75570 - Resource Valuation and Decision-Making Methods

Academic Year 2021/2022

  • Docente: Anna Montini
  • Credits: 12
  • SSD: SECS-P/01
  • Language: English
  • Moduli: Anna Montini (Modulo 1) Anastasios Xepapadeas (Modulo 2)
  • Teaching Mode: Traditional lectures (Modulo 1) Traditional lectures (Modulo 2)
  • Campus: Rimini
  • Corso: Second cycle degree programme (LM) in Resource Economics and Sustainable Development (cod. 8839)

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 and the greening national accounts. The course will conclude with discussion of contemporary environmental policy instruments.

Course contents

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

  1. Fundamentals of Cost-Benefit Analysis: Project Appraisal, Valuing Benefits and Costs, Discounting Future Benefits and Costs, Choice of Discount Rate.
  2. Valuation when primary markets are missing from observed behaviour and through Surveys: Total economic value.
  3. 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.
  4. Data collection techniques and resource valuation case studies.
  5. Topics in Cost-Benefit Analysis: The choice of the social discount rate – Ramsey rule and declining discount rates, Distributional weights, Risk analysis – sensitivity, Monte Carlo, qualitative - in CBA
  6. Cost-benefit analysis for the environment and total economic value; Ecosystem valuation: Valuation of ecosystems services, Ecosystems services and human well-being, Biodiversity valuation; Conservation vs development; Irreversibility and decision making in the face of risk, option price and option value; The TEEB (The Economics of Ecosystems & Biodiversity) approach.
  7. Sustainability: Strong and weak sustainability; Comprehensive wealth and genuine savings; Introduction to green accounting and the adjusted domestic product; Sustainable Development Goals.
  8. Introduction to the economics of climate change.
  9. Emerging infectious diseases: Discussion of the recent COVID-19 pandemic and the link between emerging infectious diseases, climate change and the increasing human encroachment in the natural environment.

Readings/Bibliography

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

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

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

G. Atkinson and S. Mourato, 2015, Cost-Benefit Analysis and the Environment: Recent Developments, OECD WP 97.

S. Levin and A. Xepapadeas, 2021, On the Coevolution of Economic and Ecological Systems, Annual Review of Resource Economics, 13:10.1-10.23, https://doi.org/10.1146/annurev-resource-103020-083100

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

W. Hethcote, 2000 The mathematics of infectious diseases. SIAM Rev 42:599–653

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

Further readings will be recommended by the two lecturers.

Teaching methods

Lectures

Assessment methods

There will be a final written exam consisting of two questions for each module; all of them must be answered. The final grade will be the average of the two grades.

Module I - There will be a final written exam consisting of two questions, both of which must be answered. The final exam comprises 100% of the final grade. There is also an optional assignment. 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.

Module II - There will be a final exam consisting of two questions, both of which must be answered. There is also an optional assignment. 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 ESAMI 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/assignments 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

Slides and some suggested readings are available on VIRTUALE.

Office hours

See the website of Anna Montini

See the website of Anastasios Xepapadeas

SDGs

Sustainable cities Responsible consumption and production Climate Action

This teaching activity contributes to the achievement of the Sustainable Development Goals of the UN 2030 Agenda.