Carbon Emissions from Energy Consumption (Billions of tons)

Transcription

1 Lecture 7(i) Announcements 1) Midterm results posted. a) Moodle gradebook has score and other info b) Link at Moodle (Week 6) explains how everything works c) Short version: to calculate your score = Number wrong (1 question bonus) (if correct name/id) Median=81.5 ( 75 th percentile = th percentile = ) For large lectures, there is no class Wed of Thanksgiving week 3) Platform debates in discussion sections this week Participation counts towards your homework grade Lecture 1. Further Discussion of Global Issue 1: Carbon Policy 2. New Issue: International Trade 3. Impacts of Tariffs and Quotas

2 Carbon Emissions from Energy Consumption (Billions of tons) Country Year US Europe Japan China India Rest of World World Source: European Commision, Joint Research Center, Trends in Global CO2 Emissions. Kyoto Protocol (1997): Attempt to get 5% reductions by 2012 relative to Europe: main signatory. US didn t sign because developing countries (including China and India) not part of agreement. Let s look at table to see what happened. Japan now making the analogous argument about going forward made earlier by U.S. (Deal without US and China makes no sense.)

3 For upcoming Paris clim ate conference Carbon Policy in European Union : The tagline is: For a universal climate agreement 1. EU Emissions Trading System ( Issue: supply of allow wances has been large relative to demand so that the price such that the price has been lower than expected (About 5 a ton.) 1) weak economy and shift of heavy industry out of Europe 2) clean energy 3) tooo many allowances given out?

4 2000 S 0 =S S Carbon taxes (existing high gas taxes) 20 pounds 2000 D 0 (1 gallon gas 20 lbs CO 2 2) D If distribute 6 allowances, market price willl be based on year supply and demand. What will price actu ually be in 2015 for allowances? A number of studies suggest ( as a ballpark figure) $20 per ton of CO 2 an appropriate Pigo ouvian tax. That s 20 cents a gallon. Germany gas tax is already $3 a gallon!

5 3. Subsidizing clea an technology Germany s push for clean energy energiewende or energy transition (see New York time article and video o) / com/2014/09/14/science/earth/sun-and-wind-alter-german-landscape-leaving-utilities-behind.html?_r= =0 Getting 30% of eletri c power from clean energy (wind/solar), (compared to 15% in US) Key problem with Germany s policy: Wind and solar are intermittent. So need conventional sources as backup. But how can conventional sources be economically viable if you only run them as backup?

6 Carbon in the U.S.. Emissions down since Key reasonss why: 1. Improvements in automobile fuel economy a) Policy (fuel-efficiency standards) b) Higher gas prices for a while, now going the other way 2. Continuing decline in manufacturing 3. Natural gas repla acing coal because of successs of fracking (natural gas produces twice as much heat per carbon emit tted as coal.) Big policy issue going forw ward. Divided government President Obama using executive powe er through the Environmental Protection Agency (EPA) EPA now defines carbon as pollution; announced rules to make power plan nts cut back. Delegating to states how it gets done (maybe cap-and-trade?)

7 Carbon in China Emissions growing Key reason why: Economic Growth (See homework graph emissions and GDP P) relating Next Step: Platform Debate on Carbon Policy in sec ctions this week President Xi Jinping has announced a cap and trade syst em start ting 2015 Two-for-one away from coal reduces particulate pollution (Chi na s problem) and carbon (World s problem) for China because switching I WANT YO OU to propose and debate policy on this issue. a

8 2. Global Issue 2: International Trade Suppose Econland opens up to trade with the rest of the world and widgets cost $1 in the world economy. P World = 1 With free trade, this will drive the price in Econland to the world price. At this price, producers want to supply 1 unit, consumers demand 9 units. The difference of 9-1=8 is made up by imports. 10 $ D S Q

9 What happens in our Econland Demand and Supply Graph when we open up to trade in rest of world at P World = 1 P world 10 $ D S Q Q supply Consumer Surplus with trade Q demand. Imports Producer Surplus with trade

10 Effects of Trade when P World = 1 Table Ban Imports P 5 Q prod 5 Q con 5 Imports 0 CS 12 PS 12 Gov S 0 TS 25 (Econland) Free Trade Change Alternative Scenario: P World = 7 Illustrate PS and CS with free trade 10 $ D S Q

11 Effects of Trade when P World = 7 Table Ban Exports P 5 Q prod 5 Q con 5 Free Trade Change In the news: Since the 1970s, we have a ban on exports of oil. Hasn t been relevant, until very rece ently. Here is what monthly crude prod duction looks like Exports 0 CS 12.5 PS 12,5 Gov S 0 TS 25 (Econland)

12 US is still a net importer. The issue is that there are different types of crude, and different kinds of refineries are designed for different grades of oil. With freee trade, US oil prod ducers can get top $. With banning of exports, excess supplies of particular grades of oil can depress prices. Refineries think the ban on exports is great and want to keep it.