Economics of Environmental Policy Instrument Design


Course Objective

After completing this module, the student is able to:
- Understand and describe the differences between policy instruments for
managing environmental problems (such as taxes, subsidies, emission
trading, performance standards and other regulations);
- Understand and discuss under which conditions environmental
regulations are necessary and under which conditions economic
instruments are more appropriate;
- Analyse the desirability of policy instruments with respect to
specific environmental problems (conventional pollutants, climate
change, fisheries, transport, ecosystem services, etc.);
- Discuss how institutions and distributional concerns influence policy
instrument design, including in developing countries;
- Apply this knowledge to a case study in which policy instruments are
designed to solve a relevant environmental problem of choice.

Course Content

A sound economic analysis of environmental policies is imperative for
achieving effective and efficient solutions to solve the important
sustainability problems of our planet. Many of these problems arise
because the consequences of everyday behaviour on the environment or
natural resources are not borne by the individuals who choose how to
behave. Market-based policy interventions harness the power of financial
incentives to encourage firms and individuals to take into account the
full societal impacts of their decisions. This course gives an overview
of the primary market-based environmental policy instruments, both in
theory and as applied in different policy contexts from the local
through to the global level. It offers in-depth analyses of the
desirability and application of the following policy instruments to a
variety of environmental problems: taxes, subsidies, emission trading
systems, output-refunded pricing systems, and individual transferable
quota systems. Additional topics may include regulatory standards,
voluntary mechanisms, renewable energy policies, fuel economy policies,
and insights for moving towards a circular economy. This course tackles
some of the most pressing environmental problems that our planet faces
today, such as, climate change, transport externalities, the depletion
of fish stocks, water management and industrial pollution.

Teaching Methods

Lectures, tutorials with assignments, and a research project. 6 ec = 160
hours in total.

Method of Assessment

Closed-book exam (50%)

Assignments and research project (50%)

Entry Requirements

Bachelor’s degree in Economics;
Bachelor’s degree in Earth and Economics;
Bachelor’s degree in Econometrics, Environmental Sciences, Transport
Science, Engineering, or Geography (with sufficient background in
economics and statistics).


Mandatory readings TBD, but may include:

Sterner, T., Coria, J. (2012). Policy Instruments for Environmental and
Natural Resource Management. 2nd Edition. RFF Press, New York.

Emissions Trading in Practice: A Handbook on Design and Implementation.
World Bank, Washington, DC.

Supplemental readings to be made available on Canvas.

Target Audience

Students of the MSc Spatial, Transport and Environmental Economics.
Students of the MSc Economics, Specialization Public Policy
First year students of MSc Earth Sciences, specialization Global
Environmental Change and Policy who meet the above entry requirements.
Students of MSc Environment and Resource Management who meet the above
entry requirements.

General Information

Course Code E_STR_EEPID
Credits 6 EC
Period P2
Course Level 400
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator prof. dr. M.W. Hofkes
Examiner prof. dr. C. Fischer
Teaching Staff prof. dr. W.J.W. Botzen
F. Zhou
prof. dr. C. Fischer

Practical Information

You need to register for this course yourself

Last-minute registration is available for this course.

Teaching Methods Study Group, Lecture
Target audiences

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