NIFK13006U  The Economics of Climate Change

Volume 2017/2018

MSc Programme in Climate Change
MSc Programme in Agriculture


This course investigates the economic aspects of climate change and the economics of climate policy in a global perspective.

It starts with a brief introduction to the key economic concepts which are useful to analyze the climate change problem (e.g., efficiency and optimality, externalities and public goods, property rights, market failure).

The course then discusses the issues around international environmental problems from a game theory perspective. It analyzes several pollution control instruments, with a particular focus on the use of tax incentives and marketable permits to control emissions of greenhouse gases.

The overall mitigation/adaptation problem is addressed; the implications of choosing the appropriate social discount rate are discussed.

The final part of the course addresses specific issues such as the role of energy prices and the transition to renewable energy; the situation and role of developing countries. The latter includes ethical principles underlying equity and environmental justice considerations in a North-South perspective. 

Learning Outcome

The aim of the course is to provide a good understanding of the economic aspects of climate change and the economics of policy measures to control climate change. After completing the course the student should be able to:


- Describe the basic concepts of market failure, (global) externalities and the rationale for public intervention to control externalities.

- Describe the relevant instruments to control the emission of GHG.

- Describe the economic principles and problems associated with global climate change agreements.

- Summarise the magnitudes of global costs and benefits associate with the control of climate change.

- Summarise the existing international climate change agreements and the instruments applied.

- Reflect on the ethical aspects of environmental justice and burden sharing in international climate policy.



- Identify relevant approaches to economic analysis of GHG emissions and climate change.

- Select relevant instruments to control GHG emissions.

- Identify economic obstacles to global climate change agreements.

- Identify economic approaches to remove obstacles to global climate agreement.


- Incorporate economic considerations in scientific and political analyses of climate change issues.

- Evaluate the different policy instruments available to control GHG emissions.

- Explain the relevance and limitations of economic approaches to the control of climate change.

- Assess the economic aspects of (current) climate policy negotiations and the relevance of the policy instruments suggested to realise the targets.

It is highly recommended that students have acquired basic competences in micro economics (e.g. LOJB10259 or similar courses).
Teaching comprises lectures and exercises including written course assignments where the students analyse the economic aspects of specific climate change issues. The assignments are organized as group work.
7,5 ECTS
Type of assessment
Written examination, 4 hours under invigilation
The written exam is in the course literature specified as "Curriculum for exam".
Exam registration requirements

Active participation in group assignment work and hand-in of a group assignment report. The report must be evaluated as "passed" to allow participation in the final exam.

All aids allowed

NB: If the exam is held at the ITX, the ITX will provide you a computer. Private computer, tablet or mobile phone CANNOT be brought along to the exam. Books and notes should be brought on paper or saved on a USB key.

Marking scale
7-point grading scale
Censorship form
External censorship

Identical to ordinary exemination. If 10 or fewer register for the re-examination the examination form will be oral.

If the student has not passed the group project report, then the project must be carried out individually and it must be handed in two weeks prior to the  re-exam. It must be approved before the exam.

Criteria for exam assesment

Please refer to course description and learning goals

  • Category
  • Hours
  • Lectures
  • 42
  • Exercises
  • 24
  • Preparation
  • 136
  • Exam
  • 4
  • Total
  • 206