37801 - Environmental Economics

Learning outcomes

The purpose of this course is to enable students to rigorously apply appropriate resource evaluation and decision-making methodologies. In particular, as regards evaluation methods where decisions have marginal impacts in a non-competitive market, theories and applications will be shown in case of tradable and non-tradable resources: in the sub-case of tradable resources, the concept of shadow exchange rate will be introduced; while in the sub-case of non-tradable resources, the concepts of willingness to pay and opportunity costs will be discussed. Evaluation methods where decisions have non-marginal impacts will also be presented. As regards evaluation methods where there is no market, both production approaches (e.g., response method, replacement cost, opportunity cost, preventive cost) and utility approaches (e.g., revealed preferences and stated preferences) will be discussed. Students will also be taught recent theories and applications of evaluation methods as dependent on available information such as (fuzzy or crisp) Cost Effectiveness Analysis, (fuzzy or crisp) Multi-Criteria Analysis, (fuzzy or crisp) Threshold Analysis, (fuzzy or crisp) Cost-Benefit Analysis. Next, as for decision-making methods, as dependent on the appropriate evaluation methods, the choice of a strategy or some strategies will be tackled, by optimising or non-optimising, ranking or combining them, within constrained or non-constrained problems. Students will also be taught recent theories and applications of decision-making methods under uncertainty or risk, time spans, space interactions, indirect effects, and distributive effects.

Course contents

Resource valuation methods (Anna Montini)

Fundamentals of Cost-Benefit Analysis (CBA)

- Project Appraisal

- Valuing Benefits and Costs

- Categories of environmental benefits

- Discounting Future Benefits and Costs

- Risk and uncertainty

- Choice of Discount Rate

- CBA and its application to the environment

Valuing the environment from Observed Behaviour

- Hedonic Price Method

- The Value of Statistical Life

- Travel Cost Method

- Defensive Expenditure Method

- Case studies

Valuing the environment through Surveys

- Contingent Valuation

- Choice Experiments

- Case Studies

Resource decision-making methods (Fabio Zagonari)

Optimal use of renewable resources: examples and applications

Optimal use of non-renewable resources: examples and applications

Cost-Effective Analysis (fuzzy and crisp)

Threshold Analysis (fuzzy and crisp)

Multi-Criteria Analysis (fuzzy and crisp)

Optimising vs. non-optimising

Ranking vs. combining

Uncertainty vs. certainty

Participatory vs. non-participatory

Constrained vs. unconstrained

Interdependent vs. independent

Instant vs. non-instant

Readings/Bibliography

Resource valuation methods

R. Perman, Natural Resource and Environmental Economics, 4th edition, Pearson Education, 2012

A.E. Boardman, D.H. Greenberg, A.R. Vining, D.L. Weimer, Cost-Benefit Analysis - Concepts and Practice, Prentice Hall, 2010

Resource decision-making methods:

Conroy & Peterson (2013) Decision-making in natural resource management, Wiley-Blackwell

Guntenspergen (2014) Application of threshold concepts in natural resource decision-making, Springer

Herath & Prato (2006) Using MCDM in natural resource management, Ashgate

H.F.Campbell and R.P.C.Brown, Benefit-Cost Analysis, Cambridge University Press, Chapters 9, 11, 13

D.W.Pearce and R.K.Turner, Economics of Natural Resources and the Environment, Hemel Hempstead: Harvester Wheatsheaf, Chapters 4-8 & 16-19

Assessment methods

Written examination, 1 hour long and based on 4 questions. Notes or other materials are not allowed.

Teaching tools

ESSENTIAL REFERENCES

Markandya, A., Pascual, M. (2014) The valuation of ecosystem services and their role in decision making: constraints and ways forward, in Nunes, P.A.L.D. et al. (2014) Handbook on the economics of ecosystem services and biodiversity, Edward Elgar, 278-301

Coria, J. et al. (2014) Biodiversity conservation and ecosystem services provision: a tale of confused objectives, multiple market failures and policy challenges, in Nunes, P.A.L.D. et al. (2014) Handbook on the economics of ecosystem services and biodiversity, Edward Elgar, 337-366

van den Bergh, J.C.J.M. (2011) Environment versus growth -  a criticism of “de-growth†and a plea for “a-growthâ€, Ecological Economics 70: 881-890

Kallis, G. (2011) In defence of de-growth, Ecological Economics 70: 873-880

Dietz, S., Neumayer, E. (2007) Weak and strong sustainability in the SEEA: concepts and measurement, Ecological Economics 61: 617-626

Zagonari, F. (1998) International pollution problems: unilateral initiatives by environmental groups in one country, Journal of Environmental Economics and Management 3: 315-326

OPTIONAL REFERENCES

Bartelmus, P. (2013) The future we want: green growth or sustainable development? Environmental Development 7: 165-17

Kallis, G. et al., (2012) The economics of de-growth, Ecological Economics 84: 172-180

van den Bergh, J.C.J.M. (2010) Externality or sustainability economics? Ecological Economics 69: 2047-2052

Kratena, K., Streicher, G. (2012) Spatial Welfare Economics Versus Ecological Footprint: A Sensitivity Analysis Introducing Strong Sustainability, Environmental and Resource Economics 51: 617-622

Traeger, C.P. (2011) Sustainability, limited substitutability, and non-constant social discount rates, Journal of Environmental Economics and Management 62: 215-228

Cabello, J.M. et al. (2014) Multi-criteria development of synthetic indicators of the environmental profile of the Spanish regions, Ecological Indicators 39: 1-23

Bond, A.J., Morrison-Saunders, A. (2011) Re-evaluating sustainability assessment: aligning the vision and the practice, Environmental Impact Assessment Review 31: 1-7

Office hours

See the website of Fabio Zagonari