I.         GIS Assignment: Energy and the Environment  (10 points)

Gas flaring, when associated gas produced from a reservoir during oil

production is flared or burned off, has been identified as a significant

contributor to climate change (World Bank GGFR). According to the World  Bank, ‘thousands of gas flares at oil production sites around the globe burn    approximately 140 billion cubic meters of natural gas annually, causing more than 300 million tons of CO2 to be emitted to the atmosphere”. There is also

evidence that flaring can have significant negative health effects on surrounding communities as well.

We’ll explore these issues here using data visualization and some spatial statistics in ArcGIS

1.   5pts First, NOAA has provided some detailed data on global gas flaring here:

http://skytruth.org/viirs/ . Included in the ‘hw2’ zip file is a shapefile of the world (called “world_electricity”). The columns labeled “bcm_x” stand for billion cubic meters of flared gas in year x. Create a map of the distribution of flared gas in

2016. Which countries were the top 5 countries for gas flaring in the world? Has the top 5 ranking changed between 2012 and 2016?

2.    5 pts  The world shapefile also includes columns showing the percentage of the population in each country with access to electricity for each year where data is  available labeled “XYear” (so X2012 is the percentage of the population in each country with access to electricity in year 2012).  Create a map of the distribution of access to electricity in 2012. What are the bottom 5 countries for access to electricity in the world?

Given your observations of distributions of flares globally in question 1, what would your suggestion be to a policy maker in a country interested in expanding electricity access? (Assuming the optimal outcome for policymakers is 100% access)

II.        Climate Change policy (4points)

(Kolstad, 238). Suppose we have  100 different firms emitting pollution. The Ministry of the Environment (MOE) currently regulates these firms by

requiring specific pollution control equipment to be installed by each firm.

The MOE is considering issuing tradable permits to each firm indicating how much pollution the firm may emit. Permits would be issued in such a way as  to result in the same amount of pollution as the technology regulations.

Briefly (in one paragraph or less)  discuss the implications of switching to tradable permits on the likelihood of seeing research and development to  reduce the cost of pollution control.

III.      Energy Economics: Demand Elasticity of Gasoline (8pts)

Assume the short run price elasticity of demand for gasoline is -0.45.

Americans purchase around 160 billion gallons of gasoline each year ( for 2014, EIA) .

a.   4pts If the federal tax on gasoline were increased enough to raise the price of gasoline by 40%, what would be the effect on the quantity of gasoline   demanded?

b.  4pts Is raising the tax on gasoline a more effective way to reduce vehicle use if the demand for gasoline is elastic or if it is inelastic? Briefly explain.

IV.      Hotelling’s Rule (8pts, 4pts each)

The intuition behind Hotelling’s rule that prices of nonrenewable or depletable resources should rise at a rate equal to the market interest rate, comes from the fact that ‘when a resource is abundant, then consumption today does not

involve an opportunity cost of foregone marginal profit in future, since plenty available for both today and the future. So when resources are traded in a

competitive market are abundant, P=MC and marginal profit is 0. As resource becomes increasingly scarce, however, consumption today involves an

increasingly high opportunity cost of foregone marginal profit in the future. So as resources become increasingly scarce relative to demand, marginal

profit (P-MC) grows. The profit created by user scarcity=marginal user cost (MUC)= price- marginal cost of extraction (P-MEC).