Presentation

Instructors:

Mireille Chiroleu-Assouline (m.chiroleu-assouline AT psemail.eu)

Matthew Gordon (matthew.gordon AT psemail.eu)

Hélène Ollivier (helene.ollivier AT psemail.eu)

Course Overview:

This is a Master-level field course in Environmental Economics. This course provides a brief review of the theory of externalities followed by an in-depth survey of the design of environmental regulations, under perfect information as well as asymmetric information, while exploring various policy tools (Pigouvian taxes, tradable permits, standards or subsidies, eco-labels, etc). The course combines the theory behind the design of environmental regulation with the current research landscape that explores how regulation works in practice. The course will also explore some rationales behind the oft-observed difficulties to regulate environmental externalities, such as the global nature of greenhouse gases, the disconnect between location of pollution and location of consumption through trade. Finally, the course will cover different types of environmental hazards and the question of measuring damages, as well as the potential endogenous response from exposed individuals.

Course Structure:

The grading breakdown for the course is:

• 50% for the part related to Mireille Chiroleu-Assouline’s classes
• 50% for the part related to Matthew Gordon and Hélène Ollivier’s classes

See Section "Information about the exam" for further details.

Course Schedule:

We’ve organized the course into a succession of topics following the order indicated below. To indicate the name of the professor in charge of each lecture, we use initials: hence, MCA stands for Mireille Chiroleu-Assouline, MG for Matthew Gordon, and HO for Hélène Ollivier.

Lectures

1. Environmental regulation without uncertainty 1/2 (MCA)
   Externalities and theorems of welfare economics, optimal pollution and internalization of the externalities, comparison between instruments (efficiency/dynamic efficiency/distributive effects), distributive effects of carbon pricing
2. Environmental regulation without uncertainty 2/2 (MCA)
3. Environmental regulation in an uncertain world (MCA)
   Choice between price vs quantity instruments under uncertainty,
 precautionary principle.
4. Environmental regulation under ex ante asymmetric information 1/2 (MCA)
   Firms’ incentives to hide information about abatement costs,
 adverse selection and green products (ecolabels), contract theory, alternative mechanisms.
5. Environmental regulation under ex ante asymmetric information 2/2 (MCA)
6. Environmental risk regulation under ex post asymmetric information (MCA)
   Non-point source pollution,
 risk regulation: liability rules,
 compliance, monitoring and incentives.
7. Market imperfections and environmental regulation (HO)
   Models of environmental regulation in second best settings, with a focus on the EU ETS.
8. Trade and the environment (HO)
   Models of international trade with pollution as a negative externality and with heterogeneous firms.
9. Climate change and disasters in a globalized world (HO)
   Global externality, measurement of damages from climate change and disasters, and interlinkages through trade.
10. Air Pollution: Welfare and Distribution (MG)
    How can we estimate the harms of air pollution? What are the costs of addressing air pollution? What are the distributional effects of policies to address air pollution? How should we use estimates of the above to inform policy? This lecture aims to teach students how to recognize and interpret descriptive, structural, and reduced form work on this topic.
11. Risk, Insurance, and Natural Disasters (MG)
    How do individuals and communities insure against environmental risks like natural disasters? What kind of policies encourage adaptation (or maladaptation)?
12. Climate change (MG)
    What are (some of) the effects of climate change? How can we use estimates of the damages of climate change to inform policy?