30L304 :Environmental Economics

General info

Instruction language English
Type of Instruction 2 x 2 hours lectures (Lecture schedule)
Type of exams written exam plus assignments (Examination schedule)
Course load:6 ECTS credits
Registration:via Blackboard
Blackboard InfoLink to Blackboard (When you see 'Guest are not allowed in this course', please login at Blackboard itself)


prof. dr. D.P. van Soest (Coordinator)

prof. dr. R. Gerlagh

S.L. Zhou (TA)


Environmental and resource economics considers resources and the natural environment from an economic perspective and integrates resources and environmental pollution into economic analysis. Important economic concepts are external effects, common property management and cost-benefit analyses. The students are also trained in the use of game theory, dynamic analysis and econometric valuation methods.


After a general introduction into the relationship between economic activity and natural environment, the material of this course will be split into four parts. In part 1, pollution control is considered and, more specifically, policy instruments such as the Pigouvian tax and tradable permits. The effect of imperfect information on the choice of the instrument is considered as well. Part 2 is about renewable and non-renewable resources and growth issues. For renewable resources, like fish, the focus is on the difference between optimal management and open access to the resource. For non-renewable resources, like oil, the focus is on the optimal extraction path and the conditions for growth, in case the resource is essential for production. Growth issues are discussed in general. International aspects are central in part 3. Especially for a small economy, the question is considered whether opening up for trade is welfare improving in the presence of local pollution externalities. Furthermore, the tension is considered between the benefits of joining an international environmental agreement and free-riding on such an agreement. Game theory is used for this last analysis. Part 4 considers cost-benefit analyses and especially the valuation of environmental cost and benefits. Some valuation theory and the concept of option value are presented. Furthermore, methods and valuation in practice are discussed. The lectures are a mixture of theory, examples and empirical illustrations. The assignments consist of a number of exercises and some econometric applications.


Each student has to hand in four assignments that will be marked and included in the final mark. To pass, the mark for the Final Exam must be a 5.0 or better. Then the Final Grade consists of the average grade for the four assignment (with equal weight for each) and the grade for the Final Exam, both with a 50% weight.

Compulsory Reading

  1. Textbook: Roger Perman, Yue Ma, James McGilvray, David Maddison and Michael Common (2011), Natural Resource and Environmental Economics,, Pearson: 4th edition, chapters 2, 5, 6, 7, 9, 10, 12, 13, 15, and 17.
  2. Some additional papers.
  3. Lecture Notes.

Required Prerequisites

basic micro- and macro-economics, statistics package (e.g., STATA)

Recommended option for