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Environmental and Natural Resource Economics Economics 4600

Environmental and Natural Resource Economics Economics 4600. Instructor: David A. Penn. Environmental and natural resource economics. This course is focused on four primary questions…. Question #1: Why do environmental problems occur?.

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Environmental and Natural Resource Economics Economics 4600

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  1. Environmental and Natural Resource EconomicsEconomics 4600 Instructor: David A. Penn

  2. Environmental and natural resource economics • This course is focused on four primary questions…

  3. Question #1: Why do environmental problems occur? • Example: Why is the Gulf and South Atlantic red snapper in danger? • Major concepts: market failure, externalities, public goods, nonrenewable resources, economic efficiency, property rights. • Solutions: fishing restrictions, catch limits, individual transferable quotas

  4. Question #2: How much pollution is too much and how can we do better? • How clean should we make the Stones River? Should we tighten CAFÉ standards? Should we save the gray bat? • Major concepts: non-market values, cost-benefit analysis, discounting, efficiency vs. fairness. Gray Bat (Myotis grisescens)

  5. Question #3: Are we running out of natural resources? • What does it mean to talk about “running out” of a natural resource like petroleum or copper? Have we been running out? Will we run out? • Major concepts: non-renewable resources, dynamic efficiency, resource substitution and sustainability. Historical U.S. Crude Oil Production, 1954 to 2006

  6. Question #4: How do we deal with climate change? • Why has the U.S. drastically cut SO2 emissions, but done little about CO2 emissions? • Environmental issues: international environmental treaties, free riders.

  7. Readings • Text: Stephen Smith, Environmental Economics. • Articles and readings: posted on D2L. • Class notes: posted on D2L.

  8. Grading • Two midterm exams • Wednesday, February 20 • Monday, April 1 • Attendance • Homework • Final Exam • Monday May 6, 3:30-5:30

  9. Topics Today (Jan 23) • Course introduction • Assignment for Monday • D2L: Reading 1: Economists and the Environment • Smith, Chapter 1. • Be prepared to discuss

  10. Policy on Make-Up Exams and Late Homework • Exams are given only at the scheduled time. • Homework is due in class on the dates announced.

  11. Introduction • Economics is valuable because it disciplines one’s thinking. • Every course of action involves some social gain and some social loss. • At what cost to society do we eliminate water pollutants? • At what cost do we ban red snapper fishing? • At what cost do we extinguish wildlife species? • At what cost do we dirty lakes and rivers?

  12. Introduction • The objective for this course is not to pick sides in environmental disputes. • The objective here is to provide you with a rigorous framework with which to evaluate environmental issues.

  13. How Do Economists Think About the Environment? • Economists do not believe that the free market solves all problems. • Examples: • The market fails to allocate pollution efficiently. • The market fails to conserve wildlife efficiently. • Environmental economics is interested in understanding the conditions of ‘market failure’.

  14. How Do Economists Think About the Environment? • Some environmental problems (though not all) can be addressed by the creation of new markets. • Examples: • Alter market prices to correct market failure. • Trading pollution permits. • Many environmental problems are not adequately addressed with market solutions.

  15. How Do Economists Think About the Environment? • Economic value encompasses more than just goods traded in a marketplace. • Examples: • An endangered species may have economic value even if nobody uses it. • The Amazon rainforest may have economic value to people who never visit. • Economics is concerned with valuing these ‘non-market’ goods.

  16. How Do Economists Think About the Environment? • Using the environment in a certain way often precludes using it in some other way. • Examples: • Preserving habitat precludes using land for other uses, such as for homes. • Constructing a dam for power may eliminate fish migrations. • Economists are most concerned with identifying and evaluating tradeoffs.

  17. The Focus of this Course • The use of real-world case studies is meant to develop your economic intuition. • I want you to be able to understand and recognize economic issues related to natural resources and the environment.

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