markets.” Unpublished.
c. Fuel Efficiency Standards
1. Soren T. Anderson, Ian W. H. Parry, James M. Sallee, and Carolyn Fischer (2011), “Automobile Fuel
Economy Standards: Impacts, Efficiency, and Alternatives,” Rev Environ Econ Policy 5(1): 89108 doi:10.1093/reep/req021.
d. Subsidizing new technology.
1. Chandra, Ambarish, Sumeet Gulati and Milind Kandlikar (September 2010), "Green Drivers or Free
Riders: An Analysis of Tax Rebates for Hybrid Vehicles," Journal of Environmental Economics and
Management, 60 (2), 57-144.
6. Energy.
a. William D. Nordhaus, “Energy: Friend of Enemy”, The New York Review of Books,
http://www.nybooks.com/articles/archives/2011/oct/27/energy-friend-or-enemy/?pagination=false.
b. Richard Schmalensee (December 2011), “Evaluating Policies to Increase Electricity Generation from
Renewable Energy” Rev Environ Econ Policy, doi:10.1093/reep/rer020.
c. More Material to be added later.
7. International Environmental Issues – if time permits.
Tentative Lecture Schedule (to be finalized). Do not consider right now.
1.
Tue, January 6th, 2015
Introduction/Economics
of Pollution Control
2.
Thurs, January 8th, 2015
Pollution Control/Ambient
Standards
3.
Tues, January 14th, 2015
Ambient Standards
4.
Thurs January 15th, 2015
Marine Resources
5.
Tues, January 20th, 2015
Marine Resources
6.
Thurs, January 22nd, 2015
Marine Resources
7.
Tues, January 27th, 2015
Marine Resources
8.
Thur January 29th, 2015
Marine Resources
9.
Tues, February 3rd, 2015
Marine Resources
10.
Thurs, February 5th, 2015
Climate Change
11.
Tues, February 10th, 2015
Climate Change
12.
Thurs, February 12th, 2015
Midterm
13.
Tues, February 17th, 2015
Reading Week
14.
Thurs, February 19th, 2015
Reading Week
15.
Tues, February 24th, 2015
Climate Change
16.
Thurs, February 26th, 2015
The Urban Environment
17.
Tues, March 3rd, 2015
The Urban Environment
18.
Thurs, March 5th, 2015
The Urban Environment
19.
Tues, March 10th, 2015
The Urban Environment
20.
Thurs, March 12th, 2015
Transportation
21.
Tues, March 17th, 2015
Transportation
22.
Thurs, March 19th, 2015
23.
Tues, March 24th, 2015
Transportation
24.
Thurs, March 26th, 2015
Energy
25.
Tues, March 31st, 2015
Energy
26.
Thurs, April 2nd, 2015
Energy
27.
Tues, April 7th, 2015
Energy
28.
Thurs, April 9th, 2015
Summary and Recap.
Assignment 1 given
Assignment 1 due.
Assignment 2 given.
Assignment 2 due.
Assignment 3 given.
Assignment 3 due.
Assignment 4 given.
Assignment 4 due.
Assignment 5 given.
Assignment 5 due.
Transportation
Assignment 6 given.
Assignment 6 due.