University of California at Santa Barbara

ESM 204: Economics for Environmental Management

Winter 2007

 

Instructor:  Christopher Costello (4410 Bren Hall); Teaching Assistant:  Marc Conte (3424 Bren Hall)

Class: TuTh 11:00-12:15 (Bren 1414); Sections: W 9:30-10:20 (BH 1510), W 3:30-4:20 (BH 1510) and Th 8:30-9:20 (BH 1424).

Prof. Costello's office hours: Tuesdays 8:30-9:30 and 2:00-3:00.  Email:  costello@bren.ucsb.edu.

Mr. Conte's office hours: Tuesday/Wednesday 2:00-3:00. Email: mconte@bren.ucsb.edu.   

   

Introduction:  What is economics?  And what could it possibly contribute to the analysis and solution to environmental problems?  The answer to these questions are two of the central themes of this core course in The Economics of Environmental Management.  Broadly speaking, economics is the science of how to allocate scarce resources.  When viewed in this way, it is clear that economics might provide a useful framework within which to analyze environmental problems and approaches to solve them.  Because many environmental problems are caused by economic activity (carbon emissions, overharvesting renewable resources, toxic releases as a by-product of industrial production, urbanization), we will examine different approaches to adjusting human behavior and therefore the externalities associated with it.

To do so in a meaningful way will require a lot of work..  The pace will be quick and the out-of-class workload will be heavy.  (Expect an average of 8-10 hours of work per week outside of class.)   The purpose of the course is to give you a solid foundation in those aspects of economics and quantitative policy analysis that are important to environmental and natural resource management and policy.  The course will also serve as the foundation in economics for management, economics and policy electives in the Bren School.

There will be readings prior to most class meetings and homework assignments (projects) due every other week (more or less).  Students are expected to have completed the day's reading assignments prior to the start of class, and will occasionally be cold-called in class to summarize readings.  Consult the webpage regularly for precise assignments.  The course requirements are a midterm (20%), final exam (30%), homework/class projects (40%) and class/section participation (10%).  The midterm will be take-home and the final will be at the scheduled final exam time.  Both will be open-book.

Readings.  Most readings will be available via links on the course webpage (below).  Those that are not available on the webpage will be available in the Bren Student Commons.  There are no required texts for the course, though three texts will be relied upon heavily; students may wish to acquire some or all of these texts through an internet bookseller.  One copy will be on 2-hour reserve in the RBR.  These suggested textbooks are:

1. Boardman et al: Cost-Benefit Analysis, 2nd Ed (Prentice-Hall, 2001)

2. Hartwick and Olewiler: The Economics of Natural Resource Use, 2nd Edition (Addison-Wesley, 1998)

3. Kolstad: Environmental Economics (Oxford, 2000) [also available at the UCSB bookstore]

 A book that covers much of the material in the course at an elementary level is Goodstein: Economics and the Environment (any edition). 

Assignments.  All of the homework assignments are in the form of mini-projects.  For most of these the deliverable is a one-page memo to your policy-maker boss and an appendix with details.  These mini-projects are a very important part of the course (as reflecting in their contribution to your final grade).  I expect to see high quality, polished, professional work.  Writing quality counts!  Assignments are due in class unless otherwise noted.  Late work will not be graded (unless an exception has been granted prior to the due date).  You may work in a team of two on your assignments but you cannot keep the same team for more than one assignment.

Honor Code and Joint Work.  Collaboration with your homework partner (who changes with every assignment)  is obviously encouraged.  Homework collaboration beyond this is not appropriate and in fact constitutes a violation of the Bren Honor Code.  I know there is a temptation when solving a homework problem to shout “Eureka” and share your insights with your fellow students.  However, this defeats the purpose of the homework – to find a path to a solution on your own.  Furthermore, with grading on a curve, sharing of answers effectively reduces the grades of those doing the sharing.  So do your homework on your own and keep it to yourself!  It goes without saying that the exams are your own individual work and you are on your honor to execute your exam individually and neither give nor receive aid.  While I implicitly trust that within these guidelines you will do the right thing, should you be caught cheating, you will be subjected to the UCSB policies on cheating.

