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Summary Environmental economics

- Environmental economics
- Carolyn Fischer
- 2019 - 2020
- Vrije Universiteit Amsterdam
- Spatial, Transport and Environmental Economics
56 Flashcards & Notes
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A snapshot of the summary - Environmental economics

  • Environmental economics week 1 lecture 1

  • What are pigouvian taxes?
    A pigouvian tax is an emissions fee exaclty equal to the aggregate marginal damage caused by the emissions at the efficient level of pollution.
  • What is meant with the first welfare theorem and how does this apply to the pigovian tax principle?
    First welfare states that any competitive equilibrium leads to a Pareto efficient allocation of resources. This relates to the Pigovian tax principle as this taxes the externalities at the efficient level of production, therefore setting a new equilibrium that is Pareto efficient.
  • Name 3 long run effects of pigovian taxes or subsidies
    Entry and exit of producers.
    rents more than compensate compliance costs
    lump sum distribution to covered entities.
  • On what principle is the Coase theorem based and name an example of a system that adapted this theorem
    The polluter pays principle, which is translated into property rights. The European Cap and Trade system is based on this theory.
  • What happens to the (graphical) model if the model switches from Polluters pay to victim pays principle?
    The welfare gain switches from left to right. Then, instead of a gain for the victim, the polluter will gain from lowering pollution. (try to graph this)
  • How can permits be delivered to the market in a cap and trade system and what does the price of a permit reveal?
    Can be done through grandparenting, (giving them for free) or through auctioning. The price will reflect the Marginal costs of abatement, which thanks to the market will be equalised through polluters.
  • What where the main findings of Goulder & Parry (2008) paper about Instrumental choice in Environmental policy?
    The paper argues to find the lowest-cost combination of input choice. Moreover to equalize the marginal reduction costs across heterogeneous firms and a minimization of general equilibrium costs from interactions with broader tax system. As well as providing Fairness across income groups. At last Political feasibility. (Republicans and Trump)
  • Environmental economics week 1 lecture 2

  • Why do we consider technical change in an environmental economics context?
    1. Climate change is difficult and costly to battle with existing technologies. Therefore new technologies are needed, such as electric cars, solar panel technology etc. As these new technologies will reduce the costs of combating climate change.
  • What is the difference between R&D and learning by doing (LBD)?
    R&D requires an upfront investment. While learning by doing requires commercial experience with a product.
    Good example is an electric car.
    You have the R&D in the technology, and learning by doing by companies trying to gain experience with the new car, getting it cheaper on the market every year.
    Same happened to the solar market. (See graph in slide)
  • What is exactly meant by autonomous technical change and how does this differ from induced technical change?
    Autonomous technical change

    Characterized by "Supply-push"
    type of technology typically invented by the public sector (universtities)
    typically independent of market conditions.  

    Induced technical change

    refers all the way back to Hicks (1932) research.
    Hicks argued that most technical innovations are due to changing market circumstances. As for example one resource becomes more expansive.
    think about the race to find alternatives during the 1970s oil crisis.
    (lithium battery was invented by Exxon mobile during this period)
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