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Lawrence H. Goulder Stanford University Winter Quarter 2013-14 Economics 155 ENVIRONMENTAL ECONOMICS AND POLICY COURSE DESCRIPTION AND READING LIST I. COURSE DESCRIPTION Course Focus:

This course examines sources of and remedies for environmental problems in industrialized and developing countries. We focus on the economic underpinnings of important environmental problems and on ways that public policies can solve some of these problems. Class Meetings:

Lectures are Tuesdays and Thursdays 9:00-10:50. There will also be weekly 50-minute sections, beginning in the second week of classes. Instructors:

The principal instructor for this course is:

Lawrence H. Goulder Department of Economics, Landau Economics Building Room 328 phone: 723-3706 e-mail: HUgoulder@stanford.edu U office hours: Wednesdays 3:30-5:00 or by appt.

The teaching assistant is: Santiago Saavedra Pineda Department of Economics, Landau Economics Building e-mail: santisaap@gmail.com office hours: Wednesdays 1:00-3:00 in Landau Economics Building Room 360 The course also includes guest lectures by other Stanford faculty, as indicated on the lecture outline below.

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Prerequisites, Course Requirements and Grading:

To enroll in this course, students must have already taken Economics 50 or an equivalent intermediate microeconomics course approved by the professor.

This is a five-unit course. The course requirements and grading weights are:

requirement date weight in overall grade

15-minute quiz Thursday, January 30 (Note Change) 5% 50-minute midterm Tuesday, February 18 20% 3-hour final exam Monday, March 17, 12:15-3:15 p.m. 55% research paper due Friday, March 14 20%

We will also be providing problem sets approximately once a week. These will not be graded and are not to be turned in. Their purpose is simply to help you focus your studies and learn the material more effectively.

For the research paper, you’ll apply the concepts and analytical tools from the course to analyze and evaluate current or potential environmental policy. The paper should be 8-10 pages in length. Guidelines for preparing and writing the research paper will be offered later in the course.

Students may take the course on a pass-fail basis.

Exam attendance: The Economics Department has articulated a policy concerning exam attendance and scheduling. Students must take each exam on the dates scheduled above. Exam dates will not be changed for individual students to accommodate job interviews, family events, etc. Exceptions will be made only for serious medical reasons or in the event of a death in the family. If a student athlete must be off-campus the day of an exam, he/she must take the exam on the date above and supply his/her answers by fax on that date.

Students with documented disabilities: Students who may need an academic accommodation based on the impact of a disability must initiate the request with the Student Disability Resource Center (SDRC) located within the Office of Accessible Education (OAE). SDRC staff will evaluate the request with required documentation, recommend reasonable accommodations, and prepare an Accommodation Letter for faculty dated in the current quarter in which the request is being made. Students should contact the SDRC as soon as possible since timely notice is needed to coordinate accommodations. The OAE is located at 563 Salvatierra Walk (phone: 723-1066, 723-1067 TTY).

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II. LECTURE OUTLINE AND READING LIST

The readings listed below are required. Ideally, they should be completed prior to the lectures with which they are listed. The readings are available on Coursework. There is no required textbook for the course, although selections from some textbooks are included below.

1. Introduction and Framework for Analysis Thurs. 1/9 Introduction: Course Topics Some Background: Trends in Environmental Policy and Quality

Worldwatch Institute, Vital Signs – 2011, “Energy and Environment Trends”, pp. 39-46. U.S. Environmental Protection Agency, 2013. “The Clean Air Act in a Nutshell.” U.S. Environmental Protection Agency, 2008. Highlights of National Trends, pp. 4-17, 25-26, 30, 34. Edward Wong, “As Pollution Worsens in China, Solutions Succumb to Infighting,” New York Times March 21, 2013

Tues. 1/14 Externalities, Market Failures, and Welfare I: Nature of Market Failure Efficiency Impacts of Alternative Policy Instruments

Callan, Scott J. and Janet M. Thomas, Environmental Economics and Management (fifth edition), Thomson South-Western, 2010. Ch. 3, pp. 61-70; ch. 5, pp. 98-110.

Goulder, Lawrence. “Impacts of Emissions Taxes, Abatement Subsidies, and Mandated Technologies.” Notes prepared for Economics 155, December 2011.

Thurs. 1/16 Externalities, Market Failures, and Welfare II: Distributional Considerations Tradable Emissions Allowances 2. Local and Regional Air Pollution Problems Tues. 1/21 Tradable Emissions Allowances in Practice

Goulder, Lawrence. “Markets for Pollution Allowances: What Are the (New) Lessons?” Journal of Economic Perspectives 27(1), Winter 2013.

available starting Wed. 1/22 Government Intervention Reconsidered: The Coase Theorem (taped

lecture on Coursework)

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Kolstad, Charles D., Environmental Economics, ch. 6, pp. 99-105, 107-109. Thurs. 1/23 Local and Regional Pollution Control Policy: General Conclusions 3. Global Environmental Problems: The Greenhouse Effect, Stratospheric Ozone Depletion, and Transnational Acid Rain Deposition Thurs. 1/23 (cont’d.) Economic Perspectives on the Prospect of Global Climate Change Tues. 1/28 Global Climate Change: Domestic Policy Options Thurs. 1/30 QUIZ; Perspectives on Recent U.S. National and State-Level Climate Policy Initiatives

Recommendations for Designing a Greenhouse Gas Cap-and-Trade System for California, Recommendations of the Market Advisory Committee to the California Air Resources Board, June 2007. Chapter 2.

