New Book Explores Relationship Between Economics, Environment

December 21, 2010 - News Release

No matter how determined a government is to tackle an environmental problem, unless lawmakers get the economics right, a policy will fail, according to a new book by a University of Guelph economist.

"We've seen that especially in the case of greenhouse gases, where, for 20 years, targets have been set and then ignored, agreements have been signed and then abandoned, and policies have been adopted only to prove politically unsaleable,” said Prof. Ross McKitrick, an environmental economist.

McKitrick admits the relationship between economic growth and the environment is complex. But that relationship needs to be better understood because environmental policies are in the public eye and posing serious challenges for policy-makers around the world, he said.

“Right now, there is a gap between what advanced students are learning in textbooks and what you need to know to work in the field.”

Bridging that gap is the intent of his book, Economic Analysis of Environmental Policy, published this month by University of Toronto Press. The book provides tools for developing policy analysis skills applied to current challenges and debates.

One recent example is the Senate’s voting down of Bill C-311, the Climate Change Accountability Act. Some senators noted that the proposed rules would probably cost more than the purported benefits, said McKitrick.

“But at the same time, most governments, including Canada's, have done a poor job of identifying cost-minimizing strategies, so the actions we end up seeing cost a lot and accomplish very little.”

In the book, he outlines core theories of environmental valuation for use in policy development and discusses current issues such as pollution problems, regulatory standards, emission taxes and liability.

When setting regulatory standards, for example, it’s crucial to identify not just the targets but also whether incentives are created that undermine the ultimate goal of the policy, said McKitrick.

“Some policies induce more truth-telling than others. In other words, different policies create different incentives for firms to reveal information about how much it costs to comply.”

In some cases, a firm is better off revealing the information the regulator needs to get the implementation right, he said. But in other cases, the incentives favour the withholding of information.

“So when announcing a policy proposal, governments need to realize that the process of collecting the information they need to make it work can be affected by the type of policy instrument.”

Economic Analysis of Environmental Policy evolved from the environmental economics courses McKitrick has been teaching at U of G for 14 years.

“My aim was to build a framework for people to think about the issues,” he said. “In addition to students, hopefully it’s useful to those working in the field, including government staff, think tanks and others who have to figure out economic analyses.”

Prof. Ross McKitrick
Department of Economics
519-824-4120, Ext. 52532

For media questions, contact Communications and Public Affairs: Lori Bona Hunt, 519-824-4120, Ext. 53338, or, or Deirdre Healey, Ext. 56982 or

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