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Igor A. Makarov
Higher School of Economics
3-4th term
2013-2014
ENVIRONMENTAL ECONOMICS
COURSE OUTLINE
The course focuses on the sources of and remedies for global environmental problems
at both national and international level. The main attention is paid to the problem of
externalities, managing the public goods and the commons, free-ridership and social
dilemmas. All these difficulties acquire nowadays the global scale that complicates
significantly their overcoming. Some specific problems such as Westphalian dilemma
appear only on the international level.
At the same time within the course environmental problems are analyzed as the new
structural factors of world economy and world politics. These factors do not depend on any
state’s will but have a critical impact on international processes. The purpose of the course is
therefore to provide the methods and instruments of economic analysis of interconnections
between environment, world economy and international relations.
Class meetings:
Lectures: 8 weekly lectures for 2 h 50 min
Assigned readings:
Reader on environmental economics includes all the required readings, most of
recommended readings will be sent to students later in the course.
Additionally, any of the following textbooks may also be used:
1. Tietenberg T. (2007) Environmental economics and policy. Reading Addison Wesley.
2. Kolstad C. (2000 or 2011) Environmental Economics. Oxford University Press.
COURSE SYLLABUS
Required readings are marked with the asterisk
1. Introduction to the course. Theoretical Aspects of Environmental Economics
Economic and political disciplines studying environmental issues Environmental economics.
Ecological economics. Natural resource economics. Nature management. Normative and
positive environmental economics. Environmental economics and environmental policy.
Main environmental trends in the world. Natural resources scarcity. The increase of
anthropogenic pressure on the environment. Transboundary pollutions. Political ecology.
Main global environmental problems. Ozone layer depleting. Climate change. Lose of
biodiversity. Acid rains. Deforestation. Air and water pollution.
Main environmental trends in Russia. Cause of poor environment. Potential to improve it.
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The concept of environment. Natural resources and natural conditions, interconnections
between them. Taxonomy of natural resources.
Readings (required readings are marked with asterisk):
*Kolstad C. (2011) Environmental Economics, pp. 3-10, 18-20, 30-39.
*Henry L., Douhovnikoff V. (2008) Environmental Issues in Russia // Annual Review of
Environment and Resources, Vol. 33, 2008. Pp. 437-460.
Romanova T. (2011) What Is Political Ecology? // Russia in Global Affairs. Vol. 9, No. 1.
Lujala P. (2003) Classification of Natural Resources // 2003 ECPR Joint Session of
Workshops, Edinburgh.
Likhacheva A. et al. (2010) Daily Bread and Water // Russia in Foreign Affaires. Vol. 8,
No.4.
OECD (2011) Towards Green Growth
2. Sustainable development. Evaluating the environment
Trends of population growth. Environmental constraints. Malthus theory. Economic growth
and environment. “The limits to growth”. Kuznets curve.
The concept and principles of sustainable development. Strong and weak sustainability.
Valuation of environment. Biocentric and anthropocentric approaches. Taxonomy of values.
Natural capital and environmental services. Empirical methods of environment valuation.
Revealed preference vs. stated preference. Hedonic price. Compensating wage. Travel cost.
Contingent valuation.
Indicators of sustainability. Environment in indicators and economic development.
Environmental footprint. Environmental sustainability index. Adjusted net savings.
Readings (required readings are marked with asterisk):
*Goulder L., Kennedy D. (2009) Interpreting and Estimating the Value of Ecosystem
Services:
http://www.stanford.edu/~goulder/Goulder%20and%20Kennedy%20%20Ecosystem%20Service%20Values.pdf
*Solow R. (2000) Sustainability: An Economist’s Perspective / in: Stavins, Robert N. (2000).
Economics of the Environment: Selected Readings, fourth edition. W.W.Norton & Company:
131-138.
Tietenberg T. (2007) Environmental & Natural Resource Economics, chapters 2, 3, 5.
