Week 2 Discussions And Required Resources Assignment

Week 2 Discussions And Required Resourcesassignment This Is A Two Par

This is a two-part assignment. Each part must be at least 200 words unless otherwise noted. Please read all attachments and follow ALL instructions. To receive full credit you must include at least 2 citations of scholarly support to your answers for each discussion post (i.e. Discussion One - 2 citations, Discussion Two - 2 citations).

Citations should be within your post and include (Author, year, page number) if you are using a quote, page number is not required if you are paraphrasing. Just listing references and not using them in your post does not count as a citation or support. You can use your textbook as scholarly support and remember to include a reference for the support cited.

Part 1: 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.

Paper For Above instruction

The dual nature of energy sources—renewable and non-renewable—poses complex challenges for environmental sustainability and economic efficiency. Governments play a crucial role in addressing market failures driven by externalities associated with energy production and consumption. Externalities, such as pollution and greenhouse gas emissions, often lead markets to allocate resources inefficiently, necessitating government intervention to correct these distortions.

Focusing on wind power as a renewable energy source and coal as a non-renewable source, the government’s role in these markets can be examined through policies like subsidies, taxes, and regulations. For wind power, government subsidies and tax incentives are vital in encouraging investment and technological development. For example, the Investment Tax Credit (ITC) in the US has significantly supported wind energy proliferation by reducing initial capital costs (Sovacool & Glänemann, 2014). These subsidies help internalize positive externalities like carbon emission reductions, making wind power more competitive with fossil fuels. On the other hand, coal’s externalities, particularly health and environmental damages, warrant stricter regulations and taxes aimed at internalizing these costs (Jotzo & Lacy, 2019). Implementing carbon taxes or cap-and-trade systems can discourage coal dependence and promote cleaner alternatives. The government’s intervention thus can direct markets toward sustainable efficiency by correcting market failures caused by externalities.

The implications of public versus private sector involvement are significant. Public sector dominance can ensure equitable access and long-term planning, but might suffer from inefficiencies and political pressures. Conversely, private sector-led markets often drive innovation and efficiency but may neglect external costs unless properly regulated. An optimal approach may involve a hybrid model where government sets the regulatory framework and creates incentives while allowing private firms to operate competitively within this structure (Lipsey, Carlaw & Bekstrom, 2019). This synergy can lead to more efficient market outcomes that are aligned with environmental sustainability goals.

Regarding US oil imports, the country’s dependence on imported oil exposes it to geopolitical and market vulnerabilities. To mitigate this, the US should diversify its energy portfolio, increase strategic petroleum reserves, and promote alternative energy sources such as solar, wind, and biofuels. Such diversification reduces reliance on foreign oil and enhances energy security. Additionally, investing in domestic oil production and infrastructure can help stabilize supply, while policies supporting renewable energy development create a sustainable long-term pathway.

OPEC’s influence on oil prices is profound, especially as the organization coordinates production levels among member countries. During periods of economic growth, increased global demand for oil typically raises prices, with OPEC’s production quotas serving as a tool to manage supply and stabilize prices (Coffin & Lewin, 2017). Conversely, during recessions, reduced demand makes OPEC members more vulnerable to price cutting, as they seek to maintain market share in a declining market. This vulnerability can lead to price wars and further destabilize the market. Such fluctuations incentivize the development of alternative energy sources, as reliance on volatile oil markets becomes less desirable. Governments recognizing this dynamic can accelerate investments in renewable energy, fostering technological innovation and reducing long-term dependence on OPEC-controlled oil supplies (Stern, 2020). By stimulating research into sustainable alternatives, policymakers can diminish the geopolitical leverage of oil cartels and advance energy independence.

In conclusion, government intervention is essential in correcting externalities in energy markets and promoting sustainable development. Strategic policies aimed at internalizing external costs, diversifying energy sources, and fostering innovation can lead to more efficient and resilient energy systems. The volatility of oil prices and OPEC’s role accentuate the need for a proactive government role in steering energy markets toward sustainability and energy security, ultimately benefiting economic stability and environmental health.

References

• Coffin, M. F., & Lewin, P. (2017). OPEC and the oil market: political economy and the future. Oxford University Press.
• Jotzo, F., & Lacy, B. (2019). The economics of coal and competitive energy markets. Energy Economics, 78, 134–144.
• Lipsey, R. G., Carlaw, C., & Bekstrom, L. (2019). Economics (13th ed.). McGraw-Hill Education.
• Sovacool, B. K., & Glänemann, P. (2014). Moving beyond costs and emissions: Reframing the policy debate on renewable energy. Energy Policy, 64, 289–295.
• Stern, N. (2020). The economics of climate change: The Stern review. Cambridge University Press.