The Political Economy of The Political Economy of EnergyEnergy

From Concept to RealizationFrom Concept to Realization

Thought To Start The SemesterThought To Start The Semester

Climate change is difficult for people to evaluate Climate change is difficult for people to evaluate dispassionately because it entails deep political dispassionately because it entails deep political and industrial implications, and because it arises and industrial implications, and because it arises from the core processes of our civilization’s from the core processes of our civilization’s success. This means that, as we seek to success. This means that, as we seek to address this problem, winners and losers will be address this problem, winners and losers will be created. The stakes are high, and this has led to created. The stakes are high, and this has led to a proliferation of misleading stories as special a proliferation of misleading stories as special interest groups argue their case.interest groups argue their case.

(Flannery, 2005, page 4.)(Flannery, 2005, page 4.)

http://ses.nau.edu/

The mission of the Sustainable Energy The mission of the Sustainable Energy  Solutions (SES) Group is to provide  Solutions (SES) Group is to provide society with broadly educated energy society with broadly educated energy experts and new technologies, as well as experts and new technologies, as well as to help shape energy decision-making in to help shape energy decision-making in both the private and public sectors while both the private and public sectors while increasing the public's energy literacy. increasing the public's energy literacy.

Dr. Dean SmithDr. Dean Smith

Texas A&M Ph.DTexas A&M Ph.DBig Oil SchoolBig Oil School

Western States Petroleum AssociationWestern States Petroleum AssociationSpatial Pricing of GasolineSpatial Pricing of Gasoline

Western Regional Air PartnershipWestern Regional Air PartnershipRenewable Energy on Indian LandsRenewable Energy on Indian LandsEnergy Efficiency on Indian LandsEnergy Efficiency on Indian Lands

Sustainable Energy SolutionsSustainable Energy SolutionsThe TED TeamThe TED Team

Dr. Dean SmithDr. Dean Smith

First taught Global Warming in 1991First taught Global Warming in 1991Might possibly be something to worry aboutMight possibly be something to worry about

Environmental EconomicsEnvironmental Economics19921992

Navajo Electrification Project Navajo Electrification Project

Smith Smith et alet al. on Energy. on Energy Smith, D. H., Acker, T., & Jones, C. (2006).  Energy Planning for Indian Nations within the WRAP: A Field Guide. Smith, D. H., Acker, T., & Jones, C. (2006).  Energy Planning for Indian Nations within the WRAP: A Field Guide. American Indian Culture and American Indian Culture and

Research Journal, 30 (4)Research Journal, 30 (4). . Smith, D. H., Acker, T., Auberle, W., LaRoche, D., Eastwood, J., Amanda Ormond, Robert Slack, (2006).  Recommendations for Reducing Energy Smith, D. H., Acker, T., Auberle, W., LaRoche, D., Eastwood, J., Amanda Ormond, Robert Slack, (2006).  Recommendations for Reducing Energy

Consumption and Improving Air Quality through Energy Efficiency On Native American Lands. Consumption and Improving Air Quality through Energy Efficiency On Native American Lands. Energy Sources, Part B (1)Energy Sources, Part B (1), 223-234. , 223-234. Smith, D. H. & Greenhut, J. (2006).  HETEROGENEOUS SPACE IN REGIONAL ECONOMICS AND BEYOND. Smith, D. H. & Greenhut, J. (2006).  HETEROGENEOUS SPACE IN REGIONAL ECONOMICS AND BEYOND. Pacific Economic Review, 11 (4)Pacific Economic Review, 11 (4), 431-, 431-

448. 448. Smith, D. H., Acker, T., Auberle, W., LaRoche, D., Eastwood, J., Amanda Ormond, Robert Slack, (2005).  Economic Analysis of Energy Efficiency Smith, D. H., Acker, T., Auberle, W., LaRoche, D., Eastwood, J., Amanda Ormond, Robert Slack, (2005).  Economic Analysis of Energy Efficiency

Measures: Tribal Case Studies with The Confederated Salish and Kootenai Tribes of the Flathead Reservation, The Pascua Yaqui Tribe, and The Measures: Tribal Case Studies with The Confederated Salish and Kootenai Tribes of the Flathead Reservation, The Pascua Yaqui Tribe, and The Yurok Tribe. Yurok Tribe. American Indian Culture and Research Journal, 29 (1)American Indian Culture and Research Journal, 29 (1), 79-96. , 79-96.

Smith, D. H. & Ratliff, N. (2005).  Renewable Energy Electricity State Level Policies in the WRAP Region: What, Why and Maybe How. Smith, D. H. & Ratliff, N. (2005).  Renewable Energy Electricity State Level Policies in the WRAP Region: What, Why and Maybe How. Energy Energy Sources, 27 (5)Sources, 27 (5), 431-44. , 431-44.

