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Cambridge Centre for Environment, Energy and Natural Resource Governance

Studying at Cambridge


Fundamentals of Environmental Economics

MPhil EP Module EP02

Andreas Kontoleon

Shaun Larcom


Environmental economics as a discipline is concerned with three broad questions. First, what are the economic and institutional causes of environmental problems? Second, how important are these problems economically, that is, in monetary terms? And third, what can we do to halt and reverse environmental degradation or even enhance the quality of our natural environment? This module gives an introduction to the answers environmental economics provides to the first and to the third question (the module EP01 looks more closely at the second question).

The module first introduces the field and its policy challenges. We then explore the question: Why do people pollute or overuse natural resources? This goes some way towards answering the first question above. We shall diagnose environmental problems using the analytical framework of economics. This includes a discussion of the complex interaction between the economic system, specifically markets, and the natural environment. In the second half of the course, we turn to the design and assessment of environmental regulation and policies. The course covers both the microeconomic and macroeconomic perspectives on regulation in a variety of policy settings, each characterised by specific constraints.