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Centre for Development, Environment and Policy (CeDEP)

Economics of Environmental Policy

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This module provides a theoretically rigorous coverage of the economic concepts and principles of environmental policy. It provides the knowledge and analytical tools needed to design and evaluate public policies towards the environment. It covers externalities such as pollution and public goods, exploitation of natural resources, trade and sustainable development.

The module covers the theory underlying the different policy strategies and at how these strategies work in practice. Examples of existing policies are used to illustrate the difficulties of applying the theory in practice. Many of these examples are taken from the United States or the European Union but students should apply the analyses to environmental problems and policies implemented in other countries. The module draws on a number of examples from the rural and agricultural sectors, but the theory applies to environmental problems and policies in general.

Objectives and learning outcomes of the course

  • To understand the main interactions between the environment and the economy and the physical constraints that place limits on the interaction.
  • To apply specific methodologies so that solutions to environmental problems can be identified and implemented.
  • To use the knowledge acquired to be able to effectively evaluate environmental policy that is already in practice.
  • To understand the divergence between policy design in principle and the practical reality.

Scope and syllabus


Unit 1: Environmental economics as a discipline
Unit 2: Diagnosing environmental problems


Unit 3: A framework for the design and evaluation of environmental policies
Unit 4: Environmental policy instruments 1: standards and taxes
Unit 5: Environmental policy instruments 2: subsidies and marketable permit
Unit 6: Uncertainty and non-convexity
Unit 7: The targeting and enforcement of environmental policy
Unit 8: The economics of environmental liability


Unit 9: International issues in environmental policy
Unit 10: Transboundary externalities and environmental policy

Module sample

P521 module uses a core text which is specially written and will take you through your self-directed study. Exercises, assignments and other activities, such as self-assessment questions, film clips and animations are included to help you with learning. Most module study guides are now provided in electronic format on a USB flash memory stick, but can also be downloaded from the online learning environment. Click the linked image below to view a sample of our e-study guide: