75570 - Resource Valuation and Decision-Making Methods

Learning outcomes

The purpose of this course is to enable students to rigorously apply appropriate resource evaluation and decision-making methodologies. In the first module, 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. The second module of this course aims at connecting the resource valuation methods presented in the first module, with cost-benefit analysis (CBA) methods which will be appropriate for the evaluation and decision making regarding projects related to environment and natural resources. More specifically module 2 will present the way that contemporary CBA tools are used in the resource context and will cover topics related to the discount rate, distributional issues and risk analysis. Next, ecosystems and the valuation of their services will be presented in order to connect total economic value with CBA. Special issues related to biodiversity, irreversibility, and quasi-option value will be presented. Resource use is intrinsically linked with sustainability. This course will cover concepts related to sustainability, comprehensive wealth, genuine savings, the greening national accounts and the UN sustainable development goals (SDGS). Finally, the course will conclude with a discussion of the link between emerging infectious diseases, climate change and the increasing human encroachment in the natural environment.

Course contents

The purpose of this course is to enable students to rigorously apply appropriate resource evaluation and decision-making methodologies.

The course is organized in two modules (Prof. Anastasios Xepapadeas, Module 1, and Prof. Anna Montini, Module 2).

The first module of this course aims at connecting the resource valuation with cost-benefit analysis (CBA) methods, which will be appropriate for the evaluation and decision-making regarding projects related to environment and natural resources. More specifically, module one will present the way that contemporary CBA tools are used in the resource context and will cover topics related to the discount rate, distributional issues and risk analysis. Next, ecosystems and the valuation of their services will be presented in order to connect total economic value with CBA. Special issues related to biodiversity, irreversibility and quasi-option value will be presented. Resource use is intrinsically linked with sustainability. This course will cover concepts related to sustainability, comprehensive wealth, genuine savings, the greening of national accounts and the UN sustainable development goals (SDGs). The course will cover the following topics:

• Cost-Benefit Analysis: Basic Concepts
• The Welfare Foundations of Cost-Benefit Analysis
• Discounting in Cost-Benefit Analysis
• Distribution Issues and Benefits Transfer
• Cost-Benefit Analysis: Risk Assessment
• Total Economic Value and (Quasi) Option Value
• Ecosystem Services and their Valuation
• Biodiversity Concepts and Valuation
• Valuing Health and Life Risks
• Defining and Measuring Sustainability
• Sustainability at the Corporate Level
• Sustainability and Development

The second module of this course considers different valuation techniques for environmental goods and environmental services:

Valuation when primary markets are missing from observed behaviour and through Surveys

Valuation Methods: Revealed and stated preferences under existing, surrogate and hypothetical markets; Travel cost, Hedonic Pricing, The value of statistical life, Contingent valuation, Choice Experiments; Benefit Transfer.

Data collection techniques and resource valuation case studies.

Readings/Bibliography

Lectures in the form of slide presentations will be provided during the course.

A. Xepapadeas, 2024, Lectures in Applied Environmental Economics and Policy, 2024, World Scientific Lecture Notes in Economics and Policy, Vol 19., World Scientific, New Jersey.

G. Atkinson, N Braathen, B. Groom and S. Mourato, 2018, Cost-Benefit Analysis and the Environment: Further Developments and Policy Use, OECD.

European Commission, 2014, Guide to Cost-benefit Analysis of Investment Projects 2014-2020, DG for Regional and Urban Planning.

R. Perman, Yue Ma, J. McGilvray, and M. Common, 2012, Natural Resource and Environmental Economics, 4th edition, Pearson Education.

The World Bank, 2006, Where is the Wealth of Nations? Measuring Capital in the 21^st Century, Washington DC.

Further readings will be recommended by the two lecturers.

Teaching methods

Lectures

Assessment methods

There will be a final exam consisting of four questions (2 for module one and 2 for module two), all of which must be answered. There is also an optional assignment (one optional assignement for module 1 and one optional assignemtn for module 2). For students who complete the optional assignment the grade of the assignment counts for 20% of the final grade and the final exam counts for 80%. For students who do not complete the optional assignment the final exam counts 100% of the final grade.

In case online exams will be envisaged by the University of Bologna, the structure of the written exam is the same. The exam will be run through Zoom or MS Teams and Exams Online (EOL). Detailed instructions on how to manage and hand in the online exam are available on the course page on the VIRTUALE platform.

The maximum possible score is 30 cum laude, if all answers - and the optional assignment if submitted - are correct, complete and rigorous.

The grade is graduated as follows:

<18 failed
18-23 sufficient
24-27 good
28-30 very good
30 e lode excellent

Teaching tools

Presentations/Slides and some suggested readings are available on VIRTUALE.

Office hours

See the website of Anna Montini

See the website of Anastasios Xepapadeas