As an Undergraduate Economics teacher, you can use this set of computer-based tools to help you in teaching about opportunity costs using an in-class experiment of trading emissions permits for the use of a hypothetical fuel that emits greenhouse gases.
Global warming due to greenhouse gas emissions from the burning of fuel, is an important aspect of climate change. This lesson plan will enable your students to apply their understanding of opportunity costs for the use of a greenhouse gas emitting fuel in product manufacturing. This resource will allow your students to experiment with individual/consumer choices and budget constraints for production decisions by trading emissions permits at a fixed market price in an interactive classroom experiment.
Thus, the use of this lesson plan allows you to integrate the teaching of a climate science topic with a core topic in Economics.
As an Undergraduate Economics teacher, you can use this set of computer-based tools to help you in teaching about opportunity costs using an in-class experiment of trading emissions permits for the use of a hypothetical fuel that emits greenhouse gases.
Global warming due to greenhouse gas emissions from the burning of fuel, is an important aspect of climate change. This lesson plan will enable your students to apply their understanding of opportunity costs for the use of a greenhouse gas emitting fuel in product manufacturing. This resource will allow your students to experiment with individual/consumer choices and budget constraints for production decisions by trading emissions permits at a fixed market price in an interactive classroom experiment.
Thus, the use of this lesson plan allows you to integrate the teaching of a climate science topic with a core topic in Economics.
The tools in this lesson plan will enable students to:
| Grade Level | Undergraduate |
| Discipline | Economics |
| Topic(s) in Discipline | Opportunity Sets, Opportunity Costs, Individual Choices, Consumer Choices, Budget Constraints, Fixed Market price, Becker-DeGroot-Marshak (BDM), Market Failures, Externalities, Pollution Permits, Emission Permits, Emission Permit Allocation, Cap and Trade Schemes |
| Climate Topic | Climate Economics; Climate Mitigation and Adaptation |
| Location | Global |
| Language(s) | English |
| Access | Online / Offline |
| Approximate Time Required | 45-60 mins |
| Share | |
| Resource Download |
Here is a step-by-step guide to using this lesson plan in the classroom/laboratory. We have suggested these steps as a possible plan of action. You may customize the lesson plan according to your preferences and requirements.
Teaching Module (15 min)
Use the teaching module, How Individuals Make Choices Based on Their Budget Constraint’‘2.1 by OpenStaxTM, Rice University, to introduce the topic of opportunity costs in economics. Use the tool to explain individual/consumer choices based on budget constraints and how this gets factored into opportunity costs. Use the exercises given in the text to illustrate these economic concepts. You may also choose to use another teaching module by CORE Project (link given in additional resources section) to enable better understanding of opportunity costs using several other examples and exercises given in text.
Reading (15 mins)
Use the academic paper, ‘Teaching Opportunity Cost in an Emissions Permit Experiment’ by Charles Holt et al., International Review of Economics Education, provided by The Economics Network, UK, to conduct an in-class individual choice experiment to teach your students to identify and account for opportunity costs in production decisions. The students play the role of producers and must make production quantity decisions based on the costs of fuel input and the associated emissions permits. Explain what these tradable pollution/emissions permits are and how they affect the opportunity costs of production. Follow the instructions given in the paper to conduct the classroom activity. This activity is designed to be paper-based or conducted online using the Veconlab software (details given in text). Use the suggested extensions and discussion points given in the paper to initiate classroom discussions about the use of tradable emissions permits, the cap and trade schemes, and the permit allocation systems. Finally, discuss how these decisions based on opportunity costs in production are relevant in the context of human induced climate change.
Use this lesson plan to help your students find answers to:
| 1 | Teaching Module | A teaching module by the CORE Project to further your students’ understanding of opportunity costs in economics through in-built examples and exercises.
This can be accessed here. |
| 2 | Reading | An academic paper, ‘An experimental study of auctions versus grandfathering to assign pollution permits’ by Jaco K. Goeree et al., Journal of the European Economic Association April–May 2010 8(2– 3):514–525. |
| 1 | Teaching Module; “2.1 How Individuals Make Choices Based on Their Budget Constraint” | By OpenStaxTM |
| 2 | Classroom Activity, “Teaching Opportunity Cost in an Emissions Permit Experiment” | By Charles Holt et al., International Review of Economics Education, provided by The Economics Network, UK. |
| 3 | Additional Resources | CORE Project CORE by The OPEN University and JISC, UK. |
| Grade Level | Undergraduate |
| Discipline | Economics |
| Topic(s) in Discipline | Opportunity Sets, Opportunity Costs, Individual Choices, Consumer Choices, Budget Constraints, Fixed Market price, Becker-DeGroot-Marshak (BDM), Market Failures and Externalities, Tradable Pollution/ Emission Permits, Emission Permit Allocation, Cap and Trade Schemes.. |
| Climate Topic | Energy, Economics, and Climate Change; Climate Mitigation and Adaptation |
| Location | Global |
| Language(s) | English |
| Access | Online / Offline |
| Approximate Time Required | 45-60 mins |
| Share | |
| Resource Download |
Here is a step-by-step guide to using this lesson plan in the classroom/laboratory. We have suggested these steps as a possible plan of action. You may customize the lesson plan according to your preferences and requirements.
Teaching Module (15 min)
Use the teaching module, How Individuals Make Choices Based on Their Budget Constraint’‘2.1 by OpenStaxTM, Rice University, to introduce the topic of opportunity costs in economics. Use the tool to explain individual/consumer choices based on budget constraints and how this gets factored into opportunity costs. Use the exercises given in the text to illustrate these economic concepts. You may also choose to use another teaching module by CORE Project (link given in additional resources section) to enable better understanding of opportunity costs using several other examples and exercises given in text.
Reading (15 mins)
Use the academic paper, ‘Teaching Opportunity Cost in an Emissions Permit Experiment’ by Charles Holt et al., International Review of Economics Education, provided by The Economics Network, UK, to conduct an in-class individual choice experiment to teach your students to identify and account for opportunity costs in production decisions. The students play the role of producers and must make production quantity decisions based on the costs of fuel input and the associated emissions permits. Explain what these tradable pollution/emissions permits are and how they affect the opportunity costs of production. Follow the instructions given in the paper to conduct the classroom activity. This activity is designed to be paper-based or conducted online using the Veconlab software (details given in text). Use the suggested extensions and discussion points given in the paper to initiate classroom discussions about the use of tradable emissions permits, the cap and trade schemes, and the permit allocation systems. Finally, discuss how these decisions based on opportunity costs in production are relevant in the context of human induced climate change.
Use the tools and the concepts learned so far to discuss and determine answers to the following questions:
Use this lesson plan to help your students find answers to:
| 1 | Teaching Module | A teaching module by the CORE Project to further your students’ understanding of opportunity costs in economics through in-built examples and exercises.
This can be accessed here. |
| 2 | Reading | An academic paper, ‘An experimental study of auctions versus grandfathering to assign pollution permits’ by Jaco K. Goeree et al., Journal of the European Economic Association April–May 2010 8(2– 3):514–525. . |
| 1 | Teaching Module; “2.1 How Individuals Make Choices Based on Their Budget Constraint” | By OpenStaxTM |
| 2 | Classroom Activity, “Teaching Opportunity Cost in an Emissions Permit Experiment” | By Charles Holt et al., International Review of Economics Education, provided by The Economics Network, UK. |
| 3 | Additional Resources | CORE Project CORE by The OPEN University and JISC, UK. |
