Economics 351 Noelwah R.

Netusil
Fall 2015 Vollum 227, x7306
Syllabus e-mail: netusil@reed.edu
Environmental Economics
Course Objective: This course will introduce students to the methods economists use to
analyze issues related to the environment. We will discuss the positive and normative
aspects of environmental economics, techniques that are used to value the environment,
and approaches—such as regulation and incentive-based programs—that are used to
control pollution. This course is taught with the expectation that students have
completed Economics 201.

Office Hours: Office hours will be held in Vollum 227 on Mondays and Wednesdays
from 3:15-4:15 and on Thursdays from 4:00-5:00. Students who are unable to come
during these times are encouraged to make an appointment.

Text and Required Readings: The principal text for this course is Environmental
Economics (2nd edition) by Charles D. Kolstad. Students are also responsible for the
required readings and for additional readings that will occasionally be announced in
class. Students are expected to contribute to class discussions by finding examples of
current environmental issues in the business, financial, and general press.

Evaluation: Evaluation will be based on three homework assignments, a midterm and

comprehensive final examination, participation in a group project, and class
participation. Every student should be prepared to contribute meaningfully to every
class session.

Collaboration: All submitted work is expected to reflect your effort on the assignment.
You are encouraged to work with classmates, tutors, and the instructor on problem sets.
However, when you write the assignment, it must be your work and should be written
in words that reflect your understanding of the course material. The Honor Principle
and the ethics of proper academic conduct must guide your conduct in this class in all
respects. The following section from the Guidebook to Reed College summarizes my
expectations:

Reed College is a community of scholars. The fundamental ethical principle governing

scholarship is that one should never claim or represent as one's own work that which is
not one's own. The principle of proper academic conduct requires that all work submitted
for academic purposes--including, but not limited to examinations, laboratory reports,
essays, term papers, homework exercises, translations, and creative work--be the work of
the person who submits it, and that, in the case of work based upon experiment and
observation, the experimental results and observations be reported faithfully. The
principle thus requires that no one claim authorship to the work of another and that no
one falsify or misrepresent empirical data. This principle should be clear to every scholar,
although determining its application in particular circumstances will require careful
thought and guidance.1
1  For  more  information  see:  http://www.reed.edu/academic/gbook/comm_pol/acad_conduct.html  
Citations: Citations should be used when appropriate and should conform to the
guidelines in the Citation Guide for Papers and Theses in Economics, which is available
on the class Moodle site.

Materials on Reserve: The following texts are on 2-hour reserve; other required readings
are available electronically. Readings marked with a * are optional.

Easton, Thomas A. 2007. Taking Sides: Clashing Views on Controversial Environmental

Issues (12th edition) Guilford, CT: McGraw Hill/Dushkin.

Goldfarb, Theodore D. 2001. Taking Sides: Clashing Views on Controversial Environmental

Issues (9th edition) Guilford, CT: McGraw Hill/Dushkin.

Kolstad, Charles D. 2011. Environmental Economics (2nd edition) New York, New York:
Oxford University Press.
Outline and Reading List
I. Introduction

August 31st

Kolstad, Chapter 1 (to page 15).

Lackey, Robert T. 2006. Axioms of Ecological Policy. Fisheries. 31 (6): 286-290.

*Sandmo, Agnar. 2015. The Early History of Environmental Economics. Review of

Environmental Economics and Policy 9 (2) 1-21.

September 2nd: Cost of Environmental Protection

Kolstad, Chapter 1 (page 15 to end).

Pasurka, Carl. 2008. Perspectives on Pollution Abatement and Competitiveness:

Theory, Data, and Analyses. Review of Environmental Economics and Policy 2(2): 194-
218.

Grainger, Corbett A. and Charles D. Kolstad. 2010. Who Pays a Price on Carbon?
Environmental and Resource Economics 46(3): 359-376.

*Pizer, William A. and Raymond Kopp. 2005. Calculating the Costs of

Environmental Regulation. Handbook of Environmental Economics, Volume 3, edited
by Jeffrey Vincent and Karl-Goran Maler. New York: Elsevier.

September 4th: Positive and Normative Analysis

Kolstad Chapter 2.

Tol, Richard S.J. 2009. The Economic Effects of Climate Change. Journal of Economic
Perspectives 23 (2): 29-51.

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 Tol, Richard S. J. 2014. Correction and Update: The Economic Effects of Climate
Change. Journal of Economic Perspectives 28 (2) 221-226.

