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

This module deepens students’ understanding of the application of
environmental economics to identify solutions for specific problems of
environmental and resource management. There are various policy
instruments and institutional arrangements for addressing environmental
externalities and resource management. A sound economic analysis of
environmental policies is imperative for achieving effective and
efficient solutions to solve the important sustainability problems of
our planet. This course aims to give an overview of market-based
environmental policy instruments in different policy contexts from the
local through to the global level, and in developed and developing
economies. 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, and
individual transferable quota systems. Moreover, it provides insights
for moving towards a circular economy. This course tackles some of the
most pressing environmental challenges that our planet faces today, such
as air pollution, climate change, plastic waste, overfishing, ecosystem
services, and environmental effects of trade and globalization. In
addition to lectures and tutorials, students will work on a research
project in which they design policy instruments to solve a relevant
environmental problem of their choice.

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).


Sterner, T., Coria, J. (2012). Policy Instruments for Environmental and
Natural Resource Management. 2nd Edition. RFF Press, New York.
Partnership for Market Readiness & International Carbon Action
Partnership (2016). Emissions Trading in Practice: A Handbook on Design
and Implementation. World Bank, Washington, DC.
Supplemental readings will 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. C. Fischer
Examiner prof. dr. C. Fischer
Teaching Staff

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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