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Since the 1970s, mainstream policies aimed at maximising economic growth have come under increasing scrutiny regarding their disregard of the resulting effects on the environment; particularly the effects of pollution from industrial production, the depletion of natural resources and impacts on biodiversity. Although these limits to growth had been recognised by Classical economists in the late 18th century, it was work such as 鈥淭he economics of the coming spaceship earth鈥� by Kenneth Boulding in 1966 (in Daly 1973) that began a process that has resulted in the current international drive for sustainable development. This recognition has now been institutionalised to the extent that many government policies exist with the explicit aim of promoting sustainable development. The policies are generally aimed at changing the way that individuals and businesses make decision about production and consumption of goods and services. As such, it is important from a business perspective to understand the design of these tools and techniques for sustainable development and how they impact on firms and their customers.

This course is concerned with the policy tools that governments use to try to achieve sustainable development and how businesses and individuals may react to those tools. The course stresses the complementary nature of economic and environmental systems, and examines the growing recognition of the importance of natural resources and the environment in economic policy decision making. Government intervention in markets is an integral element in the drive for sustainable development, and managers as well as individuals should be aware of the importance of these policies. Policy tools can be considered in three groups: decentralized policies such as liability laws, property rights and voluntary action; 'command and control' strategies such as standards and regulations; and market-based programs such as taxes, subsidies and tradable pollution permits. This course examines the nature and impact of each of these policies, discusses criteria for evaluating their effectiveness in achieving their goals, and considers their appropriateness for particular aspects of sustainable development.

On successful completion of this course, students should be able to:

1. understand the linkages between the natural environment and economic systems;
2. understand the meaning and implications of the terms materials balance and market failure;
3. explain the economic rationale for taxes, subsidies and tradable permits as tools for promoting sustainable development;
4. explain how businesses and consumers are likely to react to these policies;
5. evaluate the different policy approaches to sustainable development from an economic perspective.