Teacher: Professor Markku Ollikainen

Objectives: After completing the course, students are able to derive rigorously the key results of static externality and the optimal use of all instruments. They have ability to choose instruments under uncertainty or under imperfect competition. They have the skills use numerical analysis to apply theories in various types of empirical environmental problems.

Contents: The course provides a rigorous survey on the classical theory of static externality. The course starts with the case of certainty and perfect competition. The goal of environmental quality is derived and the optimal use of all relevant instruments are solved. The restrictive assumptions of certainty and perfect markets are then relaxed. First, the course focuses on how imperfect competition changes the use of instruments. Then, uncertainty on costs and benefits of abatement is introduced and the implications to choice of instruments is examined. Throughout the discussion the production-abatement model employed in two versions: the specification in terms of production function and cost function. An integral part of the course is application of the theories in numerical models.

Literature and teaching material: William Baumol and Wallace Oates (1988). The Theory of Environmental Policy. 2nd edition. Cambridge University Press, and material provided by Professor Markku Ollikainen.

Teacher: Professor Markku Ollikainen

Objectives: After completing the course, students understand how to design alternative economic mechanisms so as to overcome the problems of asymmetric information and creating incentives to internalize externalities. They are able to assess the cases to which the conventional trading, auction and other mechanisms fit. They know how to apply these mechanisms for pollution control or promotion of public good in nature, such as biodiversity.

Contents: The course deepens the theory and analytical skills provided by course Environmental Economics I. It focuses first on classical trading models applied both as emissions trading systems and water quality trading systems. The next topic is the auction theory and how it is applied to pollution control. Promotion of public goods is examined in a special auction system, green auctions or bidding systems. Finally, the course focuses on the challenge of nonpoint source pollution for instruments.

Literature and teaching material:

  1. William Baumol and Wallace Oates (1988). The Theory of Environmental Policy. 2nd edition. Cambridge University Press,
  2. Anastasios Xepapadeas (1997). Advanced Principles of Environmental Policy. 1st edition. Edward Elgar,
  3. Material provided by Professor Markku Ollikainen.

Teacher: Professor Markku Ollikainen

Objectives: Once completing the course, students understand how climate change is linked to human decisions and the incentives provided by the market. They are able to analyze roles of energy production, land-use, land change and forestry. They know how to assess and use economic instruments to mitigate climate change. They know how to apply economic principles to promote adaptation to the inevitable increase in the mean global temperature.

Contents: The course provides a comprehensive economic approach to climate change: its origins, links to climate science, tasks of mitigation and adaptation, and economic instruments needed for both goals. The course places much emphasis on international climate agreement and international instruments to implement it. European union emissions trading scheme, separate policy towards land-use and effort sharing sectors are analyzed separately. Discussion on instrumented targeting emissions is complemented by an analysis of instruments promoting production of clean energy. The rest of the course is devoted to adaptation policies. Economic principles concerning tasks left to private agents and the society, respectively, are examined and so are the instruments promoting adaptation.

Literature and teaching material:

  1. The Economics of Climate Change. Stern review,
  2. William Nordaus (2013). The climate casino: Risk, uncertainty, and economics for a warming world. 1st edition. Yale University Press.

Teacher: Professor Olli Tahvonen

Objectives: To present an introduction to multidisciplinary economic-ecological optimization models and to the newest economic research on biologically renewable resources.

Contents: Classic economic models on renewable resources; Generalizations of the classic biomass and rotation models; Age- and size-structured models; Applications of age-and size structured optimization models for forest, fish and mammal populations.

Literature and teaching material: Material by Professor Olli Tahvonen


Teacher: Professor Olli Tahvonen

Objectives: To offer capabilities for understanding and apply dynamic optimization methods in economics and in environmental and natural resource economics.

Contents: Nonlinear programming in dynamic models; Dynamic programming; Optimal control theory; AMPL-programming language.

Literature and teaching material: Knut Sydseater, Atle Seierstad and Arne Strom (2008). Further Mathematics for Economic Analysis. 1st edition. Pearson Education, and material provided by Professor Olli Tahvonen.

Teachers: Professor Kari Hyytiäinen and Dr. Marko Lindroos


  • To understand the potential of modeling and numerical analysis in planning, implementation and evaluation of water protection efforts and projects, and
  • to learn the skills needed to formulate and to solve bio-economic problems including static and dynamic problems and deterministic and stochastic problems.

Contents: Matlab programming language is used to formulate and solve a number of case study problem formulations. The case study examples include combatting eutrophication (i.e. reduction of the nutrients loads to the inland waters and the Baltic Sea) and fisheries management. The techniques and methods studied include static optimization (both unconstrained and constrained), dynamic discrete-time optimization, cohort models, game theoretic applications, Monte Carlo simulation, data fitting, dynamic programming, cost-effectiveness analysis and cost-benefit analysis.

Literature and teaching material: Jon Conrad (2010). Resource Economics. 2nd edition. Cambridge University Press.