Advanced Topics in Environmental Economics

1

Ec 476Professor Tietenberg

Colby CollegeMiller Lib 234

Spring, 2001email: thtieten

Tel: 3143

Advanced Topics in Environmental Economics

This course is designed as a seminar in which all participants are expected to contribute to group learning, not merely to absorb material passively. Sustainable Development, a concept that lies on the frontier of environmental economics, provides the focus for our inquiry. Analyzing this concept closely reveals the large contributions that economic analysis can make in understanding the nature of the problems and in providing guidance on solutions, but it also raises fundamental questions about the appropriate domain for economic analysis. You will be exposed to both the emerging insights and the controversies and given ample opportunities to develop your own perspective.

Topics will be examined using both discussion and presentation formats.

Discussion Format: Having read the background readings, each participant will be expected to contribute to a discussion that extracts the major insights in the readings and assesses their validity and import. My role will be to ask leading questions and to probe the responses.

Presentation Format: These sessions will focus on presentations by student and faculty members of the seminar.

Some World Wide Web Sites of Interest

This information can be very useful in selecting topics and

researching the two projects required for this class.

Colby’s Sustainable Development/Economics Page:

National Center for Environmental Economics (EPA) Site:

Free U. of Brussels Sustainable Development Site:

Institute for Sustainable Development:

NSF Environment and Global Change:

OECD Environment Reports:

United Nations Development Program:

United Nations Environment Program:

National Institute for the Environment:

Association of Environmental and Resource Economists:

And finally when only humor will do:

Let me know if you find some helpful sites not on this list.

The texts for this course will be:

Bromley, Daniel W., ed. The Handbook of Environmental Economics (Oxford, UK: Blackwell, 1995)

Stavins, Robert N., Economics of the Environment: Selected Readings (New York: W. W. Norton & Company)

The United States Experience with Economic Incentives for Protecting the Environment by Robert Anderson ( EPA#-240-R-10-001), This is a very helpful EPA report that can be downloaded in sections from Reading this pdf report requires Acrobat Reader. If you don’t have it, it can be downloaded free from

This course presumes that you have had a survey course in environmental and natural resource economics. If you wish to review that material you may want to consult:

Tietenberg, T. (1999). Environmental and Natural Resource Economics. 5th ed. Reading, MA: Addison-Wesley Longman.

or

Tietenberg, T. (2000). Environmental Economics and Policy. 3rd ed. Reading, MA, Addison-Wesley Longman.

The grades in this course will be based upon: (1) class participation (quality and consistency of contributions - zeros are assigned for each missed class), 20%, (2) concept paper (content, analytical depth, organization and style), 25% (3) internet case study 15%, (4) valuation project 15%, (5) two oral presentations (organization, content and delivery), 20%, and (5) quizzes (short pop quizzes may be given periodically to reward those who have done the reading.) 5%.

Each student will be expected to have set up an email address and to check it regularly. I will use email to communicate with participants in the intervals between classes.

Research Projects and Oral Presentation Assignments:

Conceptual Paper: Each student in the class is responsible for writing a major paper on some economic aspect of sustainable development policy. While the internet project (described below) is designed to focus on implementation issues in the context of a specific economic and cultural setting, the conceptual paper is designed to provide a broad overview of both the theory and empirical evidence which lie behind our current level of understanding of that issue. The target audience for your paper is assumed to be economically literate, but not familiar with your particular topic. Models for this type of paper would be the survey articles that appear at the beginning of each issue of the Journal of Economic Literature. The normal paper will about 7500 words. I have included a list of possible topics at the end of this syllabus. (These are meant to be suggestive, not meant to limit your choice.) Please include your word count on the title page of your paper.

Paper Proposal: The paper proposal will consist of a two-page, single spaced document which provides: (1) the title of the project, (2) the scope of the project (research questions, coverage, etc.), (3) a tentative outline (using three levels of headings) of the final report and a tentative bibliography of sources you will consult. This proposal should reflect sufficient knowledge of the literature that you can specify both the subjects to be covered by the report and how they fit together. This proposal will count 10% of the conceptual paper grade.

Due: Monday, March 5 at noon.

Optional First Draft: At your discretion you may submit a first draft of the paper for my critique. I will make comments on the paper and provide suggestions for improvement. No grades will be assigned to the first draft. You can use the comments to improve the paper. If you chose this option, I must receive the paper by noon, Friday, April 20. For me to make comments the paper must be substantially complete—no half written sections of papers, missing references or footnotes to be added later or spelling errors that could easily have been detected by a spelling checker. (No exceptions—plan ahead.)

Final Paper: The final paper is due at noon Friday, May 11. A three-point-per-day penalty will be assigned (out of 100) for each day the paper is late. This implies, for example, that a paper, which, if handed in on time, would have received an 82%, would, after a three-day-late penalty, receive a 73%.