Nordhaus, William. 2007. Critical Assumptions in the Stern Review on Climate

Change. Science 317 (July 13): 201-202.

*Fisher, Anthony C. and Phu V. Le. 2014. Climate Policy: Science, Economics, and
Extremes. Review of Environmental Economics and Policy 8(2): 307-327.

*Pindyck, Robert A. 2013. The Climate Policy Dilemma. Review of Environmental

Economics and Policy 7(2): 219-237.

*van den Bergh J.C.J.M. and W.J.W. Botzen. 2015. Monetary Valuation of the Social
Cost of CO2 Emissions: A Critical Survey. Ecological Economics 114: 33-46.

II. Principles of Environmental and Resource Economics

A. Welfare Economics

September 9th and 11th

Kolstad, Chapter 3.

Heal, Geoffrey. 2013. Reflections—Defining and Measuring Sustainability. Review

of Environmental Economics and Policy 6(1): 147-163.

Portney, Paul R. Corporate Social Responsibility: An Economic and Public Policy

Perspective in Environmental Protection and the Social Responsibility of Firms:
Perspectives from Law, Economics, and Business, Bruce L. Hay, Robert N. Stavins, and
Richard H.K. Vietor, editors. Washington, DC: Resources for the Future: 107-131.

Bailey, Ronald. 2002. Wilting Greens. Reason.com (December 1).

*Arrow, Kenneth, Partha Dasgupta, Lawrence Goulder, Gretchen Daily, et al. 2004.
Are We Consuming Too Much? The Journal of Economic Perspectives 18(3) 147-172.

*Kneese, Allen V. and William D. Schulze " Ethics and Environmental Economics"
In Handbook of Natural Resource Economics, Vol. 1, ed. A.V. Kneese and J. L.
Sweeney. New York: Elsevier.

B. Markets and Market Failure

September 14th, 16th, 18th and 21st

Kolstad, Chapters 4 and 5.

Ostrom, Elinor et al. 1999. Revisiting the Commons: Local Lessons, Global
Challenges. Science 284 (April 9) 278-282.

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 Farley, Joshua et al. 2015. The Vermont Common Assets Trust: An Institution for
Sustainable, Just and Efficient Resource Allocation. Ecological Economics 109: 71-79.

Portney, Paul R. Trouble in Happyville. Journal of Policy Analysis and Management

11 (1): 131–132.

*Frank, Robert. 2008. Chapter 18W: General Equilibrium and Market Efficiency in
Microeconomics and Behavior McGraw-Hill Irwin: Boston, MA.

C. Benefit Cost Analysis

September 23rd and 25th

Kolstad, Chapter 6.

Office of Management and Budget. 2003. OMB Circular No A-4: Regulatory

Analysis (September 17). (Skim section E).

Gayer, Ted and Robert W. Hahn. 2005. Designing Environmental Policy: Lessons
from the Regulation of Mercury Emissions. Journal of Regulatory Economics. 30 (3):
291-315.

Murdoch, William, Stephen Polasky, Kerrie A. Wilson, Hugh P. Possingham, Peter

Kareiva, and Rebecca Shaw. 2007. Maximizing Return on Investment in
Conservation Biological Conservation 139 (3-4): 375-388.

*Cameron, Trudy. 2010. Euthanizing the Value of a Statistical Life. Review of

Environmental Economics and Policy 4(2): 161-178.

*Fry, Matthew, Adam Briggle, and Jordan Kincaid. 2015. Fracking and
Environmental (In)justice in a Texas City Ecological Economics 117: 97-107.

*Hammitt, James K. Positive Versus Normative Justifications for Benefit-Cost

Analysis: Implications for Interpretation and Policy. Review of Environmental
Economics and Policy 7(2): 1-21.

*Hanley, Nick and Clive L. Spash. 1993. Cost-Benefit Analysis and the Environment.
Brookfield, Vermont: Edward Elgar Publishing Co.

*Heinzerlin, Lisa and Frank Ackerman. 2002. Pricing the Priceless: Cost-Benefit
Analysis of Environmental Protection. Georgetown Environmental Law and Policy
Institute: Georgetown University Law Center.

*Kelman, Steven. Cost-Benefit Analysis: An Ethical Critique. Pages 129-136 in

Glickman, Theodore S. and Michael Gough (eds.). 1990. Readings in Risk
Washington, D.C.: Resources for the Future.

