Instructor’s Manual to Accompany
ENVIRONMENTAL ECONOMICS
An Introduction
2024 Release
Barry C. Field
University of Massachusetts Amherst
Martha K. Field
Greenfield Community College
,Table of Contents
Preface ............................................................................................................................ 2
Section I. Introduction
Chapter 1. What Is Environmental Economics? .............................................................. 4
Chapter 2. The Economy and the Environment ............................................................... 6
Section II. Analytical Tools
Chapter 3. Benefits and Costs, Supply and Demand ....................................................... 9
Chapter 4. Markets, Externalities, and Public Goods ...................................................... 15
Chapter 5. The Economics of Environmental Quality ..................................................... 19
Section III. Environmental Analysis
Chapter 6. Frameworks of Analysis .................................................................................. 24
Chapter 7. Benefit–Cost Analysis: Benefits ...................................................................... 28
Chapter 8. Benefit–Cost Analysis: Costs .......................................................................... 34
Section IV. Environmental Policy Analysis
Chapter 9. Criteria for Evaluating Environmental Policies ............................................... 37
Chapter 10. Decentralized Policies: Liability Laws, Property Rights, Voluntary Action ... 41
Chapter 11. Command-and-Control Strategies: The Case of Standards ............................. 47
Chapter 12. Incentive-Based Strategies: Environmental Charges and Subsidies ............... 53
Chapter 13. Incentive-Based Strategies: Market Trading Systems ..................................... 57
Section V. Environmental Policy in the United States
Chapter 14. Federal Water Pollution-Control Policy .......................................................... 62
Chapter 15. Federal Air Pollution-Control Policy............................................................... 67
Chapter 16. Federal Policy on Toxic and Hazardous Substances ....................................... 71
Chapter 17. State and Local Environmental Issues ............................................................. 75
Section VI. Global Environmental Issues
Chapter 18. Global Climate Change.................................................................................... 78
Chapter 19. International Environmental Agreements ........................................................ 82
Chapter 20. Globalization ................................................................................................... 85
Chapter 21. Economic Development and the Environment ................................................ 88
1
, Chapter 1
What Is Environmental Economics?
Updates for 2024 Release
Chapter 1 includes updates on climate change data, specifically for exhibits on
carbon taxes and CO2 emissions. The emphasis on incentives as a key concept remains
consistent with previous editions.
Objectives
The purpose of this chapter is to whet students’ appetites, by presenting them with
some examples of the types of problems environmental economists work on and some of
the approaches they take. Most of the examples are illustrated with short exhibits to
increase their immediacy. They are meant to be sketches that are easily understandable by
students, without the need of devoting a lot of class time to their deeper interpretation.
Main Points
At this juncture, there are just two leading ideas to emphasize: (a) the critical role
of incentives in producing environmental degradation and in designing environmental
policies and (b) the importance of studying the short- and long-run benefits and costs of
environmental improvements.
Teaching Ideas
It is especially important to set a positive tone early. Most students will come to
the class as environmental advocates. With its attention to costs, trade-offs, and notions
of efficiency, environmental economics can seem for many to lead toward a weakening
of the forces of environmental advocacy and to lower aspiration levels for environmental
improvements. That is why many environmental advocacy groups look at environmental
economics with a jaundiced eye. It’s important to begin getting the message across that
this is incorrect, that, instead, the subject will prove to be very useful in such things as
designing environmental policies with more teeth than some of those we have had in the
past, getting more environmental improvement from the resources we devote to these
programs, and learning more about the real levels of environmental damages and the
values people put on improving the natural environment.
Many students will also come to the class with the simplistic notion that
environmental deterioration is primarily a result of ―capitalism,‖ where decisions are
presumably made with reference only to the bottom line and not to wider social or
2
, ecological concerns. A critical proposition of environmental economics is that
uncontrolled markets will indeed underprice environmental pollution, which calls for
public policy and regulatory action to rectify the situation. Environmental pollution is not
a result of markets per se but of unregulated markets. An essential message is that
environmental pollution will occur in any system if the incentive system is not structured
appropriately.
One other preconception that students sometimes have is that environmental
quality issues are exclusively issues of the natural, biological, and medical sciences. In
this view, the best decisions will become manifest as a result of the application of these
sciences with enough diligence. The idea that human preferences should have anything to
do with decisions about environmental quality will very often strike them as curious, if
not downright wrong. It is never too early to start discussing this.
Answers to Discussion Questions
We have not included discussion questions for this first chapter.