Arrow K. et al. (2004) Are we consuming to much? // Journal of Economic Perspectives,
Vol. 18, No. 3, pp. 147-172.
Wackernagel M. et al. (2002) Tracking the Ecological Overshoot of the Human Economy //
Proceedings of the National Academy of Sciences July 9, 2002.
3. Market failures. Externalities. Managing the commons
Anatomy of market failures. Externalities. Governing externalities. Pigouvian tax. Necessity
of government intervention. Property rights. Coase theorem.
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Public goods. Merit goods. Common-pool resources. Tragedy of the commons. Hardin’s
analysis. Logic of collective action. Prisoner’s dilemma and its limitations to the analysis of
commons. Ostrom’s contribution. The role of institutions.
Readings (required readings are marked with asterisk):
*Thomas J.M., Callan S.J. (2004) Environmental Economics and Management: Theory,
Policy, and Applications, chapter 3.
*Coase R. (1960) The Problem of Social Cost // Journal of Law and Economics, No. 3. P. 144.
Ostrom E. (1990) Governing the commons.
Tietenberg T. (2007) Environmental & Natural resource Economics, chapter 4.
Kolstad C. (2000 or 2011) Environmental Economics. Chapters 4, 5, 13.
4. Instruments of environmental policy
Environmental policy instruments. Command-and-control versus market. Output taxes.
Emission taxes. Abatement subsidies. Technical mandates.
Introducing uncertainty. Prices vs quantities in the conditions of uncertainty. Weitzman
analysis.
Concept of cap-and-trade. Free allocation of emissions versus auction. Concept of cap-andtrade. Free allocation of emissions versus auction. Comparative analysis of environmental
policy instruments. Distributional impacts.
Readings (required readings are marked with asterisk):
*Goulder L. (2006) Emissions Taxes, Tradable Emissions Allowances, and Technology
Mandates: Comparing the Efficiency and Distributional Impacts // Working papers of
Stanford Universities.
*Thomas, J. M, Callan, S. J. (2004). Environmental Economics and Management: Theory,
Policy, and Applications, chapter 5.
Weitzman M. (1974) Prices vs Quantities // The Review of Economic Studies, Vol. 41, No. 4,
pp. 477-491.
5. Climate change
Physical background of climate change. Human and natural causes. Greenhouse effect.
Impacts of climate change. Projections of future climate changes. Economic models of
climate change. Problem of uncertainty. Discounting. Mitigation versus adaptation.
History of international climate change regime. UN Framework Convention on Climate
Change. Kyoto Protocol. Causes of Kyoto’s inefficiency. Montreal vs Kyoto. Recent
negotiations on climate change agenda in Copenhagen, Cancun, Durban, Doha. New climate
agreement.
“Flexibility mechanisms” of Kyoto protocol. Clean development mechanism (CDM). Joint
implementation (JI). New market mechanisms.
Emissions trading. Domestic cap-and-trade schemes. Forestry. Agriculture.
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Economic impacts of climate change in Russia. Role of Russia in international climate
change regime.
Readings (required readings are marked with asterisk):
*IPCC (2007) Climate Change 2007: Synthesis report. Summary for policymakers.
*Victor D. (2011) Global Warming Gridlock: Creating More Efficient Strategies for
Protecting the Planet. Chapter 1: Introduction and overview.
*Grigoryev L. et al. (2013) Domestic Debates on Climate in Russia / in: Climate Change,
Sustainable Development, and Human Security: A Comparative Analysis, chapter 9.
Charap S., Safonov G. (2010) Climate Change and Role of Energy Efficiency / in: Russia
after the Global Economic Crisis, chapter 6.
Stern N. (2007) The economics of climate change: the Stern review. Cambridge University
Press, Cambridge.
Kossoy A., Guigon P. (2013) State and Trends of the Carbon Market 2012.
6. The political economy of international environmental regime
Environmental problems from the perspective of neorealism, liberal institutionalism,
constructivism. Neo-environmentalism.
