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COURSE IDENTIFIERS ENST 490 Section 1 : Environmental Markets: Science and Economics Curriculum for Ecology and the Environment Fall 2013 Tuesday-Thursday 11:00-12:15 Bingham 208 Textbook: Environmental Markets: Science and Economics, Custom Textbook, McGraw Hill. INSTRUCTOR IDENTIFIERS Instructor: Andy Yates Office: Gardner 304 Office Hours: Tuesday-Thursday 9:30-11 Phone Number: 919-966-5374 Email: [email protected] CATALOG DESCRIPTION This course examines the interplay of science and economics in the design of environmental markets. The first part of the course is an introduction to the principles of environmental economics in general and environmental markets in particular. The second part of the course consists of several case studies of environmental markets. These case studies introduce the principles of environmental science and illustrate the critical role that scientific models of natural systems play in the design of environmental markets. The first case study is water pollution (Nitrogen) from wastewater treatment plants into North Carolina's Neuse River. The second case study is local air pollution (N0x, S0x, ozone, PM2.5) from electric power plants in the southeast United States. The third case study is global C02 pollution including special emphasis on carbon sequestration and markets for carbon offsets. The fourth case study is ecosystem service markets including wetland and stream mitigation banking. TARGET AUDIENCE The primary audience for this course is graduate students and advanced undergraduate students interested in the interdisciplinary analysis of environmental issues. COURSE PREREQUISITES There are no formal prerequisites for the course. COURSE GOALS and KEY LEARNING OBJECTIVES 1. Gain an understanding of the principles of environmental economics and the design issues for environmental markets. 2. Gain an understanding of the principles of environmental science and how these principles inform the design of environmental markets. 3. Apply this knowledge to analyze an existing or proposed environmental market. 4. Students that complete this course should be able to contribute to interdisciplinary research teams working on the design of environmental markets. COURSE CONTENT DESCRIPTION 1. Introduction to Environmental Economics. We discuss the basic principles of economics (demand, supply, efficiency) and show their application to the environment. 2. Environmental Markets. We discuss how to use markets to obtain environmental goals. We also contrast environmental markets with alternative regulations such as standards and taxes. 3. Water pollution. We give an overview of the science and regulation of water pollution. We analyze a case study of permit markets for emissions of Nitrogen into North Carolina’s Neuse River. Special emphasis is give to the use of SPARROW to model emissions through the river. 4. Air Pollution. We give an overview of the science and regulation of air pollution. We analyze a detailed case study of permit markets for emissions of N0x from electric power plants in the South East US. Special emphasis is given to the use of CMAQ and associated models to map flow of emissions over time and space. 5. Carbon pollution. We discuss scientific models of the effect of carbon emissions on climate. We analyze a detailed case study on permit markets for carbon and the problems of sequestration and offsets. 6. Ecosystem Service Markets. We analyze the determinants of ecosystem function as well as ecosystem restoration techniques. We study the interaction of these elements with the market structure in ecosystem service markets. CLASS STRUCTURE The class will be a combination of a traditional lecture format and the newer “flipped” classroom format. For the environmental economics and environmental markets part of the course, I will mostly lecture. For the case studies, I will assign readings in advance of class. Students should prepare a list of 5 discussion questions for each set of readings. We will discuss these questions in the subsequent class. Student will also turn in their discussion questions as a homework assignment. COURSE REQUIREMENTS There is a mid term exam, a final exam, a team project and the discussion questions homework assignments. For the team project, groups of 2 students will conduct an analysis of an existing or proposed environmental market. The output of the project will consist of a written report (approximately 10-15 pages) and an oral presentation to the rest of the class summarizing their findings. These presentations will take place the last two weeks of class. GRADING The midterm exam accounts for 25 percent of the class grade, the final accounts for 30 percent of the class grade, the team project accounts for 35 percent of the class grade. The homework assignments count for 10 percent each. IMPORTANT DATES Thursday, October 10 Thursday, December 12 (12pm) Midterm exam Final Exam COURSE OUTLINE 1. Introduction to Environmental Economics Textbook chapters 1-3 2. Environmental Markets Textbook chapters 4-6 Tietenberg, “Economic Instruments for Environmental Regulation,” Oxford Review of Economic Policy, 1990. Stavins “What Can We Learn from the Grand Policy Experiment” Journal of Economic Perspectives Newell, Richard G. and Kristian Rogers (2003) “The Market-Based Lead Phasedown,” RFF Discussion Paper 03-37. Burtraw, Dallas, David A. Evans, Alan Krupnick, Karen Palmer, and Russell Toth. 2005. “Economics of Pollution Trading for SO2 and NOx.”Annual Review of Environment and Resources 30: 352–290. 3. Case Study 1: Water Pollution Textbook chapters 7-9 M. Doyle, J. Rigby, K. Schnier, and A. Yates, ``Market power, private information, and scale in pollution permit markets with application to Nitrogen trading in North Carolina’s Neuse River”, Working paper 2013. 4. Case Study 2: Air Pollution Textbook chapters 10-13 Muller and Mendelsohn, “Efficient Pollution Regulation: Getting the prices right”, American Economic Review, 2009, 99: 1714-1739. Bielen and Yates, “Permit markets with acute and chronic damages”, Working Paper 2013. 5. Case Study 3: CO2 Textbook chapters 13-14 Nordhaus (1993) “Reflections on the Economics of Climate Change”, Journal of Economic Perspectives, 7:11-25. McKibbin and Wilcoxen (2002) “The role of economics in Climate Change Policy”, Journal of Economic Perspectives, 16:107-129. Kruger, Oates, and Pizer, “Decentralization in the EU Emissions Trading Scheme and Lessons for Global Policy,” Rev Environ Econ Policy (2007) 1(1): 112-133 Pizer and Yates, “Linking and de-linking pollution permit markets” Working paper 2013. 6. Case Study 4: Ecosystem Service Markets Textbook chapters 15-17 M. Doyle and A. Yates, ``Ecosystem Service Markets Under No-Net-Loss Regulation", Ecological Economics, Vol. 69, 2010, pp. 820-827. T. BenDor, T. Guo, and A. Yates, ``Optimal staging of credit releases in ecosystem service markets'', working paper 2013.