ECN170 Environmental and Resource Economics

The course gives an introduction to environmental and resource economics (ERE). This consists of four parts: 1) The general model for the interactions between the economic and the ecological systems.

2) Models for optimal use of resources: i) Renewable/conditionally renewable resources. - Environmental resources - water-, air-, and soil quality (environmental economics). - Biological resources - fish, forest, wildlife populations (bioeconomic models). - Non-renewable resources - oil, gas, minerals.

3) Regulatory tools (environmental taxes, tradeable emission permit, etc.)

i) Cost-benefit analysis (CBA)/Cost-effectiveness analysis (CEA)/valuation of environmental goods

ii) Green accounting (a) National level - Green national accounts, and b) Firm level - Environmental /sustainability acccounting

4) Policies/regulatory measures. i) Decentralised policies (Liability laws, property rights, voluntary action).

ii) Command-and-control measures (laws, standards).

iii) Incentive-based measures (taxes, subsidies, tradable permits). Criteria for choice of policies:

The aim of ERE is socially optimal management of environment and natural resources maximizing social welfare. Part 1 reviews welfare theory and a general model for interaction between the economic and ecological systems, and how optimal resource management maximises the welfare of society. Part 2 reviews the specific models for socially optimal management of environmental resources, biological resources and non-renewable resources. If we are currently not at the socially optimal of the resource, we can identify alternative actions that may reach this goal. Part 3 reviews analytical tools that can be used to identify measures where social benefits exceeds social costs, which will bring us closer to the optimal amount of the resource. Part 4 discusses how to implement these profitable actions through the use of various policy measures. Often, specific combinations of the action and policy measure must be analysed, and combinations of measures are also considered. Policy measures are compared based on a list of criteria including their efficiency, fairness, incentives for long-run improvements, and enforceability.

Knowledge:

• Understand what environmental and resource economics and sustainable development is
• Know simple models for economic optimal management of environmental quality, biological resources and non-renewable resources
• Know what cost-benefit analysis is
• Know what external effects and public goods are
• Know what environmental accounting at the company level is
• Know environmental policy instruments for optimal pollution control and management of natural resources, and criteria for choice of instruments.
• Knowledge of global pollution problems and policy instruments

Skills:

• Ability to make simple applications of economic theory to environmental problems
• Ability to evaluate what models can be applied to different natural resources
• Ability to evaluate pros and cons of using different environmental policy instruments to reduce pollution of air, water and soil.

General competence:

• Use graphical representation to illustrate theory and models
• Understand how theory and models can be applied to real world problems