NIFK13006U The Economics of Climate Change

Volume 2025/2026
Education

MSc Programme in Climate Change

MSc Programme in Environmental Science
MSc Programme in Forest and Nature Management

 

Content

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

The course starts with a brief introduction of the key economic concepts, which are useful to analyze the climate change problem (e.g. Neoclassical economic models, taxes and private consumption, market equilibrium, efficiency and optimality, externalities, property rights, market failure).

The course then introduces the theory of the optimal pollution level in regulating greenhouse gas (GHG) emissions and discusses national policy instruments to reduce emissions, with a particular focus on the use of tax incentives and tradable  permits to control production companies. Regulation with prescriptive instruments, property rights based instruments and voluntary measures are also discussed. A special focus is on the European Trading System for CO2 permits. Moreover, as our private consumption of e.g. food is related to substantial emissions of GHGs, the course also discusses how knowledge about consumers’ preferences can be obtained and how policy instruments can be applied to improve the sustainability of our consumption habits.    

International climate agreements are also discussed from a game theory perspective, analyzing lack of incentives for some countries to participate in the agreements and free-ride.

The course discusses the current EU and Danish climate policies and addresses the role of developing countries in climate change mitigation, including. The latter includes ethical principles underlying equity and environmental justice considerations on who should bear the burden of GHG emission reductions in a North-South perspective.

The economic understanding and analysis of the transition to a sustainable and carbon neutral future is core to the course. Focus is on how to achieve sustainable and efficient regulation of GHG emission reductions and to identify costs and benefits of carbon reducing initiatives. The course treat the United Nations World sustainable development goals no. 7. Affordable and clean energy, 11. Sustainable cities and communities, 12. Responsible production and consumption and 13. Climate action.

Learning Outcome

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

Knowledge:

  • Describe the basic concepts of market equilibrium, market failure, (global) externalities and the rationale for public intervention to control externalities.
  • Describe basic principles of methods used to obtain information about consumers’ preferences.
  • Describe the relevant instruments to control the emission of GHG.
  • Explain the economic principles and problems associated with global climate change agreements.
  • Reflect on the ethical aspects of environmental justice and burden sharing in international climate policy.

 

Skills:

  • Identify relevant approaches to economic analysis of GHG emissions and climate change.
  • Select relevant instruments to control GHG emissions.
  • Identify approaches to reduce GHG emissions related to our private consumption.
  • Identify economic approaches to remove obstacles to global climate agreement.


Competences:

  • Incorporate economic considerations in scientific and political analyses of climate change issues.
  • Evaluate the different policy instruments available to control GHG emissions.
  • Assess the relevance of Neoclasssical economic approaches to control climate change.
It is recommended that students have acquired basic competences in micro economics (e.g. LOJB10259 or similar courses).

Academic qualifications equivalent to a BSc degree is recommended.
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.
  • Category
  • Hours
  • Lectures
  • 42
  • Preparation
  • 136
  • Exercises
  • 24
  • Exam
  • 4
  • Total
  • 206
Oral
Collective
Peer feedback (Students give each other feedback)
Credit
7,5 ECTS
Type of assessment
On-site written exam, 4 hours under invigilation
Type of assessment details
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 approved to allow participation in the final exam.

Aid
All aids allowed except Generative AI and internet access
Marking scale
7-point grading scale
Censorship form
External censorship
Re-exam

Identical to ordinary exemination. If 10 or fewer register for the re-examination the examination form will be oral. The oral exam lasts 20 - 25 minutes with no time for preparation and no aids allowed.

If the student did not get the group project report approved, then the project must be carried out individually and it must be handed in three 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