Environmental and Transport Economics

2019-2020

Course Objective

The course aims to teach the student to take market failures in the
realm of environmental and transport economics seriously (Bridging
Theory and Practice - Knowledge and Application). After taking this
course, the student is able to characterize the relationship between
government and market from an economic perspective. The student learns
why, and under what conditions, the free market does not lead to an
efficient allocation of goods, factors of production, and natural
resource use. This course focuses on externalities (pollution,
congestion), natural monopoly (e.g., railways), oligopoly (e.g.,
aviation and fossil fuels), public goods (e.g., environmental quality,
infrastructure), and the management of renewable and non-renewable
natural resource (e.g., fossil fuels, rare-earth elements, fisheries and
forests).

The student learns to apply economic methods and techniques that are
indispensable in this context for analysing market failures and
evaluating associated policies (Academic and Research Skills). This also
includes mathematical models and methods for empirically estimating the
economic values of non-priced goods such as carbon emissions and time,
and methods to judge the value of investment projects through, in
particular, cost-benefit analysis.

After completing this course:

1. You can critically analyse the functioning and failure of markets and
develop government policies to combat market failures.
2. You are able to explain how externalities can be "internalized"
through Pigouvian taxation and tradable permits, both in first-best and
second-best situations.
3. You are able to describe the causes and consequences of tax
competition between governments and of market power in networks and to
provide policy advice to combat this.
4. You are able to characterize the extraction path of natural resources
in a market equilibrium and you are able to explain why and how this
path differs from the socially optimal one.
5. You can apply economic methods and techniques to analyse market
failures and evaluate associated policies.
6. You are able to make cost-benefit calculations and you can use
valuation methods (such as discrete choice models and stated
preferences).
7. You are able to present and discuss results from scientific articles
in a comprehensible manner, both written and orally, together with and
in front of your fellow students.
8. You are aware of the various difficulties that may arise in
regulating markets in reality, and do you understand that simple
"recipes", while useful to illustrate the possibilities, cannot simply
be applied in practice.

Course Content

The premise that the free market automatically leads to an efficient
allocation of goods and factors of production, and that, as a result,
the government should not intervene in the market process, is often too
simple a representation of reality. The course Environmental and
Transport Economics deals with the complex relationship between "market"
and "government" from the perspective of environmental and transport
economics. In the course, general economic insights with regard to the
relationship between "market" and "government" are developed and
elaborated on the basis of practical and appealing examples.

At the core of the course is the concept of "externalities" as an
economic cause of environmental problems such as pollution and
overexploitation of natural resources. Policy instruments to combat
these problems are discussed in the course. In addition, other forms of
externalities are being investigated - in particular traffic jams and
congestion in road traffic. But the course also deals with market
failures arising from market power on railways ("natural monopoly"), in
aviation ("oligopoly" and "contestable markets") and in energy supply
("cartels" such as OPEC); or because of public goods such as
infrastructure. Finally, methods to empirically estimate the economic
values of non-priced goods such as carbon emissions and time, and
methods to make informed investment decisions (in particular
cost-benefit analysis) are discussed and applied.

Teaching Methods

Lectures.
Instruction lectures.
Tutorials.

Method of Assessment

Written exam (60%), individual assessment.
Assignments (40%), group assessment.

Literature

Transport Economics: Syllabus "Markets and Governments: Transport
Economic Applications".

Environmental Economics: Syllabus "The Climate-Economy model DICE" and a
selection of articles.

Recommended background knowledge

Microeconomics I and II; Quantitative Research Methods I and II;
Regional and Urban Economics; Public Economics.

General Information

Course Code E_EBE2_ETE
Credits 6 EC
Period P5
Course Level 300
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator dr. G.C. van der Meijden
Examiner dr. G.C. van der Meijden
Teaching Staff

Practical Information

You need to register for this course yourself

Last-minute registration is available for this course.

Teaching Methods Seminar, Lecture, Instruction course
Target audiences

This course is also available as: