Theorie:

1. Een aantal korte vraagjes:

   • What is an externality and give and explain an example of both a positive and negative externality.
   • Explain the sustainable harvest rate of a renewable resource.
   • Explain pollution control by location (zone).

2. Regarding the IPAT principle, give two reasons why neoclassical economists argue that economic growth must be maintained.

3. Why is an emission tax a cost-efficient pollution control instrument? Make a graph and explain.

4. Why will there be efficiency losses if the abatement costs are uncertain? Make a graph and explain this for the case of an emission tax and for the case of an emission licensing system, both with an overestimation and underestimation of the abatement costs.

5. Graph of a multi-period model for extraction of non-renewable resources is given:

   • Explain the graph.
   • Imagine there would be a rise in the price of the backstop technology. Draw the changes on the graph and explain.

Oefeningen:

1. Typical exercise about cost-benefit analysis (investment in conventional vs. electrical car):

   • Calculate NPV (constant cash flow over time) and IRR for both investments.
   • What extra subsidy should be given to owners of electrical cars to make this option more feasible than buying a conventional car?

2. Compare pollution control instruments: emission tax vs. emission standard (exercise session 1).

   Tip: Exactly the same question as the additional exercise of session 1 (but different topic and numbers).