*Portney, Paul R. and John P. Weyant (eds.). 1999. Discounting and Intergenerational
Equity Washington, D.C.: Resources for the Future.

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III. Economic Valuation

A. Introduction

September 28th

Sagoff, Mark. Can We Put a Price on Nature's Services? Pages 16-23 in Taking Sides:
Clashing Views on Controversial Environmental Issues (9th edition).

Abromovitz, Janet N. Putting a Value on Nature's "Free" Services. In Taking Sides:

Clashing Views on Controversial Environmental Issues (9th edition).

Gatto, Marino and Giulio A. De Leo. Pricing Biodiversity and Ecosystem

Services: The Never-Ending Story. Pages 41-52 in Taking Sides: Clashing Views on
Controversial Environmental Issues (12th edition).

Morrison, Jim. How Much is Clean Water Worth? Pages 36-40 in Taking Sides:
Clashing Views on Controversial Environmental Issues (12th edition).

Costanza, Robert and Ralph d'Arge. 1997. The Value of the World's Ecosystem
Services and Natural Capital. Nature 387 (6630): 253-260.

September 30th

Kolstad, Chapter 7.

*Champ, Patricia A., Kevin J. Boyle, and Thomas C. Brown (editors). 2003. A
Primer in Nonmarket Valuation. Boston, MA: Kluwer Academic Publishers.

*Freeman, A. Myrick. 2003. The Measurement of Environmental and Resource Values:

Theories and Methods (2nd edition). Washington, D.C.: Resources for the Future.

B. Hedonic Price Method

October 2nd and 5th

Kolstad, Chapter 8.

Donovan, Geoffrey H. and David T. Butry. 2010. Trees in the City: Valuing Street
Trees in Portland, Oregon. Landscape and Urban Planning 94(2): 77-83.

*Pyndyck R. S. and D. L. Rubenfeld. 2009. Appendix: The Basics of Regression. In

Microeconomics (7th edition) Upper Saddle River, NJ: Pearson/Prentice Hall.

*Lutzenhiser, Margot and Noelwah R. Netusil. 2001. The Effect of Open Spaces on
a Home's Sale Price. Contemporary Economic Policy 19 (3) 291-298.

*Mahan, B.L., S. Polasky, and R. M. Adams. 2000. Valuing Urban Wetlands: A

Property Price Approach. Land Economics 76(1): 100-113.

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C. Defensive Expenditures and the Travel Cost Method

October 7th

Kolstad, Chapter 9 (to page 187).

Abdalla, Charles W., Brian A. Roach, and Donald J. Epp. 1992. Valuing
Groundwater Quality Changes Using Averting Expenditures: An Application to
Groundwater Contamination. Land Economics 68(2): 163-169.

October 9th

Kolstad, Chapter 9 (to end).

Loomis, John. 2002. Quantifying Recreation Use Values from Removing Dams and
Restoring Free-Flowing Rivers: A Contingent Behavior Travel Cost Demand
Model for the Lower Snake River. Water Resources Research 38 (6) 1-8.

Yardley, William. 2011. Removing Barriers to Salmon Migration. The New York
Times (July 29).

D. Contingent Valuation

October 12th

Kolstad, Chapter 10 (to page 209).

Kling, Catherine L., Daniel J. Phaneuf and Jinhua Zhao. 2012. From Exxon to BP:
Has Some Number Become Better Than No Number? Journal of Economic
Perspectives 26(4): 3-26.

Carson, Richard T. 2012. Contingent Valuation: A Practical Alternative When

Prices Aren’t Available. Journal of Economic Perspectives 26(4): 27-42.

Hausman, Jerry. 2012. Contingent Valuation: From Dubious to Hopeless. Journal of

Economic Perspectives 26(4): 43-56.

Nelson, Nanette M., et al., 2015. Linking Ecological Data and Economic to Estimate
the Total Economic Value of Improving Water Quality by Reducing Nutrients.
Ecological Economics 118: 1-9.

*Loomis, John B. 1996. How Large is the Extent of the Market for Public Goods:
Evidence from a Nationwide Contingent Valuation Survey. Applied Economics 28:
779-782.

*Desvousges, William, Kristy Mathews, and Kenneth Train. 2015. An Adding-Up

Test on Contingent Valuations of River and Lake Quality. Land Economics 91(3):
556-571.