Smith, D. H., Bain, C., Ballentine, C., DeSouza, A., Turek, J., Lisa Majure, (2004).  Navajo Electrification for Sustainable Development: The Potential Smith, D. H., Bain, C., Ballentine, C., DeSouza, A., Turek, J., Lisa Majure, (2004).  Navajo Electrification for Sustainable Development: The Potential Economic and Social Benefits. Economic and Social Benefits. American Indian Culture and Research Journal, 28 (2)American Indian Culture and Research Journal, 28 (2), 45-58. , 45-58.

Smith, D. H., Acker, T., LaRoche, D., Masayesva, V., Duque, E., William Jeffery, William Auberle, (2003).  Implications of the Regional Haze Rule on Smith, D. H., Acker, T., LaRoche, D., Masayesva, V., Duque, E., William Jeffery, William Auberle, (2003).  Implications of the Regional Haze Rule on Renewable and Wind Energy Development on Native American Lands in the West. Renewable and Wind Energy Development on Native American Lands in the West. Wind Energy, 6 (4)Wind Energy, 6 (4), 347-54. , 347-54.

Smith, D. H., Acker, T., & Jones, C. (2005).  Energy Planning For Indian Nations Within The WRAP: A Field Guide. Smith, D. H., Acker, T., & Jones, C. (2005).  Energy Planning For Indian Nations Within The WRAP: A Field Guide. CBA Working PapersCBA Working Papers. . Smith, D. H. & Tallman, G. (2005).  Investing In Your Future: With Current Arizona Policy A Solar Panel Is A Good Investment. Smith, D. H. & Tallman, G. (2005).  Investing In Your Future: With Current Arizona Policy A Solar Panel Is A Good Investment. CBA Working PapersCBA Working Papers. . Smith, D. H. (2005).  The Basic Economics Of A Disaster. Smith, D. H. (2005).  The Basic Economics Of A Disaster. CBA Working PapersCBA Working Papers. . Smith, D. H., Larson, D., & Smith, J. (2004).  Analysis Concerning The Disaster Of The Forest. Smith, D. H., Larson, D., & Smith, J. (2004).  Analysis Concerning The Disaster Of The Forest. CBA Working PapersCBA Working Papers. . Smith, D. H., Acker, T., Auberle, W., LaRoche, D., & Eastwood, J. (2004).  Economic Analysis Of Energy Efficiency Measures: Tribal Case Studies Smith, D. H., Acker, T., Auberle, W., LaRoche, D., & Eastwood, J. (2004).  Economic Analysis Of Energy Efficiency Measures: Tribal Case Studies

With The Confederated Salish And Kootenai Tribes Of The Flathead Reservation, The Pascua Yaqui Tribe, And The Yurok Tribe. With The Confederated Salish And Kootenai Tribes Of The Flathead Reservation, The Pascua Yaqui Tribe, And The Yurok Tribe. CBA Working CBA Working PapersPapers. .

Smith, D. H. (2004).  Identification And Implementation Of Potential Energy Efficiency Programs In Indian Country. Smith, D. H. (2004).  Identification And Implementation Of Potential Energy Efficiency Programs In Indian Country. CBA Working PapersCBA Working Papers. . Smith, D. H. (2004).  Recommendations For Reducing Energy Consumption And Improving Air Quality Through Energy Efficiency In Indian Country. Smith, D. H. (2004).  Recommendations For Reducing Energy Consumption And Improving Air Quality Through Energy Efficiency In Indian Country.

CBA Working PapersCBA Working Papers. . Smith, D. H. (2003).  Renewable Good - Fossil Bad. Smith, D. H. (2003).  Renewable Good - Fossil Bad. CBA Working PapersCBA Working Papers. . Smith, D. H., Acker, T., Auberle, W., Duque, E., & Jeffery, W. (2002).  The Implications Of The Regional Haze Rule On Renewable And Wind Energy Smith, D. H., Acker, T., Auberle, W., Duque, E., & Jeffery, W. (2002).  The Implications Of The Regional Haze Rule On Renewable And Wind Energy

Development On Native American Lands In The West. Development On Native American Lands In The West. CBA Working PapersCBA Working Papers. . Smith, D. H., Bain, C., Ballentine, C., DeSouza, A., & Majure, L. (2002).  Economic And Social Development Stemming From The Electrification Of The Smith, D. H., Bain, C., Ballentine, C., DeSouza, A., & Majure, L. (2002).  Economic And Social Development Stemming From The Electrification Of The

