1. Discuss the pros and cons of the two “advanced” forms of estimating energy demand. What do they excel at and where are they lacking? How might policy changes be built into the models?

2. Assume the following two equations for the extraction of a natural resource:

A) P = 18 – 0.5 Q for Marginal Willingness to Pay

B) P = 4 for a constant Marginal Cost of Extraction

Solve for the following in a two time period setting:

1) Find and label the equilibrium when there is no limit on Q.

2) Assume that there are only 20 units of the natural resource to be extracted, and I tell you the optimal extraction rates at time period 1 and time period two are 10.1 and 9.9 respectively. Solve for the discount rate.

3) Show graphically or in terms of total benefits that the optimized extraction rates maximize total benefits.

3. Discuss the cost features of renewable energies in the supply electricity. What are some of the harder costs that are more difficult to capture. What aspects of renewable electricity supply are more expensive than traditional fossil fuels? Where are they cheaper?