Environmental Economics

Course description
The purpose of the course is to present basic analytical tools for developing coupled models of the economy and the environment and discuss their use in policy design. The course will begin with static approaches to environmental policy design, then the analytical framework will be extended to dynamic approaches using optimal control and differential games both in deterministic and stochastic environments. This part will cover linear-quadratic and non-linear models of pollution control, stochastic models and pollution control under deep uncertainty using robust control methods, The course will conclude with an introduction to controlled spatio-temporal dynamics in resource management, focusing on pattern formation and the design of spatially dependent policies. Course lectures will be accompanied by slide presentations which will be available to the students.

Topics

Environmental Policy

  • Environmental Policy: An Introduction
  • Environmental Policy Externalities and Public Goods, Applied Environmental Policy, Auctioned Permits
  • Dynamic Optimization: An Introduction
  • Optimal Control, Differential Games, Characterizing OLNE and FBNE
  • Environmental Policy and Market Imperfections

Environmental Management in a Dynamic Context: Deterministic and Stochastic Environments

  • Deterministic Models of Pollution Control
  • Non-linear Dynamics:  The Lake Game
  • Uncertainty: Basic Concepts
    • Sigma – Algebras and Probability Measures, Random Variables, Distribution Functions, Probability Density Functions, Stochastic Processes, Stochastic differential equations and stochastic control
  • Stochastic Models of Pollution Control
  • Pollution Control under Deep Uncertainty

Introduction to Controlled Spatio-temporal Dynamics of Natural Resources (Optional)

  •  Local and non-local spatial effects (diffusion, spatial kernels)
  • Turing instability and pattern formation
  • Optimal instability and policy design


Related Bibliography

Environmental Policy 

  1. Benchekroun, H. and Long, N. (1998), “Efficiency inducing taxation for polluting oligopolists”, Journal of Public Economics, 70, 325-42.
  2. Katsoulakos, Y. and Xepapadeas, A. (1995), “Environmental Policy under Oligopoly with Endogenous Market Structure”, Scandinavian Journal of Economics, 97, 411-20.
  3. Spulber, D. F. (1985), “Effluent Regulation and Long-run Optimality”, Journal of Environmental Economics and Management, 12, 103-16.
  4. Xepapadeas, A. (1997), “Advanced Principles in Environmental Policy”, Edward Elgar Publishers.

Dynamics, Uncertainty, Robust Control

  1. Athanassoglou, S. and Xepapadeas, A. (2012), “Pollution control with uncertain stock dynamics: When, and how, to be precautious”, Journal of Environmental Economics and Management, 63, 304-20.
  2. Kossioris, G., Plexousakis, M., Xepapadeas, A. and de Zeeuw, A. J. (2011), “On the optimal taxation of common-pool resources”, Journal of Economic Dynamics & Control, 35, 1868-79.
  3. Kossioris, G., Plexousakis, M., Xepapadeas, A., de Zeeuw, A. J. and Mäler, K.-G. (2008), “Feedback Nash equilibria for non-linear differential games in pollution control”, Journal of Economic Dynamics & Control, 32, 1312-331.
  4. Millner, A. (2013), “On welfare frameworks and catastrophic climate risks”, Journal of Environmental Economics and Management, 65, 310-25.
  5. Polasky, S., de Zeeuw, A. J. and Wagener, F. (2011), “Optimal Management with potential regime shifts”, Journal of Environmental Economics and Management, 62, 229-40.
  6. Weitzman, M. L. (2009), “On Modeling and Interpreting the Economics of Catastrophic Climate Change”, The Review of Economics and Statistics, 91, 1-19.

Spatiotemporal Dynamics

  1. Boucekkine R, Camacho C, Fabbri G. 2013b. Spatial dynamics and convergence: the spatial AK model. J. Econ. Theory 148:2719–36
  2. Boucekkine R, Camacho C, Zou B. 2009. Bridging the gap between growth theory and the new economic geography: the spatial Ramsey model. Macroecon. Dynam. 13(1):20–45
  3. Brock, W. A., Xepapadeas, A. and Yannacopoulos, A. N. (2014), “Optimal Control in Space and Time and the Management of Environmental Resources”, The Annual Review of Resource Economics, 6, 15.1-15.36.
  4. Brock W, Engström G, Xepapadeas A. 2014. Spatial climate-economic models in the design of optimal climate policies across locations. Eur. Econ. Rev. 69:78–103
  5. Brock W, Xepapadeas A. 2008. Diffusion-induced instability and pattern formation in infinite horizon recursive optimal control. J. Econ. Dyn. Control 32(9):2745–87
  6. Brock W, Xepapadeas A. 2010. Pattern formation, spatial externalities and regulation in coupled economic ecological systems. J. Environ. Econ. Manag. 59(2):149–64