Using the TA and Professor.  Our objective is for you to learn.  That will require a lot of preparation on our part, and a lot of studying and work on your part.  But we also know that the occasional question or concern will arise, so you should feel free to contact us outside of class. But please be respectful of our office hours.  If you absolutely cannot make the office hours, we can usually accommodate you at some other time - just contact us to make an appointment.

Prerequisites.  You are assumed to be fluent in multivariate calculus and to have completed a sequence in intermediate microeconomics at the level of Varian, Intermediate Microeconomics.  At UCSB, this would be Econ 100AB.  Alternatively, ESM 251 provides adequate preparation.  If you do not have the prerequisites, you should defer taking the course until prerequisites have been satisfied.  You are also expected to be conversant with Excel, particularly graphing and solver.  If not, please take the time to learn it.

Course Outline  The course is broken into the following 4 sections:

  1. Evaluating Public Environmental Projects,
  2. Measuring the Costs and Benefits of Environmental Projects,
  3. Regulation, and
  4. Policy and Dynamics of Renewable and Exhaustible Natural Resources  

Readings  The required readings are available in a course reader from Grafikart.  Some readings are also available via hyperlink, or are otherwise on the web.  Many of the hyperlinked readings are only available to users with a Bren account.  If your are accessing from home, you can use a remote terminal connection and Snoop.bren.ucsb.edu.

Section & Date

Topic

Readings

Assignments & Exams

Notes on Web

Section 1: Jan 9

Introduction, Project Evaluation, Public Goods, Externalities
  1. * Fullerton & Stavins, “How Economists See the Environment,” Nature, 395:6701 (1998).
  2. Kolstad, Environmental Economics, Ch 3.

Assignment 1: "Reserve Siting for Conservation"

Welcome

 

Public Decisions

Section 1: Jan 11

Examples and Evaluative Criteria
  1. Robert Stavins, Environmental Defense Fund, “The Tuolumne River: Preservation or Development?” (March 1984) (available online only).
  2. * Levin. 1997. “Lead in Drinking Water”.  Chapter 8 of Economic Analyses at EPA.  Edited by R. Morgenstern.
  3. * Ando et al., “Species Distributions, Land Values and Efficient Conservation,” Science, 279: 2126-8 (27 March 1998).

 

Examples

Section 1: Jan 16

Efficiency, Surplus & Doing Cost-Benefit Analysis
  1. Boardman et al., Cost-Benefit Analysis, Ch 1 & 2.
  2. * Helfand et al., "The theory of pollution policy". 2005. Handbook of Environmental Economics, vol. 1.
  3. * Arrow et al., “Is There a Role for Benefit-Cost Analysis in Environmental, Health and Safety Regulations?,” Science, 272:221-2 (12 April 1996).
  4. * Heather Ross:  “Clean-Air: Is the Sky the Limit?,” Resources, #143 (Spring 2001).
  5. * Steven Kelman, “Cost-Benefit Analysis: An Ethical Critique”, with replies from DeLong, Solow and Butters, AEI Journal on Government and Society Regulation (Jan/Feb 1981).
 

Surplus & CBA

Section 1: Jan 18

Inflation & Discounting
  1. Boardman, Cost-Benefit Analysis, Ch 4.
  2. *“What Price Posterity,” The Economist, March 23, 1991.

 

Assignment 1 due today

PPT on Assignment 1

Assignment 2: "Cost Benefit Analysis of Hydrocarbon Seep Tents",

Data for Assignment 2:

gas_flux_map.ppt, Engineering_costs.doc, gas_price.doc, health_benefits.doc, historic_capture.xls

Discounting

Useful discounting formulae

Section 1: Jan 23

Risk & Uncertainty
  1. Boardman, Cost-Benefit Analysis, Ch 6.
  2. Kolstad, Environmental Economics, Ch 12.
 

