Economics of Energy and Fossil Fuels

1. A scratch-off card has no actual revenue collection mechanism that I can think of . Using them to tell somebody how much they have to pay also makes little sense. Both company and client would prefer to have certainty over the monthly billing.

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2. Poland and Czech Republic have expressed concerns about Germany’s decision to power down its nuclear plants. They had initially felt upbeat about the idea of selling more power to Germany as that country becomes a net importer. However, these concerns were matched by concerns that Germans would be willing (and able) to pay more for Czech and Polish power than the locals would be. This, combined with increased demand from Germany, would create a situation where local prices for energy would rise as locals would be forced to compete for their own domestic power supply (Buchan, 2012).

3. One should presume that BP prefers to use dispersants because they remove the oil spill quickly. Oil spills are not only disastrous for the environment, but they are also a public relations nightmare. Getting rid of the oil quickly with dispersants at least resolves that problem, as well as the oil problem. BP receives much less criticism, and legal liability, for using dispersants than it does for the oil spill itself, despite the problems that dispersants create.

4. One cause of ambiguity is that many people would prefer that the oil stays in the ground. Another cause is that alternate energy sources mean that we might never need to fully deplete the world’s oil reserves.

5. Metcalfe’s tax idea is to maximize social welfare. Basically let poor people continue to pollute. The tax would be applied on business, which of course will pass that cost onto consumers. Revenues would be used to offset personal income taxes – so the poor pay higher prices for things but don’t really see the income tax benefit anyway. Metcalf’s idea doesn’t pass the basic economic sniff test, and doesn’t change people’s behaviors, two of the things he pretends it does.


6. The Deepwater Horizon response was wholly inadequate. The well leaked for months. BP did nothing and the CEO whined about messing with his time off. The federal government enacted no meaningful response and some legislators wanted to cap potential damages to oil companies.





Buchan, D. (2012). The energiewende – Germany’s gamble. Oxford Institute for Energy Studies. In possession of the author.