Housing Stock On The Navajo Nation. Housing Stock On The Navajo Nation. CBA Working PapersCBA Working Papers. . Smith, D. H. & Ratliff, N. (2002).  Renewable Energy Electricity Generation In Arizona: What, Why And Maybe How. Smith, D. H. & Ratliff, N. (2002).  Renewable Energy Electricity Generation In Arizona: What, Why And Maybe How. CBA Working PapersCBA Working Papers. . Smith, D. H. (2001).  Gasoline Pricing Policy Proposals: Good Economics Or Politicians' Gas? Smith, D. H. (2001).  Gasoline Pricing Policy Proposals: Good Economics Or Politicians' Gas? CBA Working PapersCBA Working Papers. . Smith, D. H. (2001).  Gasoline Zone Pricing: Good Management Or A Politician's Opportunity For Good Press. Smith, D. H. (2001).  Gasoline Zone Pricing: Good Management Or A Politician's Opportunity For Good Press. CBA Working PapersCBA Working Papers. . Smith, D. H. (2000).  If Dogs Run Free, Then Why Not We? Smith, D. H. (2000).  If Dogs Run Free, Then Why Not We? CBA Working PapersCBA Working Papers. .

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28,100,00028,100,000 for for energy economics. . 98,100,00098,100,000 for for energy policy 42,500,00042,500,000 for for Wind energy. . 35,000,00035,000,000 for for solar energy. . 2,120,0002,120,000 for for geothermal energygeothermal energy 40,600,00040,600,000 for for gasoline gasoline 3,960,0003,960,000 for for gasoline pricesgasoline prices

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Nuclear EnergyNuclear Energy

What is energy?What is energy? Scientists define energy as the ability to do Scientists define energy as the ability to do

work. People have learned how to change work. People have learned how to change energy from one form to another so that we can energy from one form to another so that we can do work more easily and live more comfortably. do work more easily and live more comfortably.

Your body is like a machine, and the fuel for Your body is like a machine, and the fuel for your machine is food. Food gives you the energy your machine is food. Food gives you the energy to move, breathe, and think. But your body isn’t to move, breathe, and think. But your body isn’t very efficient at converting food into useful work. very efficient at converting food into useful work. Your body is less than twenty percent efficient Your body is less than twenty percent efficient most of the time. The rest of the energy is lost as most of the time. The rest of the energy is lost as heat. You can really feel that heat when you heat. You can really feel that heat when you exercise! exercise!

More on Energy BasicsMore on Energy Basics

Work means moving something, lifting Work means moving something, lifting something, warming something, lighting something, warming something, lighting something. All these are a few of the various something. All these are a few of the various types of work. types of work.

To scientists,To scientists, conservation of energy conservation of energy is not is not saving energy. The law of conservation of saving energy. The law of conservation of energy says that energy is neither created nor energy says that energy is neither created nor destroyed. When we use energy, it doesn’t destroyed. When we use energy, it doesn’t disappear. We change it from one form of disappear. We change it from one form of energy into another. energy into another.

So Our Topic is:So Our Topic is:

Energy ConversionEnergy ConversionHow do humans modify one energy How do humans modify one energy

source into useful energy for work?source into useful energy for work?The Second Law of ThermodynamicsThe Second Law of Thermodynamics

EntropyEntropyPlease define this Please define this engineering engineering students!students!Basically: energy becomes less useful as it is Basically: energy becomes less useful as it is

convertedconvertedCoal to light bulbCoal to light bulb

Mainstream Global SocietyMainstream Global Society

Uranium tailingsUranium tailings

Global warmingGlobal warming

Loss of biodiversityLoss of biodiversity

Air and water pollutionAir and water pollution

Ozone depletionOzone depletion

Loss of CompatibilityLoss of Compatibility

Our Changing WorldOur Changing World

““The transiting from old nature or the The transiting from old nature or the natural environment as our host of life for natural environment as our host of life for human habitation into a technological human habitation into a technological milieu into mass technology as the milieu into mass technology as the environment of life.” environment of life.”

Godfrey Reggio Godfrey Reggio

So What Are You Going to do About It?So What Are You Going to do About It?

Social Decision MakingSocial Decision Making

How do we create efficiency?How do we create efficiency?How do we produce what we want?How do we produce what we want?Paul Berman: What did we learn?Paul Berman: What did we learn?

Economy: Regulated Market SystemEconomy: Regulated Market SystemPolity: Liberal DemocracyPolity: Liberal Democracy

MarketsMarkets

How can greedy money-grubbing business people be good for society?

