14.42 | Spring 2011 | Undergraduate

Environmental Policy and Economics


Course Meeting Times

Lectures: 2 sessions / week, 1.5 hours / session

Recitations: 1 session / week, 1 hour / session

Course Description

This course explores the proper role of government in the regulation of the environment. It will help students develop the tools to estimate the costs and benefits of environmental regulations. These tools will be used to evaluate a series of current policy questions, including: Should air and water pollution regulations be tightened or loosened? What are the costs of climate change in the U.S. and abroad? Is there a “Race to the Bottom” in environmental regulation? What is “sustainable development”? How do environmental problems differ in developing countries? Are we running out of oil and other natural resources? Should we be more energy efficient? To gain real world experience, the course is scheduled to include a visit to the MIT cogeneration plant. We will also do an in-class simulation of an air pollution emissions market.

Laptop Policy

This course relies on the contributions of all of the students. As a result, laptop use will only be allowed when explicitly allowed by the professor. Students with unique need to take notes on their laptop (writing difficulties, etc.) should send the professor an email requesting permission for the duration of the course. For students with permission, use of laptops will be limited to the first two rows of class.

Office Hours

We look forward to seeing you in office hours. The professor’s office hours are typically for conceptual or “big-picture” questions, not as much for details of the problem sets. The TA’s office hours are typically good places to discuss details of the problem sets or anything else.


The course textbook is:

Kolstad, Charles. Environmental Economics. 2nd ed. Oxford University Press, 2010. ISBN: 9780199732647.

The chapters from the Kolstad textbook are required. The rest of the syllabus is intended to serve as a guide to the literature and it is not expected that you will read every article. Some articles in particular will be required, and I will let you know about this in advance. Since class participation matters, you may want to read the textbook chapters in advance of class.

Two less advanced textbooks that may be useful for gaining intuition are:

Tietenberg, Tom. Environmental and Natural Resource Economics. 5th ed. Addison-Wesley, 2000. ISBN: 9780321031280.

Chapman, Duane. Environmental Economics: Theory, Application, and Policy. Addison-Wesley, 1999. ISBN: 9780321014351.

Finally, students who are interested in the current state of U.S. environmental policies are directed to:

Portney, Paul, and Robert Stavins. Public Policies for Environmental Protection. 2nd ed. RFF Press, 2000. ISBN: 9781891853036.

Grading and Assignments


The tentative grading scheme is as follows:

Class participation 10%
Problem sets 30%
Midterm exam 20%
Final exam 40%

The distribution of grades will resemble the distribution in other MIT economics courses.

Problem Sets

There will be seven problem sets. Each assignment will be placed on the course website as early as possible. Answer keys will be posted on the course website the day that the problem set is due. Students are encouraged to work together in solving the problem sets, but individual assignments are required from each student for grading.

Problem sets will typically be due on Friday at the beginning of section, and parts of sections will be devoted to discussing results. For this reason, late problem sets will not be accepted. A problem set is late if it arrives after section begins; this is because we do not want you coming late to section. Extensions will not be granted.

At least one of the problem sets will involve a statistical exercise to be conducted with STATA. This problem set will involve you in cutting edge research that aims to test whether or not air pollution causes infant mortality. Any software can be used for these problem sets, but answer keys will be written with STATA code. Most computer labs on campus have STATA on their desktops. Some TA sessions will be devoted to STATA tutorials.


A midterm exam will be given in class before spring break. The midterm will cover all material presented in lecture prior to the exam and will count for 20% of the final course grade.


A final exam will be given during the final examination period. The final exam will be comprehensive, covering all material presented in lecture, but it will emphasize the material presented after spring break.

Course Info

As Taught In
Spring 2011