Necessity of international measures of environmental protection. Difficulties of global
environmental governance. Free rider problem. Prisoner’s dilemma. Westphalian dilemma.
Conflict of long-term national interests in international environmental regulation.
Problem of leakage. Carbon protectionism. National vs global environmental governance.
Readings (required readings are marked with asterisk):
*Goulder L. (2009) Notes on International Cooperation and Free Riding // Working papers
of Stanford.
*Makarov I. (2011) «Win-win» instead global altruism // Russia in Global Affairs. Vol. 9,
No. 4.
Romanova T. (2011) What Is Political Ecology? // Russia in Global Affairs. Vol. 9, No. 1.
Nordhaus W. (1999) Global Public Goods and the Problem of Global Warming // Annual
Lecture, The Institut d'Economie Industrielle (IDEI), Toulouse, France, June 14, 1999.
7. Common-pool resources
Fresh water scarcity in the world. Water stress and water crisis. Drivers of water problem.
Features of water which distinguish it from other natural resources. Water trade. Water
footprint and virtual water. Trade of water-saving technologies. Water permits allocation.
Sharing international river basins. Water conflicts in the world.
Fisheries. Depletion of fish and its causes. Individual quotas in fisheries. Free allocation and
auction. Marine reserves.
Forest resources. Deforestation. Managing the forestry in different countries. REDD+.
Readings (required readings are marked with asterisk):
*Safina, C (1995) The World’s Imperiled Fish // Scientific American, Vol. 273, No. 5.
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*Costello C. et al. (2008) Can Catch Shares Prevent Fisheries Collapse? // Science,
September 18, 2008.
*Rogers P.(2008) Facing the Freshwater Crisis // Scientific American, July 23, 2008.
Culas R.J. (2007) Deforestation and the environmental Kuznets curve: An institutional
perspective // Ecological Economics, No. 61, 2007, pp. 429-437.
Anferova E. et al. (2005) Fish quota auctions in the Russian Far East: a failed experiment //
Marine Policy, No. 29, 2005. P. 47–56.
Frederiksen H.D. (2009) The World Water Crisis and International Security // Middle East
Policy, Vol.16, No. 4, Winter 2009. Pp. 76-89.
8. Environmental justice. Technical change and future of the environment
Intristic and instrumental value of justice. Maximin theory and environmental justice. Justice
between generations. Justice between nations. Justice between individuals. Who should pay
for the environment?
Role of technical change. Adoption, commercialisation, innovation. “Tipping point” in
adoption of green technologies. Policy instruments to induce technical change. Shared
values.
Readings (required readings are marked with asterisk):
*Harper K., Rajan R. International Environmental Justice: Building the Natural Assets of
the World’s Poor // Anthropology Department Faculty Publication Series. Paper 71:
http://scholarworks.umass.edu/anthro_faculty_pubs/71
*Porter M., Kramer M. (2011) The Big Idea: Creating Shared Value // Harvard Business
Review, January-February 2011.
Gladwell M. (2000) The Tipping Point: How Little Things Can Make a Big Difference
OECD (2011) Towards Green Growth.
Rawls J. (1971) A Theory of Justice.
Gosseries A. (2008) Theories of intergenerational justice: a synopsis.
Brown L. (2009) Plan B 4.0: Mobilizing to Save Civilization.
PREREQUISITES
Knowledge in microeconomics (basic level) is required. There are no any other
prerequisites.
AUTHOR
Igor MAKAROV – PhD in Economics, Lecturer at the Department of World Economy,
Research Fellow at the Center for Comprehensive European and International Studies, HSE
Web-site: http://www.hse.ru/en/staff/imakarov
E-mail: [email protected]
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EXAMINATION TYPE, COURSE REQUIREMENTS AND GRADING WEIGHTS
Requirement
30-minutes midterm quiz
60-minutes final exam
Weight in overall
grade
45%
55%
Final exam
At the final exam students are required to solve the quantitative problem and to prepare a
short essay on one of the course topics.
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