Course Description

All regulation systems allow firms flexibility in how to comply. For example, companies can often earn credits for over-complying, which can be sold or banked for future use. We will see that compliance then becomes a strategic decision, and so we will integrate compliance and sustainability strategies.

Finally, many options for making the firm more sustainable, such as internal carbon taxes, renewable energy certificates, and carbon offsets, are very similar to regulation. We will analyze these options to see which generate the largest emissions reductions at the least cost.

General Information

Course Meetings: Section 32: Monday and Wednesday from 10:30 am to 12:45 pm in room Aresty 431.

Office: Room 517G, Jenkins School of Business.

Office hours: Tuesdays from 1-3 in person.

Contacts: Dave can be contacted via phone (8x3725) or email (dkelly@miami.edu).

Web Site: All notes, homeworks, reviews, quizzes, and solution sets and the syllabus will be posted on BlackBoard. The syllabus is also available on Dave's website (http://moya.bus.miami.edu/~dkelly/teach/eco615/index.html)

Final Exam: Wednesday, December 6, from 10:30 am to 12:45 pm, in the same room.

Prerequisites

Textbooks

Kolstad, Charles D., Environmental Economics, Second Edition, Oxford Press, 2011.

Grades

• 3 Homeworks 25% (due dates: October 23, November 6, November 20)
• First Quiz (October 30) 25%
• Second Quiz (November 13) 25%
• Final Quiz (December 4) 25%

Additional Notes

• Attendence is required and very important for this class. All quiz material comes from class notes, and many in class problems are only available in class. Dave will provide detailed notes. But smart students will attend every class and take detailed notes on the in-class examples, and will therefore find that the homeworks and quizzes are straightforward. Of course, if you are sick or experiencing Covid like symptoms, please stay home.
• There is a homework or quiz due every Wednesday. Each homework is worth 8.3%, about a letter grade. Dave prefers homeworks to be submitted via email, but in person is OK too. If submitting by email, please submit a Word Document or pdf, avoid huge jpeg/picture files. The homework email must be sent (or handed in) by the time class starts. Dave recognizes that sometimes emergencies occur, in which case a student can be excused from turning in a homework. In this case, the final will be weighted more. Students must let Dave know in advance if they are unable to turn in a homework on time. Finally, the homeworks sometimes demonstrate how the concepts used in class are applied in the "real world." Because the real world is complicated, the homeworks can be long. Do not wait until the last minute to start the homeworks.
• The three quizzes are October 30, November 13, and December 4. Now is the time to mark your calandars. As with the homeworks, if there is an emergency or you are experiencing Covid symptoms and cannot take the quiz, the final will be weighted more. Students must let me know in advance of the quiz start time if there is an emergency.
• With six week courses, it is important to keep up. Missing one class is equivalent to missing a week's worth of undergraduate classes.
• What they say about Dave on Rate My Professor:
  • "Can be an a-- if you procrastinate."
  • "God help you if you don't go to class."

Course Outline

1. Introduction (chapters 1-2, 3.1-3.2 October 14-16).
1. What is this course about?
1. Legal versus economic framework.
2. Thinking like an economist.
3. Sustainability and regulation.
2. How does a firm manage regulation?
1. Economic trade-offs.
2. Sustainability related costs and benefits.
3. Welfare.
1. Importance of Well-Designed Regulation.
2. Market failures.
3. Welfare criteria.
4. Stakeholders.
4. Stylized Facts.
1. Environment.
2. Social.
3. Regulation.
2. Markets and market failures (chapters 4.1, 4.2D, 4.3, 5.4, 6.1A-B October 16-21).
1. Unregulated Markets.
1. Private supply and demand.
2. Private marginal cost.
3. Equilibrium.
2. Welfare.
1. Pareto criterion.
2. Welfare theorems.
3. Externalities.
4. Public goods.
5. HOMEWORK 1 DUE OCTOBER 23.
3. Marginal Social Cost.
1. Output markets.
1. Marginal social cost.
2. Sustainability Considerations.
2. Input and Pollution Markets.
1. Marginal cost of reducing/increasing.
2. Marginal cost of reducing versus key performance indicators (KPIs).
3. Multiple inputs: substituting sustainable inputs for unsustainable inputs.
4. Public Goods.
3. Regulation (chapter 11.1-11.4, 12, 13.2, 18.4, October 23 - November 20).
1. Taxes.
1. Pigouvian tax.
2. FIRST QUIZ, OCTOBER 30.
3. Direct vs. Indiret taxes
4. Equi-Marginal Principle.
5. Imperfect competition.
6. Internal carbon taxes.
7. How taxes promote sustainability.
2. Cap and Trade (Tradeable permits).
1. Optimal permits.
2. Initial allocation.
3. Banking.
4. How cap and trade promotes sustainability.
5. HOMEWORK 2, DUE NOVEMBER 6.
3. Standards.
1. Emissions Standards.
2. Technology Standards.
3. Intensity Standards.
4. How standards discourage sustainability.
5. SECOND QUIZ, NOVEMBER 13.
4. Subsidies.
5. Regulation-Like Markets
1. Carbon Offsets.
2. HOMEWORK 3 DUE NOVEMBER 20
3. Renewable Energy Certificates.
4. Additionality problem.
5. Sustainability.

Class notes.