Risk & Uncertainty

Section 2: Jan 25

Introduction to Estimating Costs & Benefits of Environmental Regulations.
  1. Kolstad, Environmental Economics, Ch 17 (pp 344-50).
  2. * Maille & Mendelsohn, “Valuing Ecotourism in Madagascar,” J. Env. Mgmt, 38:213-8 (1993).
  3. * Deacon and Kolstad: "Valuing Beach Recreation Lost in Environmental Accidents," J. Water Res. Planning & Mgmt, 126: 374-81 (2000).
  4. * Economist, "A Price on the Priceless", (8/17/91).

Assignment 2 due today.

 Solution to Assignment 2.

Assignment 3: "Travel Cost Analysis: Taman Negara"

Data for Assignment 3.

  Valuation

Section 2: Jan 30

Revealed Preference Approaches
  1. Kolstad, Environmental Economics, Ch 16.
  2. * Viscusi, “The Value of Risks to Life and Health,” J. Econ. Lit., 31:1912-46 (1993) [skim]

 

  

Section 2: Feb 1

Revealed & Stated Preference

  1. Kolstad, Environmental Economics, Ch 18.
  2. * Boyce et al., “An Experimental Examination of Intrinsic Values as a Source of the WTA-WTP Disparity,” Amer Econ Rev, 82: 1366-1373 (1992).
  3. * Paul Portney, “The Contingent Valuation Debate: Why Economists Should Care,” J. Econ. Perspectives, 8(4):3-17 (1994).
 

Revealed Preference

Stated Preference (start)

 

 

Section 3: Feb 6

Regulatory Options & Efficiency
  1. Kolstad, Environmental Economics, ch 2, 7-I, 7-II, 8.
  2. * Passell, "Cleaning the Environment Gets Harder, But there are solutions," NYT, 1/5/95.
  3. Portney & Stavins, Public Policies for Environmental Protection (RFF, 2000; 2nd Ed), Chs 2 & 3.
  4. * Sandel: "It's Immoral to Buy the Right to Pollute," NYT, 12/15/97.
  5. * Gruenspecht, “Zero Emission Vehicles: A Dirty Little Secret,” Resources, #142 (Winter 2001).

 

 

 Stated Preference (finish)

Regulatory Options

Section 3: Feb 8

Regulatory Innovations
  1. * Starrett, "Property rights, public goods, and the environment". 2005. Handbook of Environmental Economics, vol. 1.
  2. * Ferraro and Simpson: “Cost-Effective Conservation”, Resources #143 (2001)
  3. *Kathleen Segerson and Na Li, “Voluntary Approaches to Environmental Protection,” in Folmer & Tietenberg (Eds), The Intl Yrbk of Env & Res Econ (1999), only pp273-81.

Assignment 3 due today.

Solution to Assignment 3

 

Regulatory Innovations

Section 3: Feb 13

Incidence of Environmental Regulations
  1. * M. Burns, “Unusual Coalition Pushes for Creek Tax,” Santa Barbara News-Press, 10/23/2000.
  2. * Stiglitz: Economics of the Public Sector, (Third Ed, 2000), pp 482—92.
  3. * Been, “Unpopular Neighbors,” Resources, #115 (Spring, 1994).

 

Incidence

Section 3: Feb 15

Spatial Dimensions of Regulations
  1. Kolstad, Environmental Economics, chapter 9.
  2. * Kolstad and Toman, "The economics of climate policy", 2005. Handbook of Environmental Economics. vol. 3.

 

 

 

 Spatial

Section 3: Feb 20

Monitoring & Enforcement
  1. Kolstad, Environmental Economics, Ch 10-2, 11-3, 11-4.
  2. * Alberini et al., “Will Speeding the Retirement of Old Cars Improve Air Quality?,” Resources, #115 (Spring 1994).
  3. * Russell:  "Monitoring and Enforcement," in Portney (Ed), Public Policies for Env. Protection (1st ed, 1990).