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October 14th

Kolstad, Chapter 10 (page 209 to end)

Johnston, Robert J., Thomas A. Grigalunas, James J. Opaluch, Marisa Mazzotta,

and Jerry Diamantedes. 2002. Valuing Estuarine Resource Services Using
Economic and Ecological Models: The Peconic Estuary System Study. Coastal
Management 30: 47-65.

*Shogren, Jason F. and Laura O. Taylor. 2008. On Behavioral-Environmental

Economics. Review of Environmental Economics and Policy 2(1) 26-44.

*Shogren, Jason F. 2006. Valuation in the Lab. Environmental & Resource Economics
34: 163-172.
October 16th: Midterm Exam

IV. Controlling Pollution

A. Regulation

October 26th and 28th

Kolstad, Chapter 11.

Knickerbocker, Brad. 2003. How Economics May Reshape Green Policy Christian
Science Monitor (October 3).

Ambec, Stefan, Mark A. Cohen, Stewart Elgie, and Paul Lanoie. 2013. The Porter
Hypothesis at 20: Can Environmental Regulation Enhance Innovation and
Competitiveness? Review of Environmental Economics and Policy 7(1): 2-22.

Anderson, Soren T., Ian W. H. Parry, James M. Sallee, and Carolyn Fisher. 2011.
Automobile Fuel Economy Standards: Impacts, Efficiency, and Alternatives.
Review of Environmental Economics and Policy 5(1): 89-108.

*Burtraw, Dallas, Art Fraas, and Nathan Richardson. 2011. Greenhouse Gas
Regulation Under the Clean Air Act: A Guide for Economists. Review of
Environmental Economics and Policy 5(3): 293-313.

B. Pigouvian Fees

October 30th, November 2nd and 4th

Kolstad, Chapter 12

Leape, Jonathan. 2006. The London Congestion Charge. Journal of Economic

Perspectives 20(4): 157-176.

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 Viscusi, W. Kip, Joel Huber and Jason Bell. 2012. Alternative Policies to Increase
Recycling of Plastic Water Bottles in the United States. Review of Environmental
Economics and Policy 6(2): 190-211.

Tietenberg, Tom H. 2013. Reflections—Carbon Pricing in Practice. Review of

Environmental Economics and Policy 7(2): 313-329.

*Metcalf, Gilbert E. 2009. Designing a Carbon Tax to Reduce U.S. Greenhouse Gas
Emissions. Review of Environmental Economics and Policy 3(1): 63-83.

*Nordhaus, William D. 2007. To Tax or Not to Tax: Alternative Approaches to

Slowing Global Warming Review of Environmental Economics and Policy 1(1) 26-44.

C. Property Rights and Marketable Permits

November 6th

Kolstad, Chapter 13 (to page 272)

Coase, Ronald H. The Problem of Social Cost. Journal of Law and Economics
(October): 1-44. (focus on pages 1-28)

*Anderson, Terry L. and Dominic P. Parker. 2013. Transaction Costs and

Environmental Markets: The Role of Entrepreneurs. Review of Environmental
Economics and Policy 7(2): 259-275.

November 9th and 11th

Kolstad, Chapter 13 (page 272 to end)

Goulder, Lawrence H. 2013. Markets for Pollution Allowances: What Are the
(New) Lessons? Journal of Economic Perspectives 27 (1): 87-102.

Newell, Richard G., William A. Pizer, and Daniel Raimi. 2013. Carbon Markets 15
Years after Kyoto: Lessons Learned, New Challenges. Journal of Economic
Perspectives 27 (1): 123-146.

Fisher-Vanden, Karen and Sheila Olmstead. 2013. Moving Pollution Trading from
Air to Water: Potential, Problems, and Prognosis. Journal of Economic Perspectives
27 (1): 147-172.

*Hahn, Robert W. 2009. Greenhouse Gas Auctions and Taxes: Some Political
Economy Considerations. Review of Environmental Economics and Policy 3(1): 167-
188.

*Hahn and Hester. 1989. Marketable Permits: Lessons for Theory and Practice.
Ecology Law Quarterly 16: 361-406.

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 *Metcalf, Gilbert E. 2009. Market-based Policy Options to Control U.S.
Greenhouse Gas Emissions Journal of Economic Perspectives 23(2): 5-27.

*Schmalensee, Richard and Robert Stavins. 2013. The SO2 Allowance Trading
System: The Ironic History of a Grand Policy Experiment. Journal of Economic
Perspectives 27 (1): 103-122.

