Environmental and Transport Economics

URL study guide

https://studiegids.vu.nl/en/courses/2024-2025/E_EBE2_ETE

Course Objective

The course aims to teach you to take market failures in the realm of environmental and transport economics seriously. After taking this course, you are able to characterize the relationship between government and market from an economic perspective. You learn why, and under what conditions, the free market does not lead to an efficient allocation of goods, factors of production, and natural resource use. This course focuses on externalities (pollution, congestion), natural monopoly (e.g., railways), oligopoly (e.g., aviation and fossil fuels), public goods (e.g., environmental quality, infrastructure), and the management of renewable and non-renewable natural resources (e.g., fossil fuels, rare-earth elements, fisheries and forests). You learn to apply economic methods and techniques that are indispensable in this context for analysing market failures and evaluating associated policies. This also includes mathematical models and methods for empirically estimating the economic values of non-priced goods such as carbon emissions and time, and methods to judge the value of investment projects through, in particular, cost-benefit analysis. After completing this course: Academic and Research SkillsYou can critically analyse the functioning and failure of markets anddevelop government policies to combat market failures. Bridging Theory and Practice – KnowledgeYou are able to explain how externalities can be "internalized"through Pigouvian taxation and tradable permits, both in first-best and second-best situations.You are able to describe the causes and consequences of taxcompetition between governments and of market power in networks and to provide policy advice to combat this.You are able to characterize the extraction path of natural resourcesin a market equilibrium and you are able to explain why and how this path differs from the socially optimal one. Bridging Theory and Practice
- ApplicationYou can apply economic methods and techniques to analyse marketfailures and evaluate associated policies.You are able to make cost-benefit calculations and you can usevaluation methods (such as discrete choice models and stated preferences). Social Professional SkillsYou are able to present and discuss results from scientific articlesin a comprehensible manner, both written and orally, together with and in front of your fellow students. Broadening your HorizonYou are aware of the various difficulties that may arise inregulating markets in reality, and you understand that simple "recipes", while useful to illustrate the possibilities, cannot simply be applied in practice.

Course Content

The premise that the free market automatically leads to an efficientallocation of goods and factors of production, and that, as a result,the government should not intervene in the market process, is often toosimple a representation of reality. This course deals with the complexrelationship between "market" and "government" from the perspective ofenvironmental and transport economics. In the course, general economicinsights with regard to the relationship between "market" and"government" are developed and elaborated on the basis of practical and appealing examples. At the core of the course is the concept of "externalities" as an economic cause of environmental problems such as pollution and overexploitation of natural resources. Policy instruments to combat these problems are discussed in the course. In addition, other forms of externalities are being investigated
- in particular traffic jams and congestion in road traffic. But the course also deals with market failures arising from market power on the railways ("natural monopoly"), in aviation ("oligopoly" and "contestable markets") and in energy supply ("cartels" such as OPEC); or because of public goods such as infrastructure. Finally, methods to empirically estimate the economic values of non-priced goods such as carbon emissions and time, and methods to make informed investment decisions (in particular cost-benefit analysis) are discussed and applied.

Teaching Methods

Lectures. Instruction lectures. Tutorials.

Method of Assessment

- Written exam
- individual assessment.
- Assignments
- group assessment.

Literature

- Transport Economics: Syllabus "Markets and Governments: TransportEconomic Applications".
- Environmental Economics: Perman, P., Y. Ma, M. Common, D. Maddison, and J. McGilvray (2011), Natural Resource and Environmental Economics. Addison Wesley, Longman Ltd, 4th edition.

Recommended background knowledge

Microeconomics I and II; Quantitative Research Methods I and II; Regional and Urban Economics; Public Economics.