Markets and the Environment is an accessible yet comprehensive introduction to environmental economics. It examines the benefits and costs of environmental protection, markets and market failures, and natural resources as capital assets. With clear explanations of fundamental concepts, it offers students a broad understanding of a wide range of environmental issues and policy approaches. Book jacket.

Nathaniel O. Keohane is Associate Professor of Economics at the Yale School of Management Sheila M. Olmstead is Assistant Professor of Environmental Economics at the Yale School of Forestry and Environmental Studies

Preface	p. ix
Introduction	p. 1
Economics and the Environment	p. 1
Global Climate Change	p. 2
Organization and Content of This Book	p. 6
What We Hope Readers Will Take Away from This Book	p. 9
Economic Efficiency and Environmental Protection	p. 11
Economic Efficiency	p. 12
Efficiency and Environmental Policy	p. 19
Equating Benefits and Costs on the Margin	p. 21
Dynamic Efficiency and Environmental Policy	p. 27
Conclusion	p. 30
The Benefits and Costs of Environmental Protection	p. 31
Measuring Costs	p. 31
Evaluating Benefits	p. 33
Benefit-Cost Analysis	p. 43
Conclusion	p. 52
The Efficiency of Markets	p. 54
Competitive Market Equilibrium	p. 55
The Efficiency of Competitive Markets	p. 59
Conclusion	p. 63
Market Failures in the Environmental Realm	p. 65
Externalities	p. 66
Public Goods	p. 70
The Tragedy of the Commons	p. 76
Conclusion	p. 81
Managing Stocks: Natural Resources as Capital Assets	p. 84
Economic Scarcity	p. 85
Efficient Extraction in Two Periods	p. 87
A Closer Look at the Efficient Extraction Path	p. 90
The Critical Role of Property Rights	p. 94
Conclusion	p. 97
Stocks that Grow: The Economics of Renewable Resource Management	p. 98
Economics of Forest Resources	p. 98
Fisheries	p. 111
Conclusion	p. 121
Appendix	p. 122
Principles of Market-Based Environmental Policy	p. 125
The Coase Theorem	p. 126
The Array of Policy Instruments	p. 129
How Market-Based Policies Can Overcome Market Failure	p. 133
Is It Preferable to Set Prices or Quantities?	p. 143
Conclusion	p. 151
The Case for Market-Based Instruments in the Real World	p. 153
Reducing Costs	p. 154
Promoting Technological Change	p. 164
Market-Based Instruments for Managing Natural Resources	p. 168
Other Considerations	p. 173
Conclusion	p. 180
Market-Based Instruments in Practice	p. 182
The U.S. Sulfur Dioxide Market	p. 183
Individual Tradable Quotas for Fishing in New Zealand	p. 190
Municipal Water Pricing	p. 195
Water Quality Trading	p. 198
Waste Management: "Pay As You Throw"	p. 199
Habitat and Land Management	p. 201
Conclusion	p. 205
Sustainability and Economic Growth	p. 207
Limits to Growth?	p. 208
Sustainability, in Economic Terms	p. 214
Keeping Track: Green Accounting	p. 221
Are Economic Growth and Sustainability Compatible?	p. 227
Conclusions	p. 227
Conclusion	p. 230
What Does Economics Imply for Environmental Policy?	p. 230
The Roles of Firms, Consumers, and Governments	p. 231
Some Final Thoughts	p. 232
Discussion Questions	p. 235
References	p. 243
Further Reading	p. 259
Index	p. 267
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