[Econ 2277](
[Prof. Richard L. Sweeney](

[(print this presentation)](

The environment is valuable


More salient when quality is poor



Essential inputs to many processes



Pollution exposure is often very costly


Source: Currie, Greenstone and Meckel (2017)

What does this have to do with economics?

Part 1:

How much environmental quality should we have?

The answer is not “as much as possible”


The optimal environmental policy maximizes NET benefits

We’ll answer important questions like:

Review why markets are unlikely to get us to the economically efficient level of environmental protection

Common misconception: Economists always advocate free markets

When US environmental movement took off in US in 1960s, economists had been teaching as much to grad students for decades.

Part 2:

How should we design environmental policy?

Example: US lead standards

EPA’s science panel recommends airborne lead be limited to 0.15 micrograms per cubic metre

How should we craft a policy to hit that goal?


We’ll learn the benefits of “market”-based approaches

Environmentalists: Cost-effectiveness is important!

Economists know that demand slopes downward

Implication: the cheaper it is to protect the environment, the more protection people will “demand”

Learn the difference between key environmental policy tools

We’ll discuss several real world applications / policies

Part 3: Global climate change


“The mother of all externalities”

Larger, more complex, and more uncertain than any other environmental problem. (Tol 2009)

Two major challenges:

  1. Emissions stay in atmosphere for a long time.
    Implication: costs today, benefits far in the future.

  2. Impacts from local emissions felt globally. Implication: countries can’t solve this problem on their own.

What we’ll cover

What I hope you’ll take away from this course

Required Readings

Fullerton & Stavins [link]