Conceptual Paper Oral Presentation: Each member of the class will be responsible for a major oral presentation on the work covered by the concept paper. Each presenter will have one half of one class period for the presentation and the discussion it promotes. The presentation will be judged on organization, depth of analysis, breadth of coverage and synthesis of findings and delivery.

The Valuation Project. Each seminar participant will be responsible for selecting one study that uses a specific valuation methodology to shed light on some subject of interest to the field of environmental and natural resource economics. (To provide an entry into the literature one short list of such studies is provided in Sessions 7-8 on this syllabus. Many more studies exist and you are free to chose any study you wish, whether it is on this list or not.) For the chosen study the participant will be responsible for: (1) identifying the focus of the research, (2) briefly describing the valuation technique used and any unique aspects of its use in this context, (3) the results of the exercise and (4) the participant's critique of the exercise. This paper should normally run between 5-10 pages. It will be graded on the quality of the description of the project and the quality of the critique, including its contribution to class understanding about the use of this particular valuation technique.

Topic Proposal: Your topic proposal should list: (1) the complete citation for the case study, (2) the focus of the study, (3) the valuation technique used, and (4) the features which appear to make this a particularly interesting case study for the class to hear and (4) the specific article or essay on which this case study will be based. This will count 10% of your final case study grade. Due: Monday Feb 12 at noon.

Final Report: The final valuation project report is due noon Wednesday, February 21 during the normal class. A three-point-per-day penalty will be assigned (out of 100) for each day the case study is late.

Valuation Oral Presentation. Each member of the class will be responsible for a short oral presentation on the nature of the valuation exercise examined in the participant's valuation project. Each presenter will have about fifteen minutes for the presentation. The presentation will be judged on organization, depth of analysis, and the value of the insights for the class.

The Internet Project: The third assignment involves creating material (one case study) to be put on the sustainable development home page created here at Colby for the World Wide Web. Using a prescribed format (I will supply a template) each student will write a brief, but revealing report on the application of the principles of sustainable development and conventional economic analysis to one particular environmental problem (air pollution, fisheries, agriculture, energy, deforestation, etc.) in a specific geographical and cultural setting. Do not choose studies that simulate what might happen if the policies or circumstances were changed. These internet studies are designed to reveal actual, not hypothetical or possible outcomes. Having selected a specific case, the author will review (and write a short executive summary report on) the evidence that is available on that subject. (Examples of previous reports can be found on the worldwide web at sustain.html. The reports in this class obviously should not duplicate case studies already on the web site.) Each report will attempt to condense down to no more than two pages the major conclusions to be taken away from that case study. (These are to take the form of Boxed Inserts in a typical text). The objective is to make available to worldwide audience brief, but revealing, summaries of the application of economic principles to sustainable development. (If you pique web readers’ interest, they can get the details from the cited articles on which these summaries are based.) The reports should be forwarded to me as an attachment via email. I will load them on the web. You should be prepared to share informally what you have learned from this exercise during the normal class discussions when the class covers material in the general area of your project. Writing your case study in the same general area as your concept paper is perfectly acceptable.

Topic Proposal: Your topic proposal should list: (1) the title of the case study, (2) the main subject to be examined, (3) the features which appear to make this a particularly interesting case study for the class to hear and (4) the literature on which this case study will be based. This will count 10% of your final case study grade. The Colby Sustainable Development site contains a large bibliography separated into specific areas of interest. Due: Monday, February 19 at noon.

Final Report: The final internet project report is due at class time onMonday March 12. A three-point-per-day penalty will be assigned (out of 100) for each day the case study is late. Since these reports will be placed on the internet please be sure they are in the same format as all the others. I will share with you the format, but you can also visit the site to see how the others were done.

Review of Crucial Dates

Valuation Topic Proposal Due: Monday, February 12 at class time.

Internet Topic Proposal Due: Monday, February 19 at class time.

Valuation Final Report Due: Monday, February 26 during the normal class.

Valuation Oral Presentations: Monday, February 26 and Wednesday, February 28 during normal classes

Concept Paper Proposal Due: Monday, March 5 at class time.

Internet Final Report Due: Monday, March 12 at class time

Optional First Draft for Concept Paper Due: Friday, April 20 at noon

Concept Paper Presentations: Wednesday, April 25, Monday, April 30, Wednesday, May 2 and

Monday, May 7 during normal classes.

Final Concept Paper Due: Friday, May 11 at noon.

Part I. The Basics

Session #1 An Overview

Monday, February 5

Faculty Presentation Format

This session will open with an overview of the material to be covered and the mechanics of coverage.

Sessions #2-3 Defining and Modeling Sustainable Development

Wednesday, February 7

Monday, February 12

Discussion Format

Assigned Reading

John Pezzey, Sustainable Development Concepts: An Economic Analysis (Washington, DC: World Bank Environment Department Report #2) 9-16.

sRobert M. Solow, “Sustainability: An Economist’s Perspective” in Stavins, Robert N., Economics of the Environment: Selected Readings (New York: W. W. Norton & Company): 131-138.

