Green Markets:

Can We Buy and Sell Our Way Out of the Environmental Crisis?

Bren School of Environmental Science & Management

University of California, Santa Barbara

Winter 2008

Instructor

Matthew Kotchen, 4420 Bren Hall, kotchen@bren.ucsb.edu, 805-893-8668

Class Meetings

Tuesdays, 8:30 – 10:20 am, 1510 Bren Hall

Seminar Overview

This seminar is oriented primarily for MESM students with exposure to economics (i.e., ESM 251 and 204 at a minimum). Meetings will be organized around questions that relate to the overall objective of understanding the prospects for decentralized markets to address environmental challenges. Quite simply, can we buy and sell our way out of environmental problems? If so, how? And if not, why? This seminar is an outgrowth of a long-term research agenda in collaboration with Matthew Kahn at UCLA. Details about him, along with a link to his active environmentally related blog, can be found at http://mek1966.googlepages.com/. My aim is for the seminar to be a process of mutual discovery. I envision meetings to be a combination of me presenting material that conveys one way of thinking about the question at hand and/or explaining the methods/results of papers that we read. But more importantly, I hope that students will present and discuss their findings and ideas that come from efforts both inside and outside of class. This should be a participatory seminar and everything is on the table, including ideas about what questions we should be considering. What is more, we will build the list of readings and a general bibliography together as the quarter progresses. Think of this seminar as a working group.

Tentative List of Questions, Schedule, and Bibliography (work in progress)

January 8

Webcast of FTC Workshop on Carbon Offsets and Renewable Energy Certificates

• Link to Workshop webpage.
• Story, L. “F.T.C. Asks if Carbon-Offset Money Is Well Spent,” New York Times, Jan 9, 2008.
• Kotchen, M. J. “An Economics Perspective of the Market for Voluntary Carbon Offsets,” 2008.

January 15

Topic: What is new about “green” goods and services for consumer theory?

• Kotchen, M. J. “Impure Public Goods and the Comparative Statics of Environmentally Friendly Consumption,” Journal of Environmental Economics and Management, 49 (2005) 281-300.
• Kotchen, M. J. “Green Markets and Private Provision of Public Goods,” Journal of Political Economy, 114 (2006) 816-834.
• Srom, S. “Charity’s Share From Shopping Raises Concern,” New York Times, Dec 13, 2007.
• Kotchen, M. J. “Voluntary Provision of Public Goods for Bads: A Theory of Environmental Offsets,” 2007, NBER working paper W13643.

Question(s) for thought: Why the recent surge of environmental concern? Is it a trend or indicative of a fundamental paradigm shift? How might it be similar or different from the surge in the late 1960s and 1970s? Is there something different about the environmental problems that we face?

January 22

What drives consumer choice in green markets?

• Clark, C. F.  et al, “Internal and External Influences on Pro-Environmental Behavior: Participation in a Green Electricity Program,” Journal of Environmental Psychology, 23 (2003) 237-46.
• Kotchen, M. J. and M. R. Moore, “Private Provision of Environmental Public Goods: Household Participation in Green-Electricity Programs,” Journal of Environmental Economics and Management, 53 (2007) 1-16.
• Kotchen, M. J. and M. R. Moore, “Conservation: From Voluntary Restraint to a Voluntary Price Premium,” Environmental and Resource Economics, forthcoming.
• Kahn, M. E. “Do Greens Drive Hummers or Hybrids? Environmental Ideology as Determinant of Consumer Choice,” Journal of Environmental Economics and Management, 54 (2007) 129-145.

Question(s) for thought: What are the areas in which substantial consumer demand for green are most likely? Why? What are the areas in which consumer demand for green are most likely to have an important environmental impact? If the answer to the two questions differ, why?

January 29

What insights from production theory can we glean that help us think about challenges and opportunities for green markets? 

Question(s) for thought?

February 5

How effective is the information-based approach to environmental policy?

• Tieteneberg, T. “Disclosure Strategies for Pollution Control,” Environmental and Resource Economics, 11(3-4), 1998.
• Teisl, M. F. et al, “Can Eco-Labels Tune a Market? Evidence from Dolphin-Safe Labeling,” Journal of Environmental Economics and Management, 43, 2002.

Question(s) for thought?

February 12

What are the potential pitfalls, or reasons to temper hope, with respect to the environmental impacts of green markets?

• Lyon, T. and J. W. Maxwell, “Greenwash: Corporate Environmental Disclosure Under Threat of Audit,” Working paper.
• Kotchen, M. J. and J. J. Moon, “Corporate Social Responsibility for Irresponsibility,” 2007.

Question(s) for thought?

February 26

What are current trends with respect to institutional (centralized/decentralized) policy approaches as they relate to green markets?

• Prakash, A. and M. Potoski, “The Voluntary Environmentalists: Green Clubs, ISO 14001, and Voluntary Environmental Regulations,” Chapter 2, Cambridge University Press.
• Kotchen, M. J. and K. van ’t Veld, “An Economics Perspective on Treating Voluntary Programs as Clubs,” in Voluntary Programs: A Club Theory Perspective, Potoski and Prakash (eds.), MIT Press, forthcoming.
• Morganstern, R. D. and W. A. Pizer, Reality Check, Resources for the Future, 2007.

Question(s) for thought?

March 4

What are fundamental macroeconomic concerns regarding aggregation and globalization?

• Selected references to the literature on the I=PAT equation.
• Selected references with application of ecological footprint analysis.
• Diamond, J. “What’s Your Consumption Factor?” New York Times, Jan 2, 2008.
• Friedman, T. “Save the Planet: Vote Smart,” New York Times, Oct 21, 2007.

Question(s) for thought?

March 11

What, if any, are important distinctions that should be drawn out with respect to developing versus developing countries?

Question(s) for thought?