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153ECON783 Energy and Resource Economics 能源经济代考 Question 1 See lecture slides (a) Explain the different scenarios that the International Energy Agency use in their World Energy Outlook...
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能源与资源经济学代写 Question 1 (a) Explain the different scenarios that the International Energy Agency use in their World Energy Outlook. (4 marks)
TERMS TEST
22^{nd} September 1.00pm-2.50pm.
(Time Allowed: One and a half hours+5minutes reading plus 20 minutes to scan and upload )
NOTE: ANSWER UP TO THREE (3) of the SIX (6) questions.
Each question is worth 20 marks.
Total marks = 60
Answer any THREE questions.
(a) Explain the different scenarios that the International Energy Agency use in their World Energy Outlook. (4 marks)
(b) What has the impact of the COVID-19 pandemic on world energy demand. Briefly explain the IEA’s sustainable recovery plan. (5 marks)
(c) Explain why demand for electricity is expected to increase faster than overall energy demand over the next three decades. Why does it increase faster in the Sustainable Development Scenario compared to the Stated Policy scenario? Investment in Electricity flexibility is expected to be higher than investment in new capacity. Explain what flexibility is and why so much investment is needed for this. (6 marks)
(d) Describe current market conditions of the world oil market. What are the key drivers of supply currently? What are the key drivers of demand going forward? Explain why oil demand is expected to decrease steadily until 2050 in the Sustainable Development Scenario. (5 marks)
Consider a monopoly owner of a mine which can operate for two periods. Total mining costs are TC=50q_{t} and the market demand curve is p_{t} =600-50q_{t}. There are 6 units of the resource R_{0} to allocate across the two periods. The interest rate is r = 0.1.
i. Write down the Hotelling rule for the mining amounts q_{t} for a Monopoly. (2 marks)
ii. Calculate the optimal mining amounts q_{t} , the prices p_{t }for both periods and the present value of the total profits. (8 marks)
iii. Would the present value of the profits of the monopolist increase if R_{0 }increases to 20 units. Explain why or why not? (2 marks)
iv. Suppose now the government introduces a tax of $50 per unit. Calculate the new mining path and present value of the profits. Does the profit increase or decrease? Explain why. (8 marks)
Suppose that you are an owner of a mineral mine. The market is competitive. You want to maximise your discounted profit stream. q_{t} is the amount of the mineral consumed (and mined) in each time period. The discount rate is δ and the initial reserves are R_{0} . The inverse demand function is p_{t}=a-bq_{t} and your cost function is C=cq_{t}. Assume the mine is exhausted after T periods with T to be determined.
(a) Write down the resource constraint equation. (2 marks)
(b) Write down your maximisation problem and construct the Lagrangian function. (2 marks)
(c) Write down the first order conditions. (2 marks)
(d) Derive the Hotelling rule for this problem and explain the intuition behind it. (4 marks)
(e) Find the mining amount for each time period as a function of T. (8 marks)
(f) Explain how you could determine “T”. (You do not need to derive the equation.) (2 marks)
Suppose two electricity generation firms supply energy to the spot market. Each firm has Cournot conjectures about the other firm. Demand in the spot market is given by p = 600 – q where q = q_{1}+q_{2}. Firm i produces q_{i} Firm 1 has no costs for mining while firm 2 has constant marginal costs of MC=20. Suppose that the forward contract price is f and each firm has forward contracts of Q_{i} for i = 1,2.
(a) Write down the profits for firm 1 and firm 2 from the spot market, forward contract market and total profit. All power is traded through the spot market. (2 marks)
(b) Write down the reaction function for each firm. (2 marks)
(c) Work out the Nash equilibrium quantities offered by each firm as a function of Q_{1} and Q_{2}. What is the total quantity supplied and the price? (2 marks)
(d) Impose the no-arbitrage condition that f = p. Now find the profit for each firm as a function of the contract positions and derive the best response for firm 1 for Q_{1} in terms of Q_{2} and a similar expression for firm 2. Hence find the Nash
equilibrium for contract positions and hence the forward quantities as well spot market price and aggregate quantity supplied to the spot market (8 marks)
(e) Show that the price is lower if both firms engage in the forward contract market (1 mark)
(f) Now explain why firms engage in the forward contract market by calculating the pay-off matrix assuming either both firms don’t enter into forward contracts, both do, or 1 does and the other doesn’t. Show that the Nash equilibrium outcome is an example of a prisoner’s dilemma with both firms entering the spot market (3 marks)
Suppose in an electricity market the power generation plants have the following capacities and cost structure
Type | MC ($MWh) | Capacity (MW) |
Hydro | 0 | 3000 |
Coal | 10 | 2000 |
CC Gas | 40 | 1000 |
Gas Peaker | 120 | 500 |
(a) Draw the competitive supply curve for the production of electric energy on this system (2 marks)
(b) Assume that demand is 2500 Mw and is completely price inelastic in the very short run. What would be the spot price be in a perfectly competitive wholesale electricity market? (2 marks)
(c) Assume that demand is 4000 Mw and is completely price inelastic in the very short run. What would be the spot price be in a perfectly competitive wholesale electricity market? (2 marks)
(d) Assume that demand equation is Q=7000-p. Draw the demand and supply curves. What is the competitive market price? (6 marks)
(e) Describe the four main market components and say which ones need to be regulated or government owned monopolies and which ones can be competitive. (4 marks)
(f) Explain 4 key potential problems in electricity markets. (4 marks)
(a) Suppose there are three sectors in the NZ economy –transport, electricity and agriculture. The marginal abatement cure for agriculture is MAC_{A} =30X_{A} , for transport MAC_{T}=8X_{T} and for electricity it is MAC_{E}=5X_{E}. Initial emissions for electricity are 5 Mt, for transport 25Mt and for agriculture they are 30Mt. Total emissions are 60Mt.
(i)Derive and draw the economy wide marginal abatement curve. [hint. remember the most any sector can abate emissions is up to total initial emissions]. Note points of interest on your graph. (5 marks)
(ii) What carbon tax would be needed to ensure a 40% reduction in emissions? (2 marks)
(iii) What is the abatement for each sector to achieve the 40% reduction in emissions? (2 marks)
(iv) Calculate the total cost of the 40% reduction in emissions. (2 marks)
(v) Suppose the government decided not to include agriculture (so no carbon tax on agriculture is imposed). Calculate the tax needed for the two remaining sectors and total costs now as well as the abatement for each sector for 40% emission reduction. (2 marks)
(vi) What is the difference in total costs between (iii) and (iv). Comment. (2 marks)
(vii) Now suppose that an analysis of the marginal benefits for carbon emission abatement is MB=1300-10X. Calculate the optimum amount of abatement, the carbon tax which would ensure this level of abatement and illustrate with a diagram. (5 marks)
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