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PA - C6B' - ECO578 : Environmental Issues and Policy at Local Scale

Domaine > Economie.



How should we value the environment ? What policy should be implemented at the local level to regulate the external environmental impacts of agents on the rest of the city and more generally the rest of the world? External environmental effects arise through climate change, but also locally through air pollution for instance. The tools available to regulate pollution are numerous (taxes, permits, norms, nudges) but can have unintended consequences on inequalities and pollution elsewhere. This course explores how pollution should be taken into account in cost-benefit analysis and the global and local economic instruments available to fight pollution. Topics such as political economy of local environmental regulation, pollution leakage, inequalities and city resilience to natural disasters will also be covered. 


 Kolstad, Charles. Environmental Economics. 2nd ed. Oxford University Press, 2010. ISBN: 9780199732647.
Arrow, Kenneth, et al. "Is there a Role for Benefit-Cost Analysis in Environmental Health, and Safety Regulation?" Science 272 (1996): 221-222.
Glaeser, Edward L. & Kahn, Matthew E., 2010. "The greenness of cities: Carbon dioxide emissions and urban development," Journal of Urban Economics, Elsevier, vol. 67(3), pages 404-418, May.



I-Environmental externalities in cost-benefit analysis


  • Cost benefit analysis
  • Green accounting (Valuing non market goods: production function, revealed preferences, contingent valuation)
  • Discounting


Some readings:

Costa, Dora L. and Matthew E. Kahn. 2003. "The Rising Price of Nonmarket Goods " American Economic Review, 93(2): 227-232.

Hallegatte S., F. Henriet, J. Corfee-Morlot, 2011, The Economics of Climate Change Impacts and Policy Benefits at City Scale: A Conceptual Framework, Climatic Change, 104(1), 51-87


II- Global and local economic Instruments


  • Taxes, permits, nudges, command and control, land use regulation (zoning)


Some readings:

Glaeser, Edward L. & Kahn, Matthew E., 2010. "The greenness of cities: Carbon dioxide emissions and urban development," Journal of Urban Economics, Elsevier, vol. 67(3), pages 404-418, May.

Voluntary Information Programs and Environmental Regulation: Evidence from 'Spare the Air' (with W. Bowman Cutter), Journal of Environmental Economics and Management, 58(3), 20

Energy Conservation "Nudges" and Environmentalist Ideology: Evidence from a Randomized Residential Electricity Field Experiment

Erin Mansur and Sheila Olmstead, “The Value of Scarce Water: Measuring the Inefficiency of Municipal Regulations” Journal of Urban Economics, Volume 71, Issue 3, May 2012, pages 332–346.


III- Political economy of environmental regulation

Oates, Wallace E. and Portney, Paul R, 2003. “The political economy of environmental policy” in K. G. Mäler & J. R. Vincent (ed.), 2003. "Handbook of Environmental Economics," Handbook of Environmental Economics, Elsevier, edition 1, volume 1, number 1, January. 

Thomas Eisensee & David Strömberg, 2007. "News Droughts, News Floods, and U. S. Disaster Relief," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 693-728.

Kahn, M.E. “Environmental disasters as risk regulation catalysts? The role of Bhopal, Chernobyl, Exxon Valdez, Love Canal, and Three Mile Island in shaping U.S. environmental law”  J Risk Uncertainty (2007) 35: 17. doi:10.1007/s11166-007-9016-7

Samuel R. Dastrup, Joshua Graff Zivin, Dora L. Costa, Matthew E. Kahn, Understanding the Solar Home price premium: Electricity generation and “Green” social status, European Economic Review, Volume 56, Issue 5, July 2012, Pages 961-973


IV-Unintended consequences of local regulation: leakage


  • Leakage through the energy market
  • Industry location


Some readings:

Fowlie, M. 2009, Incomplete Environmental Regulation, Imperfect Competition, and Emissions Leakage. American Economic Journal: Economic Policy, 2009, 1(2).

Fowlie, M. 2009 Emissions Trading, Electricity Industry Restructuring, and Investment in Pollution Control.American Economic Review, 2010, 100(3).

Kahn, Matthew E., 2004. "Domestic pollution havens: evidence from cancer deaths in border counties," Journal of Urban Economics, Elsevier, vol. 56(1), pages 51-69, July.

Do Local Energy Prices and Regulation Affect the Geographic Concentration of Employment?

Are There Environmental Benefits from Driving Electric Vehicles? The Importance of Local Factors.

The Consequences of Spatially Differentiated Water Pollution Regulation in China



V-Unintended consequences of regulation: Inequalities


Maureen CropperAlan KrupnickWilliam Raich, “Preferences for Equality in Environmental Outcomes”, NBER Working Paper No. 22644, Issued in September 2016

Siqi ZhengCong SunMatthew E. Kahn, Self-Protection Investment Exacerbates Air Pollution Exposure Inequality in Urban China, NBER 2015

Matthew E. Kahn, The Beneficiaries of Clean Air Act Regulation , environment, 2001

Fowlie, Meredith, Stephen P. Holland and Erin T. Mansur. 2012. "What Do Emissions Markets Deliver and to Whom? Evidence from Southern California's NOx Trading Program." American Economic Review,102(2): 965-93.



VI –Induced innovation


Duranton G, Puga D. 2001. Nursery cities: urban diversity, process innovation, and the life cycle of products. Am. Econ. Rev. 91(5):1454–77

Acemoglu, Daron, and Joshua Linn. 2004. "Market size in innovation: theory and evidence from the pharmaceutical industry." The Quarterly Journal of Economics 119, no. 3: 1049 1090.

Audretsch D, Feldman MP. 2004. Knowledge spillovers and the geography of innovation. Vol. 4. In Handbook of Urban and Regional Economics, ed. JV Henderson, JF Thisse, 4:2713–39. Amsterdam: Elsevier

Magali A. Delmas, Matthew E. Kahn, and Stephen Locke, Accidental Environmentalists? Californian Demand for Teslas and Solar Panels, NBER Working Paper ...



VII- Resilience to catastrophic events

  • Insurance and moral hazard
  • Network characteristics


F. Henriet, S. Hallegatte, L. Tabourier, 2011. Firm-Network Characteristics and Economic Robustness to Natural Disasters, 

Boustan, Leah Platt, Matthew E. Kahn, and Paul W. Rhode. 2012. "Moving to higher ground: migration response to natural disasters in the early twentieth century."The American Economic Review 102, no. 3: 238

Maybe Next Month? Temperature Shocks, Climate Change, and Dynamic Adjustments in Birth Rates


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