ENVIRONMENTAL ECONOMICS
Instructor: Mariangela Zoli
6 credits = 36 lecture hours
Optional in Laurea magistrale (MSc) in Economics
Teaching language: English
Exam: Written examination
Aim of the course:
This course is aimed at providing students with the analytical tools and methodological skills that are
necessary to understand the origins of contemporary environmental problems, and to identify the
appropriate policies to solve them. During the course, the most recent developments and debates in
environmental and natural resource economics are addressed to students.
Environmental economics studies the complex interrelations between economics and the environment.
The starting point of the analysis is the recognition that in several cases markets do not provide the right
amount of environmental protection, and that some government intervention is frequently needed to
balance different social needs. In a world where human pressure and economic activities stress the
environment by exploiting fisheries, forests, minerals, energy sources, and other environmental resources,
it is increasingly important to study how economic tools can be used to develop sustainable environmental
approaches and policies.
During the course, a selection of specific topics of environmental economics will be treated at an
intermediate-advanced level:
1. The sources of environmental problems: property rights and externalities
This part of the course introduces the general conceptual framework used to approach environmental
problems. After an examination of the relationship between human actions, as manifested through the
economic system, and the environmental system (intended both as a source of resources and a sink), some
of the most commonly used criteria for judging the desirability of the outcomes of this relationship are
discussed. The manner in which producers and consumers use environmental resources depends on the
property rights governing those resources. It will be shown that it is from violations of the characteristics
which define an efficient property rights structure that environmental problems can arise.
2. Dynamic efficiency and sustainable development
The discussion of the main criteria that are relevant to identify environmental problems is the focus of this
part of the course. Besides the two concepts of efficiency (static and dynamic efficiency), other equity
arguments are analyzed, with particular reference to the allocation of a depletable resource over time.
3. The efficient allocation of renewable resources
This topic is developed by providing several examples, including for instance storable resources and
common pool resources (fisheries).
4. The problem of pollution: efficient targets and policy responses
The problem of pollution is a major concern of environmental economics. On the basis of the mechanisms
through which pollution damage the environment, different targets and policies can be identified. Methods
of attaining pollution targets are considered also in contexts characterized by limited information,
uncertainty, non-perfectly competitive markets, irreversibilities. Since many environmental problems spill
over national boundaries, particular attention is devoted also to international cooperation and agreements.
SUGGESTED READINGS:
Perman, R. et al. (2003), “Natural resource and environmental economics”, Pearson; Xepapadeas A. (1997),
“Advanced principles in environmental policy”, Edward Elgar Pub.
Further readings (especially journal articles) will be provided during the course.