3
ENVIRONMENTAL ECONOMICS
An Introduction
2024 Release
Barry C. Field
University of Massachusetts Amherst
Martha K. Field
Greenfield Community College
,Table of Contents
Preface ............................................................................................................................ 2
Section I. Introduction
Chapter 1. What Is Environmental Economics? .............................................................. 4
Chapter 2. The Economy and the Environment ............................................................... 6
Section II. Analytical Tools
Chapter 3. Benefits and Costs, Supply and Demand ....................................................... 9
Chapter 4. Markets, Externalities, and Public Goods ...................................................... 15
Chapter 5. The Economics of Environmental Quality ..................................................... 19
Section III. Environmental Analysis
Chapter 6. Frameworks of Analysis .................................................................................. 24
Chapter 7. Benefit–Cost Analysis: Benefits ...................................................................... 28
Chapter 8. Benefit–Cost Analysis: Costs .......................................................................... 34
Section IV. Environmental Policy Analysis
Chapter 9. Criteria for Evaluating Environmental Policies ............................................... 37
Chapter 10. Decentralized Policies: Liability Laws, Property Rights, Voluntary Action ... 41
Chapter 11. Command-and-Control Strategies: The Case of Standards ............................. 47
Chapter 12. Incentive-Based Strategies: Environmental Charges and Subsidies ............... 53
Chapter 13. Incentive-Based Strategies: Market Trading Systems ..................................... 57
Section V. Environmental Policy in the United States
Chapter 14. Federal Water Pollution-Control Policy .......................................................... 62
Chapter 15. Federal Air Pollution-Control Policy............................................................... 67
Chapter 16. Federal Policy on Toxic and Hazardous Substances ....................................... 71
Chapter 17. State and Local Environmental Issues ............................................................. 75
Section VI. Global Environmental Issues
Chapter 18. Global Climate Change.................................................................................... 78
Chapter 19. International Environmental Agreements ........................................................ 82
Chapter 20. Globalization ................................................................................................... 85
Chapter 21. Economic Development and the Environment ................................................ 88
1
, Chapter 1
What Is Environmental Economics?
Updates for 2024 Release
Chapter 1 includes updates on climate change data, specifically for exhibits on
carbon taxes and CO2 emissions. The emphasis on incentives as a key concept remains
consistent with previous editions.
Objectives
The purpose of this chapter is to whet students’ appetites, by presenting them with
some examples of the types of problems environmental economists work on and some of
the approaches they take. Most of the examples are illustrated with short exhibits to
increase their immediacy. They are meant to be sketches that are easily understandable by
students, without the need of devoting a lot of class time to their deeper interpretation.
Main Points
At this juncture, there are just two leading ideas to emphasize: (a) the critical role
of incentives in producing environmental degradation and in designing environmental
policies and (b) the importance of studying the short- and long-run benefits and costs of
environmental improvements.
Teaching Ideas
It is especially important to set a positive tone early. Most students will come to
the class as environmental advocates. With its attention to costs, trade-offs, and notions
of efficiency, environmental economics can seem for many to lead toward a weakening
of the forces of environmental advocacy and to lower aspiration levels for environmental
improvements. That is why many environmental advocacy groups look at environmental
economics with a jaundiced eye. It’s important to begin getting the message across that
this is incorrect, that, instead, the subject will prove to be very useful in such things as
designing environmental policies with more teeth than some of those we have had in the
past, getting more environmental improvement from the resources we devote to these
programs, and learning more about the real levels of environmental damages and the
values people put on improving the natural environment.
Many students will also come to the class with the simplistic notion that
environmental deterioration is primarily a result of ―capitalism,‖ where decisions are
presumably made with reference only to the bottom line and not to wider social or
2
, ecological concerns. A critical proposition of environmental economics is that
uncontrolled markets will indeed underprice environmental pollution, which calls for
public policy and regulatory action to rectify the situation. Environmental pollution is not
a result of markets per se but of unregulated markets. An essential message is that
environmental pollution will occur in any system if the incentive system is not structured
appropriately.
One other preconception that students sometimes have is that environmental
quality issues are exclusively issues of the natural, biological, and medical sciences. In
this view, the best decisions will become manifest as a result of the application of these
sciences with enough diligence. The idea that human preferences should have anything to
do with decisions about environmental quality will very often strike them as curious, if
not downright wrong. It is never too early to start discussing this.
Answers to Discussion Questions
We have not included discussion questions for this first chapter.
3
