The course starts with an overview of how the modern economics relates to the challenges that have been created by ongoing climate changes and why the global heating can be seen as a market failure. Thereafter follows three separate yet coherent blocks each of which is concluded with a study visit linked to the focus of the block.

The first block is about the resources of nature, such as sustainability and overexploitation of the resources of the planet. Here, driving forces of the increased concentration of carbon dioxide in the atmosphere are also discussed, as well as global distribution issues with regard to climate adaptation.

Block two deals with finance, innovations and economic growth. Here, the students will deal with basic economic studies about growth and climate such as the Stern report, climate models of William Nordhaus and the endogenic theory of growth. The block treats the financial costs for a climate adaptation, which meets the aim of the Paris Agreement and how these can be created. Further, preconditions and barriers for green innovations are studied both theoretically and empirically.

The final block is policy oriented and deal with global, national, company and individual levels. It treats questions such as international agreements, emission trading, regulations, taxes and subsidies. The block also studies how both mandatory legislation and self-regulation influence the companies' will and ambitions to green adaptation. Here, differences are also studied between different countries and industries

On completion of the course, the students should be able to describe and analyse:

1. the driving forces behind the climate changes
2. which role market forces and policies play for a transition to a green economy
3. the importance of technical changes, innovation and entrepreneurship for a transition to sustainable growth
4. the importance of the financial market for transition to a green economy

At least 30 hp within mathematics, statistics , qualitative analysis, or corresponding

Here is a list of the literature that underpins the topics that we will cover in the course. Journal articles are available through the KTH library.

Block A — Where does marginal damage come from, and how big is it?

Andersson, J.J. (2019). Carbon taxes and CO₂ emissions: Sweden as a case study. American Economic Journal: Economic Policy, 11(4), 1–30.

Baumol, W.J. (1972). On taxation and the control of externalities. American Economic Review, 62(3), 307–322.

Samuelson, P.A. (1954). The pure theory of public expenditure. Review of Economics and Statistics, 36(4), 387–389.

Ostrom, E. (1990). Governing the Commons. Cambridge University Press. Chapters 1–2.

Carleton, T.A. & Hsiang, S.M. (2016). Social and economic impacts of climate. Science, 353(6304), aad9837.

Rennert, K. et al. (2022). Comprehensive evidence implies a higher social cost of CO₂. Nature, 610, 687–692.

Stern, N. (2007). The Economics of Climate Change: The Stern Review. Cambridge University Press. Chapter 2.

Block B — How do we correct for it?

Weitzman, M.L. (1974). Prices vs. quantities. Review of Economic Studies, 41(4), 477–491.

Coase, R.H. (1960). The problem of social cost. Journal of Law and Economics, 3, 1–44.

Nordhaus, W.D. (2015). Climate clubs: Overcoming free-riding in international climate policy. American Economic Review, 105(4), 1339–1370.

Fankhauser, S. (2017). Adaptation to climate change. Annual Review of Resource Economics, 9, 209–230.

Block C — Who adapts, who finances, what survives?

Bolton, P. & Kacperczyk, M. (2021). Do investors care about carbon risk? Journal of Financial Economics, 142(2), 517–549.

Acemoglu, D., Aghion, P., Bursztyn, L. & Hemous, D. (2012). The environment and directed technical change. American Economic Review, 102(1), 131–166.

Klenert, D. et al. (2018). Making carbon pricing work for citizens. Nature Climate Change, 8, 669–677.

Weitzman, M.L. (2009). On modeling and interpreting the economics of catastrophic climate change. Review of Economics and Statistics, 91(1), 1–19.

Dasgupta, P. (2021). The Economics of Biodiversity: The Dasgupta Review. HM Treasury. Headline messages and Chapter 1.

Students at KTH with a permanent disability can get support during studies from Funka:

Funka - compensatory support for students with disabilities

• PRO1 - Project, 3.5 credits, grading scale: P, F
• TEN1 - Examination, 4.0 credits, grading scale: A, B, C, D, E, FX, F

Based on recommendation from KTH’s coordinator for disabilities, the examiner will decide how to adapt an examination for students with documented disability.

The examiner may apply another examination format when re-examining individual students.

If the course is discontinued, students may request to be examined during the following two academic years.

Examination and project work

• All members of a group are responsible for the group's work.
• In any assessment, every student shall honestly disclose any help received and sources used.
• In an oral assessment, every student shall be able to present and answer questions about the entire assignment and solution.

On 11/04/2019, the Dean of the ITM school has decided to establish this official course syllabus to apply from autumn term 2019 (registration number M-2019-0740).