Goulder, Lawrence. “California’s Bold New Climate Policy.” Economists’ Voice 4(3), 2007. (On

Coursework.) Burtraw, Dallas, Art Fraas, and Nathan Richardson. “Greenhouse Gas Regulation under the Clean

Air Act: A Guide for Economists.” Review of Environmental Economics and Policy 5(2), Summer 2011. (no longer required)

Goulder, Lawrence, and Andrew Schein. “Carbon Taxes vs. Cap and Trade: A Critical Review.” Climate Change Economics 4(3), August 2013.

Tues. 2/4 Environmental Policy Making under Uncertainty Thurs. 2/6 International Aspects of Environmental Problems: Acid Rain in Europe International Approaches to Addressing Global Climate Change

Nordhaus, William. “To Tax or Not to Tax: Alternative Approaches to Slowing Global Warming.” Review of Environmental Economics and Policy 1(1), Winter 2007. Excerpt: pages 30-39. Olmstead, Sheila, and Robert N. Stavins. “Three Key Elements of a Post-2012 International Climate Policy Architecture.” Review of Environmental Economics and Policy 6(1), Winter 2012.

4. Environmental Issues in Developing Countries Tues. 2/11 Sustainable Development: Defining and Measuring Sustainability

Solow, Robert M. “Sustainability: An Economist’s Perspective,” in Robert N. Stavins, ed., Economics of the Environment: Selected Readings, fourth edition (London: W.W. Norton), 2000, pp. 131-140.

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Arrow, Kenneth, et al., “Are We Consuming Too Much?” Journal of Economic Perspectives Summer 2004. pp. 147-155, 159-169. Wackernagel, Mathis, et al., “Tracking the Ecological Overshoot of the Human Economy,” Proceedings of the National Academy of Sciences July 9, 2002, pp. 9266-71.

Thurs. 2/13 Sources of Unsustainable Economic Paths; Policies to Promote Sustainability

5. Open Access Problems, Overharvesting, and Extinction Thurs. 2/13 (cont’d.) Fisheries I: Open Access, Market Failure, and Government Failure

Pauly, Daniel. “Aquapalypse Now: The End of Fish.” The New Republic, September 28, 2009. “Oceans of Abundance: An Action Agenda for America’s Vital Fishing Future.” Environmental Defense Fund, 2010.

Tues. 2/18 MIDTERM EXAM Tues. 2/18 (cont’d.) Fisheries II: Dynamics of the Fish Stock

Goulder, Lawrence H., “A Framework for Analyzing Fisheries Problems and Policy Options,” notes prepared for Economics 155, March 2006. (Additional policy options will be the focus of guest lecture by Juan-Pablo Montero on February 27) Schein, Andrew, “Owning a Piece of a Fishery: The Tradable Permits Approach in Alaska’s Halibut Fishery” Levy, Sharon. “Catch Shares Management.” BioScience, November 2010.

Thurs. 2/20 Fisheries III: Policy Alternatives 6. Valuing the Environment Tues. 2/25 Valuing Nature: Philosophical Bases of Value Empirical Methods for Assessing the Value of Environmental Amenities - I

Goulder, Lawrence H., and Donald Kennedy. “Interpreting and Estimating the Value of Ecosystem Services,” in Gretchen Daily et al., eds., Natural Capital: Theory & Practice of

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Mapping Ecosystem Services. Oxford: Oxford University Press, 2011. Mendelsohn, Robert, William Nordhaus, and Daigee Shaw, “The Impact of Global Warming on Agriculture: A Ricardian Analysis.” American Economic Review 84(4), September 1994.

Thurs. 2/27 Policies to Counter Urban Traffic Congestion (Professor Juan-Pablo Montero) Empirical Methods for Assessing the Value of Environmental Amenities - II Goodstein, Eban, Economics and the Environment (fifth edition), ch. 8, sections 8.1, 8.4, and 8.6-

8.8.

Goulder, Lawrence. “Notes on the Travel Cost Method.” Notes prepared for Econ 155. The three symposium articles below are now optional:

Three “Symposium” articles from the Fall 2012 Journal of Economic Perspectives: Catherine Kling et. al, “From Exxon to BP: Has Some Number Become Better Than No Number?,” Richard Carson, “Contingent Valuation: A Practical Alternative When Prices Aren’t Available,” and Jerry Hausman, “Contingent Valuation: From Dubious to Hopeless.”

7. Water Problems in the Western U.S. Tues. 3/4 Water Law, Problems and Solutions (Professor Buzz Thompson) Thurs. 3/6 Valuing Life and Safety

8. Population Growth, the Environment, and the Long Run Tues. 3/11 Population Growth: Sources and Policy This article is no longer assigned.

Bongaarts, John. “Population Policy Options in the Developing World,” Science 263, 11 February 1994.

These articles are assigned:

Das Gupta, Bongaarts, and Cleland, “Population, Poverty, and Sustainable Development: A Review of the Evidence,” 2011; pp. 2, 7-15. Goulder, “Population Growth, Resource Scarcity, and Per-Capita Welfare,” notes prepared for Economics 155, March 2012.

Thurs. 3/13 Population, Technology, and Long-Run Perspectives on Environmental Degradation

9. Conclusions 0BThurs. 3/13 (cont’d.) The Environmental Future: Key Analytical Themes, Key Policy Challenges