Economics 125 - Energy Economics

The human population on Earth is predicted to grow to 9 billion people by 2040, while at the same time, unprecedented numbers of people will be pulled out of poverty by the forces of globalization. This great rise in wealth is fueled by, and largely dependent upon, energy resources. At the same time, consumption of energy — the dominant driver of climate change — threatens to undo the benefits of this economic growth. In this class you will become an expert on energy markets — how they function and how they fail. The focus will be on the United States, with much of the reading drawing upon the New York Times, Wall Street Journal, The Economist and other news sources. You will tackle some of the most important questions facing our generation, both domestically and abroad. How many resources should be spent on shifting away from dirty fossil fuels, toward cleaner energy sources? How do we get energy to the people who value it the most? Finally, what are the optimal policies for navigating the tradeoffs between cheap and abundant fossil fuel and more expensive renewable energy sources, and how do these policies compare to those being implemented today?
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Units

4

Prerequisites

Economics 100 (or consent of instructor)

Quarters

Varies from year to year; taught in fall quarter 2015 (Rapson) and winter quarter 2016 (Bushnell)

Description

This course is intended for advanced economics undergraduates, as well as graduate students in non-economics disciplines relating to energy and the environment. We will use theoretical and empirical methods to examine energy markets. We are specifically interested in how to maximize the social welfare associated with energy production and use. The course explores several fundamental challenges facing policy-makers in the energy world, where the internal and external costs are often very different, markets are not fully competitive, and engineering constrains the way industries are designed. We will discuss the idiosyncratic features of several energy sectors, with an eye to why regulation is necessary yet often difficult to implement. Within the context of these sectors, we examine the California electricity crisis, the fracking boom, the 1970s oil crisis, global climate change, and other important events, and discuss policies that may improve outcomes for society.