ECON BC3039 Environmental and Natural Resource Economics

Instructor: Rajiv Sethi, Fall 2003


This course is concerned with the relationship between economic activity and the natural environment. We begin with a review of two key microeconomic concepts: externalities and efficiency. These concepts are then used to show that an unregulated economy will tend to produce inefficiently high levels of pollution. Various policies used to improve on the unregulated outcome, such as standards, taxes, subsidies and tradable permits are examined. The issue of valuing non-market benefits of pollution abatement, which is a necessary step in determining the appropriate level of pollution, is addressed. The relationship between poverty, population growth, economic development, and the environment is examined. The optimal rate at which renewable and non-renewable natural resources should be extracted, and whether or not commonly owned natural resources are indeed extracted at an optimal rate is investigated. The course concludes with a discussion of global environmental issues: ozone depletion, global warming, and the preservation of biodiversity.