Summer 2016 examination

GY222
Applied Environmental Economics

2015/16 Syllabus suitable for current students only

Instructions to candidates

This paper contains NINE questions. Answer THREE questions. All questions will be given EQUAL weight.

Time Allowed - Reading Time: None

Writing Time: 3 hours

You are supplied with: No Additional Materials

You may also use: No Additional Materials

Calculators: Calculators are NOT allowed in this examination

LSE ST 2016/GY222 Page 1 of 2

1. a) With the help of diagrams, explain the economic case for reducing emissions from motor vehicles
using an environmental tax. (50%)

b) Discuss the circumstances under which economists would favour command and control
regulation over taxes (assuming that permits are not available as an alternative). (50%)

2. Critically discuss the implications on the Hotelling model of:

a) the 'shale gas revolution';
b) the decreasing trend in solar and wind energy production costs;
c) the current deceleration in China's growth.

3. Explain and critically discuss the following statement: Fortunately, what little evidence there is suggests
that there is quite a lot of substitutability between exhaustible resources and renewable or reproducible
resources (Solow 1974: 11).

4. Critically discuss how the 'Environmental Kuznets Curve' hypothesis might lead to inappropriate policy
prescriptions.

5. What is currently blocking private finance from flowing to low-carbon sectors, and how might these
obstacles be overcome?

6. Large parts of the European population are exposed to air pollution at levels deemed harmful to health
by the World Health Organisation. Excessive air pollution also causes damages to plants and animals,
affecting biodiversity and crop yields. Explain how you could use any TWO of the following valuation
methods to value the non-market benefits of a policy aimed at reducing air pollution levels in England,
and discuss their pros and cons in this context:
a) contingent valuation method;
b) hedonic price method;
c) subjective wellbeing valuation method.

7. Behavioral economics has probably had the biggest impact on environmental economics through
research on the nonmarket valuation for environmental goods (Shogren and Taylor 2008: 29). Discuss
with reference to stated preference methods.

8. Critically discuss the performance of Payments for Ecosystem Services as an environmental

management tool, in terms of conservation effectiveness AND distributional outcomes. Use examples to
illustrate your answer.

9. The trade-off between wealth and fatality risk is often called the value of statistical life. Critically discuss
the use of this concept in environmental economics.

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