Toman, Michael A., John Pezzey, and Jeffrey Krautkramer, “Neoclassical Economic Growth Theory and Sustainability” in Daniel Bromley, ed. The Handbook of Environmental Economics (Oxford, UK: Basil Blackwell, 1995): 139-165.

Alan Randall and Michael C. Farmer, “Benefits, Costs and the Safe Minimum Standard of Conservation” in Daniel Bromley, ed. The Handbook of Environmental Economics (Oxford, UK: Basil Blackwell, 1995): 26-44.

Some Questions to Consider:

1. As Bob Solow points out, the concept of sustainability involves an obligation? Who owes the obligation? To Whom is it owed? Wht is the nature of the obligation?

1. Bob Solow suggests that “the less you know about it, the better is sounds.” He goes on to say that this is an essential vague concept, but it is not at all useless. Why is it vague? Why is it not useless?

1. Solow also points out that “we do not owe the future any particular thing.” This conflicts with the “safe minimum standard” idea that is developed by Randall and Farmer. Why does Solow believe the obligation does not involve preserving any particular resource? Why do Randall and Farmer come down on the other side? Is this an argument over assumptions or objective functions?

1. In another section of his essay Solow suggests that environmental protection regulation contributes to sustainability if it comes from consumption, but not if it comes from investment? Why? What is the nature of his argument?

1. Near the end of his essay Solow suggests that one of the purest forms of sustainability policy involves controlling population. Why does he say that?

1. The Pezzey piece confronts the task of trying to sort out what we mean by sustainability. In particular he attempts to bridge the gap between “this vague concept” and the way in which we might systematically investigate the implications of this concept within economic models.

1. Why has a call for “sustainable” development arisen? What “needs” are being addressed by this new concept? What is the difference between sustianability and survivability?

1. The concept of sustainable development is primarily driven by ethical concerns. How does it relate to the traditional economic concept of efficiency?

1. How does the economic approach to sustainable development differ from other approaches to the same concept? Is an integration possible? Or are the various approaches mutually contradictory?

1. At what level should the concept of sustainable development be applied? At the global level? national? regional? local? individual resource? all of these?
2. Economists tend to think about complex issues by translating them into mathematical terms and using those formulations to derive specific results. How do economists model sustainable development? What is being maximized? Is this constrained optimization or unconstrained optimization? Do these models faithfully follow the definitions described in the preceding class? How well do they capture the noneconomic views of sustainability? If they leave some crucial ingredients out, what are those crucial ingredients?
3. How does sustainability depend on such crucial parameters as the rate of population growth, the rate of technical progress, rate of social time preference? How do the results differ depending whether technological progress is present or not? What is the rate of time preference and how does it affect outcomes? What difference does it make whether the economy is characterized as simply consuming a depeletable resource or whether the resource can be turned into capital?
4. How do the formulations of these three concepts differ for depletable resources and renewable resources? What difference does it make whether stock effects are present or not? Can sustainable development ever involve the use of depletable resources? How can a development plan use depletable resources without depriving future generations?
5. What is the Hartwick Rule? How is it used?
6. What role do “stock effects” play in the analysis of sustainability? Why do they matter? What is the consequence of including “stock effects” in the models?
7. What are the consequences of including “pollution effects” in the models?
8. Is the notion of carrying capacity relevant for modeling sustainable development?

Sessions #4Measuring Sustainability

Wednesday, February 14

Discussion Format

Assigned Reading

David Pearce and Giles Atkinson, "Measuring Sustainable Development" in Daniel Bromley, ed. The Handbook of Environmental Economics (Oxford, UK: Basil Blackwell, 1995): 26-44.

Information on the Genuine Progress Indicator can be found at:

The United Nations Human Development Index and Human Poverty Index can be found at:

CSD Working List of Indicators of Sustainable Development and be viewed on the web at:

Information about the approach known as the ecological footprint can be seen at

Eric Neumayer, "On the Methodology of ISEW, GPI and Related Measures: Some Constructive Suggestions and Some Doubt on the "Threshold" Hypothesis" Ecological Economics, Vol. 34, No. 3, September 2000

Some Questions to Consider

1. How can we tell whether current actions are consistent with sustainable development or not? What tests can be established?

2. Can we use the national income accounts as currently constructed to determine whether we are on a sustainable path or not? Why or why not? If they can be used, define the appropriate use. If not, discuss what modifications would need to be made to get a sustainability measure. Does the search for appropriate measures of sustainability depend on whether one is using the strong or weak definition of sustainability? Why or why not?

3. At what level of geographic aggregation should sustainability indicators be measured? Global? National? Regional? Local?

4. Can we use broad economic aggregates or should we complement these with a host of other more specific measures? If we can rely on the broad economic aggregates, why are they sufficient? If we cannot, what else do we need? And why do we need it?