Resource and Environmental Economics

In many economic situations, the incentives of individual agents are not aligned with the objective of attaining aggregate economic efficiency, or the maximisation of social welfare. Such situations often lead to market failures that are characterised by environmental degradation or the overexploitation of natural resources. This course analyses the economic principles underlying the design of efficient environmental policies and the optimal management of natural resources. It identifies conditions under which market failures lead to environmental degradation or to the overexploitation of natural resources, and discusses economic policies that can counteract such market failures. Such policies include imposing taxes on certain economic activities, or allocating property rights that allow these activities to be undertaken. If property rights—which may take the form of pollution permits, or individual quotas for the harvesting of natural resources—are transferable between agents, the trade of property rights between self-interested agents yields economic efficiency as a market-based outcome.