NS4960 Spring Term 2018 Burnell and Simon Chapter 3 U. S NS4960 Spring Term 2018 Burnell and Simon Chapter 3 U.S. Energy Security Policy Private Property Rights and the Public Good

Outline Core issues of energy security Public policy considerations Free market incentives Idea of comprehensive energy security Domestic goals International repercussions

Overview I Core issues energy security somewhere near borderline between Pure public policy considerations and Marketplace of free enterprise entrepreneurial activity Comprehensive energy security policy means Significant attention be paid to current and future international relations and Existing and developing global market forces alike A domestically focused position one nation’s “energy security” can lead to insecurity in other nations

Overview II Examples Japan’s decision to develop nuclear power an example eventually led to many country’s rejecting nuclear power U.S. has driven up global food prices as adoption of ethanol additive policies led to increased demand for corn feedstocks Philosophy of governance plays a significant role in determining whether energy security is primarily driven by Public policy Market driven choice or Some combination of both

Main Points I Government and markets tend to view energy security issues quite differently Government’s generally view energy security from perspective of property rights Regulating those rights in ways that reduced marginal social costs and Ways that advance existing policy priorities Marginal social costs are the basis of regulating property and its use. The effort to manage marginal social costs through constraints on property rights has a long term impact on energy security

Main Points II From a market perspective, Energy type The uses made of the energy and The development decision regarding resource recovery Are based on a combination of Market demand The ability of firms to minimize costs and Profitability Costs are managed either through government policy or through the market mechanism.

Main Points III In some cases such as electricity generation and transmission government regulation of electricity markets serves as a basis of promoting energy security Big lesson for energy security is that it is a function of the allocation of property rights within our legal institutional framework Property rights and the exercise of such rights key components in long term market developments in Energy supply Affordability and Long term security

Main Points IV In case of nations with large national energy agencies managing key energy resources the capacity to create a more uniform articulation of property rights and rules governing property use may lead to greater capacity to produce energy security Conversely large scale government control as the potential to reduce entry points of energy innovation – PEMEX in Mexico Contrast energy revolution in the U.S. Market driven innovation often works in this highly dramatic way