 

Distribute Midterm

 

Section 3: Feb 22

Regulation in Developed and Developing Countries, Macro, Green Accounting
  1. * Dasgupta, "Population, poverty, and the natural environment", 2005. Handbook of Environmental Economics. vol. 1
  2. * Larry Summers, Global Env Pgm Memo, World Bank (December 12, 1991)
  3. * Sanger: "World Trade Group Orders US to Alter CAA," NYT, 1/18/96.
  4. * "Dirt Poor," Economist, 3/21/98.
  5. Kolstad, Environmental Economics, Ch 13-1, 13-4, 14.
  6. * Joy Hecht, “Environmental Accounting,” Resources, #135 (Spring, 1999)
  7. * Joel Darmstadter, “Greening the GDP,” Resources, #139 (2000).
  8. * I. Parry: "Reducing Carbon Emissions: Interactions with the Tax System," Resources, #128 (1997).
  9. * Barrett: "Montreal vs. Kyoto," in Global Public Goods, 1999.

Midterm Due Today 

Midterm Answers (page 1, page 2, page 3, page 4, page 5)

Assignment 5: "Regulatory Efficiency",

Supporting docs for Assignment 5: A Cost Evaluation of Alternative Air Quality Control Strategies, Table 1, Figure 1, transfer matrix, Figure 3

 

 

 

Section 4: Feb 27

Rent, Water, and Common Property
  1. Hartwick and Olewiler, "The Economics of Natural Resource Use", Ch 3
  2. * Hillburg, "State to Get Thirstier", The Daily News of Los Angeles. (23 Dec. 2002)
  3. * G. Hardin, “Tragedy of the Commons,” Science, 162:1243-1248 (13 Dec 1968).
  4. * Gordon. 1954. The economic theory of a common-property resource: the fishery. Journal of Political Economy, April 1954.
  

Uncertainty & Enforcement

Section 4: Mar 1

Fisheries Economics
  1. Hartwick and Olewiler, "The Economics of Natural Resource Use", Ch 4

 

International 

Section 4: Mar 6

Regulating the Fishery

  1. Hartwick and Olewiler, "The Economics of Natural Resource Use", Ch 5

  2. * Branch et al. 2006. "Fleet dynamics and fishermen behavior: lessons for fisheries managers".  Canadian Journal of Fisheries and Aquatic Science. 63: 1647-1668.

  3. * Deacon and Costello. 2007. "Strategies for Enhancing Rent Capture in ITQ Fisheries"

Assignment 5 due today in class.

Solution to Assignment 5

Assignment  6: "Fishery Management in Costa Rica".

Data for Assignment 6

 

Rent

Section 4: Mar 8

Forest Economics
  1. Hartwick and Olewiler, "The Economics of Natural Resource Use", Ch 10
  2. * Heal. 2000. "Nature and the Marketplace: Capturing the Value of Ecosystem Services", Chapter 5 (Forests, Carbon and Kyoto)

Practice Final Exam

Sample Answers

 

Fish & Fish Mgmt

Section 4: Mar 13

Nonrenewable Resources & Energy
  1.  Hartwick and Olewiler, "The Economics of Natural Resource Use", Ch 8
  2. * "Tilting at windmills - investing in clean energy". The Economist. Nov 18, 2006.
  3. * Hill et al. 2006. "Environmental, economic, and energetic costs and benefits of biodiesel and ethanol biofuels. PNAS. 103(30): 11206-11210.
  

Forests

Section 4: Mar 15 Wrap up Course Summary, Questions, Buffer

Assignment 6 due today

Solution to Assignment 6 

 Nonrenewables

Mar 22

12:00-3:00

Final Exam - MSI 1302

     Open book, open note final exam (note location)

 

 

 Last updated: Feb 27, 2007