ENE423 Economics of the Environment and Climate

• Topics

  This is a masters level course is mostly about environmental challenges and how they affect the individuals, the firm, and government, with some emphasis on climate change. On an axis from ethics to climate change, it is about sustainability. It goes beyond introductory environmental economics (and the bachelor course FOR15) in part in its focus on ethics, meaning social structures - beliefs, for instance - that support or direct individual responsibility. Also in techniques and depth, as in a focus on policy instruments, political economy and game theory. Climate change is special amongst environmental problems in being global, intergenerational, and involving new science.

  Advancements take the following shapes, all led from a practical angle of how environmental concerns affect and are relevant from the viewpoint of individuals and firms. A firm will ask how environmental and climate change affects it directly as well as its stakeholder (owners, employees, customers, suppliers), and perhaps more importantly how environmental and climate policies affect it, and these. Apart from the special emphasis on the economics of cooperation using game theory, and the intergenerational cost benefit analysis, advancements are in the direction of modern theory: incentives, and in the directions of political economy and institutions.

  A fairly recent development both in practice and in the literature is the role of environmental concerns and risks (or broader: Environment, Social and Governance: ESG) in finance, as when stock funds offer and investors want to be invested in ESG stock funds, or green bonds.

  An ethical dimension: say individuals or groups or concerns that are poorly represented, endowed or otherwise marginalized (unborn, say) is an important part of this study. Also: do - or should - firms and individuals care about such aspects of their decisions as sustainability, or carbon footprint? If so: how? consequences? What is the role, if any, of owners and investors?

  Literature is partly from Kolstad's book Environmental Economics, partly from Scott Barrett's book Environmental Statecraft, and also journal articles.

• Learning outcome

  Knowledge

  Upon successful completion, the student

  • Can identify ethical dimensions in the problem of environmental policy, climate policy, sustainability and treaties, especially as these relate to distribution, efficiency and decisions.
  • Is able to connect the challenge of managing the environment to characteristics of
    • the physical environment,
    • the stakeholders, such as individuals, firms and states, their endowments and preferences
    • institutions.
  • Can place the firm, its owners and other stakeholders in their various roles, including from ethical perspectives, relating these also to political economy and institutions.

  Skills

  Upon successful completion, the student

  • Understands how ethical concerns can apply to problems interpersonal and environmental. and how these both feed into policy and are affected by policy and institutions.
  • Understands how market failure - such as pollution problems - require different logic, policies and engagement when they are intergenerational, transnational.
  • Is able to analyse
    • how the firm and a sector is affected both by environmental / global change and by policies and treaties
    • how the firm and a sector is likely to engage to influence policy
    • the strengths and weaknesses of government policy instruments, pollution taxes, regulation, tradable permits, within the framework of a benevolent planner.
  • Knows the basic methodological challenges and methods used in prioritizing environmental problems and protection.
  • Understands the institutions and political economy of environmental issues, including justice and the basic notions of property rights and liability, as well as international treaties.

  General Competence

  Upon successful completion, the student is able

  • To see ethics as both feeding into and being influenced by individual action and government policy.
  • To use these concepts and techniques in an applied setting and to communicate insights and results.
  • To analyse an environmental management issue in the light of stakeholder interests such as the firm and its customers, institutions.

• Teaching

  Lectures, about 20, including guest lectures. The course is delivered two-way in auditorium and only to a very limited extent - virtually. The auditorium is our factory, where we - apart from at our desks - produce.

• Recommended prerequisites

  Students are recommended to have covered a program equivalent of the Bachelor program at NHH, and in particular to master intermediate economics (microeconomics in particular), and corresponding analytical tools.

  Bachelor course in Introductory Environmental Economics, FOR15 Introduction to Environmental Economics, or equivalent, is advantageous, not required. Both use Kolstad as a background for part of the courses, and in environmental economics, ENE423 emphasizes how the toolbox proves its usefulness and limitations illustrated with examples.

• Credit reduction due to overlap

  None.

• Compulsory Activity

  The student delivers, individually, one or two home assignments (in English) submitted and approved: two pages / 600 words. The assignment is graded approved/try again/rejected. Having the assignment(S) approved is necessary prior to submitting the term paper.

• Assessment

  The assessment is based on a term paper (duration approx. 14 days, in November) of approx. six pages/ 2500 words, delivered alone.

• Grading Scale

  A - F

• Computer tools

  None.

• Literature

  Charles Kolstad book (intermediate) Environmental Economics. Additional literature distributed by lecturer.