Government’s Role in Energy

There are two important sources of energy: renewable and non-renewable sources. Given the implications of externalities, this undermines the ability of a market to produce efficient outcomes that are present in both sources of energy. What role should the government provide in this market to bring about efficiency? In your answer, pick one renewable source (i.e. wind power) and one non-renewable source (i.e. coal) and estimate the role of the government in these particular markets to bring about efficiency in the market. What are the implications of allowing either the public or private sector to bring about efficient market outcomes?

Part 2: US Oil Imports

The price of oil is a very important and volatile resource in our economy. Oil has many different functions that are either used as a final or intermediate good for our economic functioning. How do you think the United States should deal with the vulnerability of importing oil? What impact does OPEC have on the price of oil when the US, one of the largest importers of oil, is experiencing either a recession or economic growth? Why would a recession make the cartel more vulnerable to price cutting? In your answer, make sure to discuss how the control of OPEC will allow more alternative energy sources to be researched and what impact this has on the governments’ role.

Required Resources
Text
Tietenberg, T., & Lewis, L. (2012). Environmental and natural resource economics (9th ed.). Upper Saddle River, NJ: Pearson Addison-Wesley

· Chapter 5: Dynamic Efficiency and Sustainable Development

· Chapter 6: Depletable Resource Allocation: The Role of Longer Time Horizons, Substitutes, and Extraction Cost

· Chapter 7: Energy: The Transition from Depletable to Renewable Resources

· Chapter 8: Recyclable Resources: Minerals, Paper, Bottles, and E-Waste

· Chapter 9: Replenishable but Depletable Resources: Water

· Chapter 21: Population and Development