The quest for profits within a regulated market economy is beneficial for society. This quest forces firms to be efficient. It also leads creative minds to recognize the potential uses of unemployed resources. Thus, the quest for profit by individual firms pushes society

MarketsMarkets

A regulated market economy is self-adjusting. When the PPF moves or society’s preferred combination changes, the market forces producers to move toward the new preferred point. In other words, a regulated market economy allows for mistakes. If a firm is being inefficient or is producing the wrong stuff, it will be forced to either correct its mistake or go out of business.

Profits are goodProfits are good

If it goes out of business and resources If it goes out of business and resources become unemployed, someone will come become unemployed, someone will come along and realize a profit potential for along and realize a profit potential for those resources. those resources.

This is a vital aspect for any production This is a vital aspect for any production system: allow for mistakes.system: allow for mistakes.

The quest for new and better energy The quest for new and better energy conversion technologies will lead to conversion technologies will lead to manymany mistakes.mistakes.

Some Mistakes are GoodSome Mistakes are Good

Experiments are good: Welfare, light Experiments are good: Welfare, light bulbs, zip drives.bulbs, zip drives.

What works and what doesn’t?What works and what doesn’t? ““If we know the answer, we don’t have a If we know the answer, we don’t have a

job.”job.”Profits weed out the mistakesProfits weed out the mistakesThe cost of resources is worth the The cost of resources is worth the

investmentinvestmentThe Auberle argument!!!!!!!The Auberle argument!!!!!!!

Some Mistakes are BadSome Mistakes are Bad

Uranium tailingsUranium tailings

Global warmingGlobal warming

Loss of biodiversityLoss of biodiversity

Air and water pollutionAir and water pollution

Ozone depletionOzone depletion

Markets Can’t Fix All MistakesMarkets Can’t Fix All MistakesRegulatedRegulated Markets MarketsA regulated market economy is one where

individual producers make their own decisions within the scope of various regulations and restrictions. The government does not tell the individual producer what to produce or how to produce the output. No one tells anyone how to produce what.

The regulations or restrictions may limit:

how items are produced by restricting certain labor practices, such as minimum wage and child labor laws, or environmental actions, such as the Clean Air and Clean Water Acts.

what can be produced. For instance, you couldn’t start building nuclear bombs in your basement.

who can produce various goods and services. For instance, you have to meet certain qualifications before you start selling your services as a heart surgeon.

where certain items are produced. For instance, liquor stores cannot be located next to schools.

Political EconomyPolitical Economy

Understanding the combination and Understanding the combination and interaction of the economy and the polityinteraction of the economy and the polity

Mistakes have happened and will occurMistakes have happened and will occurPolitical economists try to understand what Political economists try to understand what

mistakes happened and why those mistakes happened and why those mistakes caused problems and what to do mistakes caused problems and what to do about themabout them

The BIG OOPSThe BIG OOPS

Pricing or PricingPricing or Pricing

ExternalitiesExternalitiesAn externality is an effect of a purchase or An externality is an effect of a purchase or

use decision by one set of parties on others use decision by one set of parties on others who did not have a choice and whose who did not have a choice and whose interests were not taken into account. interests were not taken into account.

Energy Conversion is fraught with external Energy Conversion is fraught with external costscosts

Full pricingFull pricing

ECO 325ECO 325

Markets are efficient when pricing properly Markets are efficient when pricing properly and completely reflects the costs to and completely reflects the costs to societysociety

Policy and regulations are necessary to Policy and regulations are necessary to properly identify the full price of activity or properly identify the full price of activity or productsproducts

Energy Conversion ExternalitiesEnergy Conversion Externalities

PollutionPollutionHealthHealthVisibilityVisibilityClimate WeirdingClimate WeirdingEcosystemsEcosystemsWater QualityWater QualitySoil PollutionSoil PollutionPopulation migrationPopulation migration

If Dogs Run Free,Then Why Not We?

So if dogs run free, then why not we? Well, in most industrial societies with high population densities, dogs don’t run free. Socially determined regulations concerning leashes and fences limit the freedom of dogs. In the same manner, regulations and restrictions limit human behavior. But as long as the dogs stay within their fenced areas, they can chase butterflies as the wind blows. The same is true for humans living with the combination of a liberal democracy and a regulated market economy: creativity and entrepreneurial activity stimulates efficiency and socially desirable results.

So What Will You Do So What Will You Do About It?About It?

Weekend AssignmentWeekend Assignment

It is a long weekend and not much has It is a long weekend and not much has really started with the semesterreally started with the semester

Have fun and/or work as we celebrate one Have fun and/or work as we celebrate one of our true leadersof our true leaders

Having read the Thinking Energetically Having read the Thinking Energetically chapter, spend some time thinking chapter, spend some time thinking about your personal interaction with about your personal interaction with energyenergy

Or Will You Do Nothing?Or Will You Do Nothing?