D. Regulation Over Space and Time

November 13th

Kolstad, Chapter 14

E. Regulations Under Uncertainty

November 16th

Kolstad, Chapter 15

F. Audits, Enforcement, and Moral Hazard; Voluntary Actions and Agreements

November 18th, 20th, 23rd, and 25th

Kolstad, Chapters 16 and 17

Gray, Wayne B. and Jay P. Shimshack. 2011. The Effectiveness of Environmental

Monitoring and Enforcement: A Review of the Empirical Evidence. Review of
Environmental Economics and Policy 5 (1): 3-24.

Alberini, Anna and Kathleen Segerson. 2002. Assessing Voluntary Programs to

Improve Environmental Quality. Environmental and Resource Economics 22 (1-2):
157-184.

*Bi, Xiang and Madhu Khanna. 2012. Reassessment of the Impact of the EPA’s
Voluntary 33/50 Program on Toxic Releases. Land Economics 88(2): 341-361.

*Grabs, Janina. 2015. The Rebound Effects of Switching to Vegetarianism. A

Microeconomic Analysis of Swedish Consumption Behavior. Ecological Economics
116: 270-279.

V. Advanced Topics

A. Risk and Uncertainty

November 30th

Kolstad, Chapter 18

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B. International/Interregional Competition

December 2nd and 4th

Kolstad, Chapter 19

Levinson, Arik. 2010. Offshoring Pollution: Is the United States Increasingly

Importing Polluting Goods. Review of Environmental Economics and Policy 4(1): 63-
83.

Esty, Daniel C. 2001. Bridging the Trade-Environment Divide. Journal of Economic

Perspectives 15(3): 113-130.

*Bhagwati, Jagdish. 1993. The Case for Free Trade. Scientific American (November)
42-49.

*Copeland, Brian R. and M. Scott Taylor. 2004. Trade, Growth, and the
Environment. Journal of Economic Literature XLII (March): 7-71.

*Daly, Herman E. 1993. The Perils of Free Trade. Scientific American (November)
50-57.

*Delbeke, J., G. Klaasen, T. van lerland, and P. Zapfel. 2010. The Role of
Environmental Economics in Recent Policy Making at the European Commission.
Review of Environmental Economics and Policy 4(1): 24-43.

*Ederington, Josh. 2010. Should Trade Agreements Include Environmental Policy?

Review of Environmental Economics and Policy 4(1): 84-102.

*Ruffing, Kenneth G. 2010. The Role of the Organization for Economic

Cooperation and Development in Environmental Policy Making. Review of
Environmental Economics and Policy 4(2): 199-220.

*Wolff, Hendrik and Lisa Perry. 2010. Trends in Clean Air Legislation in Europe:
Particulate Matter and Low Emission Zones. Review of Environmental Economics and
Policy 4(2): 293-308.

C. Environment, Growth, and Development

December 7th and 9th

Kolstad, Chapter 20.

Carson, Richard T. 2010. The Environmental Kuznets Curve: Seeking Empirical

Regularity and Theoretical Structure. Review of Environmental Economics and Policy
4(1): 3-23.

*Kahn, Matthew E. 2006. Green Cities: Urban Growth and the

Environment. Brookings Institution Press: Washington, D.C.

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 Assignment List, Due Dates, and Exam Schedule

The following is a list of assignments and due dates. All assignments are due in class on
the date listed below. In fairness to other students, late assignments will be penalized a
full grade for each day or partial day past the due date. Assignments handed in more
than three days after the due date will not be accepted.

Examinations:

The midterm exam is on Friday, October 16th. The comprehensive final exam will be
given during final exam week. The exact date and time of the final will be confirmed in
the second part of the semester by the Registrar's Office.

Problem Sets
Distributed Due
Problem Set #1 September 18th September 25th
Problem Set #2 October 2nd October 9th
Problem Set #3 November 6th November 13th
Problem Set #4 November 25th December 4th

Project Timeline
Task Date
th
Introduction to Zotero Friday, September 11 3:10-4pm, Library 17
Introduction to Excel Monday, September 14th or Thursday, September
17th
Introduction to ArcGIS Friday, September 18th 3:10-4pm, Vollum 126
Lindsey Maser, City of Portland Friday, September 25th from 3:10-4pm
BPS and Steve Yeadon, Assistant
Director of Facilities Operations
Project preference due Friday, September 11th
Group tasks, timeline and update Friday, October 2nd
Update Friday, November 6th
Section rough drafts due Friday, November 20th
Final project sections due Start of the final exam

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