Environmental Economics


Course Objective

The aim of this course is to provide students with key insights
regarding the nature of environmental problems, the management of
natural resources, and the design of environmental policy instruments.
After following this course, students are able to characterize several
types of market failure and to explain how each of these causes
environmental problems, such as overexploitation of natural resources
and air pollution. Moreover, students will be able to explain which
policy instruments can be used by the government to tackle environmental
problems that arise in a market economy. They will understand key
tradeoffs among the instruments in different settings, such as with
ancillary benefits, technological change, uncertainty, or concerns about
industrial competitiveness or the distributional impacts of policies.
Sstudents will be taught how renewable resources (such as forestry and
fisheries), and non-renewable resources (such as fossil fuels) should
optimally be exploited from a social welfare perspective and how the
optimal exploitation differs from the exploitation in a market
equilibrium. Students will also learn how to use stated and revealed
preference methods to value the environment and design payments for
ecosystem services. Finally, students will learn how approaches from
behavioural and experimental economics may be applied in environmental
The course consists of lectures, homework assignments, tutorials, case
study presentations, and class discussion. The lectures are aimed at
developing a thorough understanding of key economic, environmental and
ethical aspects of environmental problems, and of the link between
theory, methods and empirical analysis. The goal of the assignments is
to practice the use of modern economic methods to analyse and solve
problems in the field of environmental economics. The presentations and
discussions are intended to improve the participants’ economic reasoning
and communication skills.

After following this course, you:
• can explain why, and under which conditions, the free market does not
result in an efficient outcome.
• are capable of showing how externalities can be ‘internalized’ by
using market-based policy instruments
• can compare the incentive, equilibrium, and distributional effects of
emissions taxes, quotas and tradable permits, subsidies, performance
standards, etc.
• are able to advise environmental policy makers on which policy
instruments to use under different circumstances in order to correct the
market outcome
• understand how to use stated and revealed preference methods to attach
a monetary value to environmental services
• can explain how non-renewable resources like fossil fuels, are
exploited in a market economy and how the exploitation differs from the
• can show how renewable resources, like fishery and forestry, are
exploited in a market economy and how the exploitation differs from the
social optimum
• are able to describe and explain how climate policy interventions may
lead to a ‘Green Paradox’, in the sense that the problem of climate
change is aggravated instead of diminished upon the introduction of
those policies
• are able to describe the most important interactions between the
economy and the environment, and their relationship with sustainable
• are able to work with simple mathematical models to analyse the
effects of environmental policy and to determine the time profile of
renewable and non-renewable resource exploitation, both in the optimum
and in the market equilibrium
• have improved your presentation and discussion skills

Course Content

The course will cover topics among the following areas:
- welfare economics, public goods, and market failures
- comparing price-based versus quantity-based mechanisms for addressing
- managing multiple market failures and understanding policy
- feedbacks between environmental policy and technical innovation
- non-renewable resource use, climate change, and the ‘Green Paradox’
- renewable resource use: fisheries and forestry
- theory and methods for environmental valuation
- design, financing and evaluation of mechanisms for Payment for
Ecosystem Services
- environmental applications of experimental and behavioural economics
The topics for the group discussions and student presentations can be
chosen by the participants. They should be based on articles published
in scientific journals.

Teaching Methods

Lectures, assignments, student presentations, and group discussions.

Method of Assessment

Written exam (60%), assignments (20%), and presentation/participation
(20%). Passing the course is conditional on the exam grade being 5.0 or


To be announced.

Recommended background knowledge

Advanced microeconomics.

General Information

Course Code E_STR_EEC
Credits 6 EC
Period P4
Course Level 400
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator prof. dr. C. Fischer
Examiner prof. dr. C. Fischer
Teaching Staff dr. G.C. van der Meijden
prof. dr. C. Fischer

Practical Information

You need to register for this course yourself

Last-minute registration is available for this course.

Teaching Methods Lecture
Target audiences

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