Is a carbon tax the fix for global warming?

This story from planet money says yes.

Input prices rise in the energy industry

This article from the WSJ reports that "Labor and capital costs have doubled over the last decade" for energy companies. It is a good introduction to supply and demand and derived demand for inputs. It is also a illustration of why the long-run supply in perfect competition might slope upwards.

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SUMMARY: The energy industry loves to think big and tackle risky projects, but the number of those projects now underway is leading to soaring costs for people, materials and services.

CLASSROOM APPLICATION: Instructors can use the article to demonstrate that an increases in the demands for labor and capital cause short-run increases in wages and rental rates on capital. With increases in oil exploration and production, the demand for labor and capital increases. Therefore, in the short run, wages and rental rates on capital increase, thus increasing the short-run average cost of oil exploration.

QUESTIONS: 
1. (Advanced) What factors are causing the increased demand for labor and capital in the oil and gas industry?

2. (Advanced) What is the effect of the increased demand for labor and capital in the oil industry on the equilibrium wages and rental rates in this industry?

3. (Introductory) How will increased wages in the oil and gas industry affect the number of students majoring in chemical engineering and petroleum engineering?

What would Coase do?

Here is an excerpt from a story Real Sports recently ran about Donald Trump's lawsuit against Scotland. He wants to block the construction of windmills in the North Sea just off the coast of a golf resort he is building. He worries that the windmills will ruin the view from the course he has already build, and from the luxury homes and hotel he plans to build.

The ruling may hinge on who owns the property rights to the view. To explore the Coase Theory, an instructor could ask students what market transactions would be mutually beneficial in each case if transactions costs are low.  

An interesting sidebar is that the residents near the golf course initially opposed Trump's plans because the course would destroy the pristine beauty of the area.

Perverse effects

This article from the WSJ shows that government policies often have unintended consequences and that predicting the effect of a policy is difficult and may be impossible for a set of policies.

Is solar power efficient?

This article says NO!

Energy Markets

PJM coordinates day-ahead and real time electricity markets. It is a great example of real-time auctions and future markets.

How to reduce our carbon footprint?

The Wall Street Journal has a nice set of interviews with economists who discuss the advantages and disadvantages of taxing carbon emissions and a cap and trade market.  Read more if you are interested in my opinion.

I favor using an auction to allocate permits to emit carbon and then letting firms trade. Using the auction gives the government funds to use to compensate people hurt by carbon emissions. The cap and trade market gives a price that measures the marginal cost of reducing emissions. The government can easily relax or tighten the emission quota by selling or buying permits if analysts conclude that the optimal amount of emissions changes.

Supply and demand at work in CA

This article does a nice job explaining why gasoline prices are typically higher in CA than elsewhere and why they rose so much recently. The article also points out that regulation requiring a special blend of gasoline in CA plays two important roles. It contributes to the price increase. It also means that the price increase unlikely to spread to other states.