Course description
Sustainable development issues are receiving a lot of attention, as it is becoming increasingly clear that individuals, firms and governments fail to take into account the full costs and benefits of enjoying/exploiting the environment and its resources. Economics is one of the major sciences providing important tools for analyzing the core questions related to the optimal use of natural resources and for developing effective public policies that move us towards a sustainable society. The aim of this course is to present the basic theories and insights that economists rely on when studying the interactions between economic development and natural resources.
The first part of the course deals with the economics of market allocation. It comprises a discussion of the supply and demand model and relates different types of market structures (perfect competition, monopoly, oligopoly) with markets for different natural resources (coal, natural gas, oil). This part allows students to familiarize themselves with the basic economic tools required to analyze the way markets operate.
The second part deals with natural resources in the economy as a whole. It discusses how natural resources affect economic growth and institutions in different countries, studies the causes and implications of the “resource curse” as well as the main political economy problems concerning natural resources. This part enables students to understand the role of natural resources in the economy and their effect in shaping economic structures, societies, and development trajectories.
The third part deals with interaction between economy and environment in the long run. It studies externalities as a main source of environmental problems, assesses different solutions to global climate change and other environmental problems (taxes, subsidies, creation of new markets) and discusses the main difficulties with sustainable management of the environment and its resources. This part helps students to obtain a global and long-term perspective on sustainable economic development.

Learning outcomes
By the end of this course, students should be able to:
• explain changes in markets for natural resources in terms of supply and demand interaction and a suitable market structure;
• understand the development logic of the major trends in oil and gas markets;
• evaluate the expected effectiveness of governments’ policy responses to changes in markets for natural resources;
• explain how natural resources differ from the standard factors of production (capital and labor);
• distinguish between renewable and non-renewable natural resources and explain the resulting differences for economic theory;
• explain the problem of intertemporal choice in defining the levels of production of natural resources;
• explain the sources of environmental problems (externalities);
• distinguish between strong and weak sustainability and assess various measures of sustainable development;
• discuss different economic tools for solving environmental problems;
• understand the issue of climate change from the economic point of view;
• discuss the political aspect of the various solutions to environmental problems.
 
Key topics
• Economics of market allocation;
• Supply and demand;
• Market efficiency and market failures;
• Renewable and non-renewable natural resources;
• Natural resources and institutions;
• Resource curse;
• Political economy of natural resources;
• Externalities and environmental problems;
• Cost-benefit analysis and environmental decision-making;
• Indicators of sustainable development;
• Strong and weak sustainability;
• Climate change;
• Economic and political choices in solving environmental problems.

Prerequisites
This course has no prerequisites. However, some basic mathematics, algebra, and graphing will be used.

Evaluation methods
Presentations and in-class participation 30%
Home assignments 20%
Mid-term exam 20%
Final exam 30%

Throughout the course the students will be tasked with group and individual presentations related to the course contents. The exact number and timing will be discussed with the students once the choice of courses is finalized.
Students are also expected to be active during the class answering various questions, suggesting approaches for problem solving, etc. Each student might be asked to comment, using the material from the previous classes. An active in-class participation is essential. It is important to be ready to answer questions, to discuss readings and to provide feedback on other students' comments and reports.
There also will be several written home assignments to test the understanding and check the progress of the students.
Written mid-term exam will contain a number of multiple-choice and open questions covering the studied material in order to check the understanding and progress in the middle of the course (the week before Easter break).
Written final exam will consist of several open questions and problems covering the material of the whole course.

Bibliography
Core texts
DAHL C., (2015), International Energy Markets: Understanding Pricing, Policies and Profits, 2nd ed. PennWell Corporation.
GOODSTEIN E. S., POLASKY S., (2020), Economics and the Environment, 9th ed. Wiley.
HARRIS J. M., ROACH B., (2022), Environmental and Natural Resource Economics: A Contemporary Approach, 5th ed. Routledge.
MANKIW N. G., (2014), Principles of Economics, 7th ed. South-Western, Cengage Learning.

Additional readings
Classic Papers in Natural Resource Economics. Ed. C. Gopalakrishnan. Palgrave Macmillan, 2000.
HACKETT S. C., (2011), Environmental and Natural Resources Economics: Theory, Policy, and the Sustainable Society, 4th ed. Routledge.
TIETENBERG T., LEWIS L., (2018),a Environmental and Natural Resource Economics, 11th ed. Routledge.

Further readings will be suggested during classes. Obligatory readings will vary between 50 and 70 pages per week.