Environmental and Resource Economics I

Course Information

Courses and exams
Prof	Vranken Liesbet
Courses	Lectures
Examination	Written exam
Background
Credits	6
When?	2nd semester
ECTS	Link

2022

June

11/06/2022

Prepare for schrijfkramp x

1. a) Discuss the drivers of environmental impact based on the IPAT equation. Which behavioural relationships determine what happens to P, A & T. b) 2 quotes, give arguments why they are true/not true c) What is your opinion?
2. Compare the paris agreement to a game theory and explain why this agreement doesn't work that well. Why did the Monreal protocol work, compare to game theories as well (ozon)?
3. In 2015 the Environmental Policy Agency in the USA observed that Volkswagen cars were emitting more NOx on the road than during emission control tests in the laboratory. When it was found out that Volkswagen had deliberately installed a software which allowed the cars to recognize when they were being tested, and reduce their pollution during the tests, this was the start of a big scandal, called Dieselgate. Volkswagen had to pay a compensation of 25 billion USD to the US government for the 500,000 cars in the USA that were equipped with this software. In Europe 8,5 million vehicles are affected (approximately 400,000 in Belgium) and no meaningful compensation has been offered thus far.
   1. Give two advantages and disadvantages of command and control measures.
   2. How can you solve the disadvantages, what other method can you use that is better?
   3. Something with a tax on a car -> draw a graph and explain
4. a) Calculate the undiscounted net benefits of both projects. What would you do to choose one of the projects if these net benefits are equal? b) Calculate the NPV of both projects with a discount rate of 6%. Which project would you choose? c) Give the different arguments for discounting and explain with the Ramsey equation. d) Why doesn't the Stern review use market interest rates as discount rates?
5. In recent years choice experiments (or choice modeling) have become a very popular way of valuing environmental goods. Choice experiment techniques confront respondents with a number of discrete alternatives or scenarios, often representing competing environmental projects. Suppose one considers to change the management practices for a nature area. Changing the management practices would affect the biodiversity, the accessibility of the area as well as the vegetation types. To deduct public preferences for the different scenarios, some policy makers have decided to conduct a choice experiment in which the respondents (representative sample size = 1000) are presented with different hypothetical management scenarios. The scenarios are described using the attributes in Table_1. The data are analyzed using the Random Utility Model where the deterministic component is represented as a linear function of the attributes. Hence: 𝑉𝑖 = 𝛽1Price𝑖 + 𝛽2High biodiversity𝑖 + 𝛽3Good accessibility𝑖 + 𝛽4Heatland𝑖 + ε𝑖 A conditional logit model was used to estimate the parameters (𝛽’s)and the results are presented in Table_2. The estimated coefficient should be compared against a scenario with coniferous forest, low biodiversity and poor accessibility of the area.
   1. What do these results learn you about the 1000 respondents preferences for (1) a change of vegetation cover from forest to heathland, (2) an increase in biodiversity (from low to high) and (3) an increase in accessibility (from poor to good)? What would be their WTP for implementing each of these changes?
   2. If a project is implemented to increase the biodiversity, reduce the accessibility and change the vegetation type from forest to heathland. What would be the value of the environmental benefits realized by this project?

2021

June

07/06/2021

1. About economic growth (max 3/4 page)
   1. Some say that a good environmental policy is one that stimulates environmental growth. On which theory is their reasoning based?
   2. Other economists focus on degrowth. Give some arguments for this.
   3. Do you agree with these arguments on economic growth/degrowth? Formulate your own opinion.
2. About discounting and the Stern review (max 1,5 page)
   1. (Ramsey equation was given). Give the different arguments for discounting and explain with the Ramsey equation.
   2. Why doesn't the Stern review use market interest rates as discount rates?
   3. The Stern review uses the cost of risk bearing to take into account uncertainty. Explain what this is. What is the link with the option value? (you can explain it in words, but you are also allowed to do it with formulas)
   4. The Stern review promotes the establishment of global carbon markets. Give some arguments for and against such carbon markets
3. Exercise on discounting (Table with costs and benefits was given for 2 projects) (max 1 page)
   1. Calculate the undiscounted net benefits of both projects. What would you do to choose one of the projects if these net benefits are equal?
   2. Calculate the NPV of both projects with a discount rate of 6%. Which project would you choose?
   3. Discounting has often been labeled a political technology. Give 2 arguments why.

2020

June

12/06/2020

1. In a free market, an optimal level of biodiversity and ecosystems will not be provided. why?
2. All about the Stern review and arguments within the stern review.
3. Calculations for compensation surplus and equivalent surplus given an initial utility function
4. What are the uses of WTP and WTA for environmental conditions? give some critical comments from ecological economics.
5. (Given a situation and a matrix) can you make use of the minimax regret rule to make a decision?

18/06/2020

1. Discuss the drivers of environmental impact based on the IPAT equation. Which behavioural relationships determine what happens to P, A & T.
2. A company wants to open a new bio fermentation plant in the neighbourhood of Ternat, a village close to Brussels. There are some concerns about the smell of this plant. The company promises to only run the plant during working hours, when most people are at home. Yet, it has been shown that the smell of a bio fermentation can be persistent on warm days and hang around for several hours after the plant’s activity stops. The plant will mostly treat organic waste from Brussels.
   1. Is this a stock or a flow pollution?
   2. The company argues that it studied several possibilities for the treatment of waste and argues that it found the most efficient solution. You are a member of that company and you have to explain the case to a member of the government. How would you proceed?
      1. Make use of a graph of benefits and costs of the air pollution (smell)
      2. Explain how your company took into account that the wind mostly blows southwards in Ternat. How did this influence the choice of location? No need to provide equations or graphs here.
   3. A member of the action group “Clean Air in Ternat – Now” argues that the plant is not legitimate because it mostly treats waste from outside Ternat and because no public consultation has been held.
      1. What criteria to determine the level of pollution, other than efficiency, is this person referring to?
      2. How would you address the second complaint (regarding the public consultation)?
3. Some groups of society would like to expand an industry zone at the expense of a forest area. Before granting the permission to expand, the government would like to have an idea about the recreational value of the forest. They decided to go ahead with valuing the forest using the travel cost method. The basic data for the forest with no admission charge are:

Zone	Visits	Population (thousands)	Distance
1	15.000	2000	10
2	48.000	8000	15
3	10.000	2500	20

We assume that we know the travel cost per kilometre (€1) and that the following equation describes the trip generating function: vi = 11-0,35*(Ti+P)

1. Derive the total consumers’ surplus of the forest per year for P = €0
2. What would be the consumers’ surplus if P = €10?
3. Assume that the expansion of the industrial zone for export products would require €200 000 costs to clear the forest, build roads, provide utilities, etc. at the start of the project and that it would allow entrepreneurs in the area to generate €300 000 each year (except at the start of the project). Would you then advice the government to go ahead with the expansion of the industrial zone if a time horizon of 5 years is taken into consideration, a discount rate of 4% and if P = €0? Provide the calculations.
4. “Discounting” is a tool frequently used in economics. Economist consider this to be a neutral tool that is very useful for cost-benefits analysis. Others have called it “a political technology”. Can you give some reasons for why discounting would be “a political technology”? Give at least two arguments.