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Environmental Economics Main Exam 2022

Please answer three questions.

All questions carry equal weight.

There are two hours allowed for this exam.

1.

(a) Explain the supposed advantages of Pigouvian taxes and tradable emission permits over command and control regulations. [50%]

(b) Why have regulators been slow to adopt Pigouvian taxes and tradable emission permits instruments despite their supposed advantages? [50%] 

2.

(a) Explain how you would calculate the marginal cost of abating sulphur emissions. What are the limitations of your method? [30%]

(b) Explain the difference between the cooperative and the Nash solution to the acid rain game. [40%]

(c) Describe the chief difficulties involved in negotiating international agreements to reduce sulphur emissions. [30%]

3.

(a) In the single rotation model of the managed forest, what determines the optimal time to harvest?  [40%]

(b) In the multiple rotation model of the managed forest, what does the rent represent? In the same model, explain what happens to the length of the rotation cycle when planting costs increase. [30%]

(c) For what reasons and in what ways might a policymaker choose to intervene in managed forests? [30%]

4.

(a) Describe in detail how you would assess the value of a statistical life (VSL) using the hedonic method. [50%]

(b) Discuss how much trust policy makers should place in VSL estimates for cost benefit analysis. [25%]

(c) Table 1 below contains coefficient estimates derived from a discrete choice experiment conducted to evaluate three attributes (Hiking Trails, Bird Species, Road Access Points) for a national forest reserve. Using the information from Table 1 below, do the following calculations explaining each step:[25 %]

· Calculate the individual marginal WTP for an increase in hiking trails.

· Calculate the aggregate WTP for a single visitor for a policy that makes the following changes respective to the status quo

(i) Hiking Trails: increase from 2 to 4

(ii) Bird Species: reduce from 15 to 12

(iii) Road Access: increases from 1 to 3

Table 1: Coefficient Estimates (Conditional Logit Model) For Discrete Choice Experiment

5.

(a) Contrast environmental taxation and tariffs as two different ways a country could cope with environmental externalities that arise from the domestic production of an internationally traded commodity. Use diagrams to illustrate your answer. [60%]

(b) Discuss to what degree an ivory trade ban can protect populations of endangered species. [40%]

6.

(a) Explain why the discount rate is a key parameter in climate change economics. Discuss different arguments for how we should determine the discount rate for the benefits from climate change mitigation [60%]
(b) Some empirical studies use variations in climate variables to assess the future cost of climate change. Discuss the merits and problems of this approach. [40%]