2023 VJC H2 Economics Prelim Exam Paper 1 for print

Victoria Junior College [Turn over VICTORIA JUNIOR COLLEGE JC2 PRELIMINARY EXAMINATION 2023 HIGHER 2 ECONOMICS 9570/01 Paper 1 12 September 2023 2 hour 30 minutes No Additional Materials are required. READ THESE INSTRUCTIONS FIRST An answer booklet will be provided with this questi on paper. You should follow the instructions on the front cover of the answer booklet. If you need additional answer paper, ask the invigilator for a continuation booklet. Answer all questions. The number of marks is given in brackets [ ] at the end of each question or part question. This document consists of 9 printed pages and 1 blank page.

2 Victoria Junior College 9570/01/PE/23 Answer all questions. Question 1: The evolving demand for commodities Figure 1: Global lithium prices*, mid-2017-2020 *Lithium is traded as lithium carbonate. Price is in Chinese Yuan per tonne. Source: Tradingeconomics.com Extract 1: Sodium-ion battery a new alternative to lithium-ion battery In July 2021, China's Contemporary Amperex Technology Co. Limited, or CATL for short, became the first major automotive battery maker to unveil a sodium-ion battery, saying it planned to set up a supply chain for the new technology. As electric vehicles (EVs) become incr easingly popular, demand for key lithium-ion battery ingredients, particularly cobalt, has spiked. This has spurred car producers and battery makers to seek alternatives to the current lithium-ion batteries. The sodium-ion batteries do not contain lithium, cobalt, or nickel. CATL did not disclose cost details of the new batteries. The energy density, or amount of energy stored per unit v olume, of its new sodium-ion batteries is still lower than that of lithium-ion batteri es, Huang Qisen, deputy head of CATL's research centre told an online briefing. But he added that they perform well in cold-weather and fast-charging scenarios. Source: Reuters, July 29 2021 Jul

3 Victoria Junior College 9570/01/PE/23 Extract 2: Indonesia bans mineral exports to move up value chain Indonesia is taking control of its mineral resources, incentivising inves tment in processing facilities and shifting the international balance of economic power. From Asia to Europe to the United States, multinationals have made moves into Indonesia to secure access to its vas t reserves of nickel, as the country's export restrictions fuel competition for an essential metal for lithium-ion EV batteries. In August 2019, the Indonesian government announced that exports of nickel ore would be banned starting January 1, 2020. This policy was aimed at slowing the depletion of nickel ore reserves while promoting investment in processing facilities within the country. The policy has already borne fruit. On December 15, 2021, German chemical company BASF and French mining and metall urgy company Eramet announced that they “have signed an agreement to jointly assess the development of a state-of-the-art nickel and cobalt hydrometallurgical refining com plex.” Hyundai Motor and LG Energy Solution of South Korea also announced they had started construction of an EV ba ttery factory on the island of Java. However, the ban also provoked a reaction from the European Commission, which ment ioned in a statement released that the European Union has requested the establishment of a panel at the World Trade Organisation to seek the elimination of unlawful export restrictions imposed by Indonesia on raw materials. Source: Asia Times, February 22, 2022 Extract 3: Indonesia is poised for EV riches, but a nickel rush could hurt the environment As American EV maker Tesla considers making a hefty investment in Indonesia, concerns are growing over the potential environmental consequences of a nickel mining rush. Nickel mining in Indonesia has a dirty track record and the rush to extract and process more of it will add pressure to an industry with opaque rules and regulations. “Mining is an unsustainable production. You must consume large amounts of fossil fuel to power the machines for clearing forests, digging the earth, and transporting ore. The more nic kel ore is produced, the more fossil fuel is consumed, which has a great impact on climate change, ” Arianto Sangadji, a leading researcher on the industry, said. Dirty aspects of nickel mining are expected to be difficult to mitigate. From the mines to the smelters, nickel leaves an impact, on local ecosystems and on climate change. But the opportunity for Indonesia remains enormous; one potentially even more valuable t han its vast palm oil industry. The International Energy Agency predicts that some 70 million EVs will be on roads by 2025 and a huge number could contain battery parts mined and manufactured in Indonesia. Source: CNA, 28 Feb 2021

4 Victoria Junior College 9570/01/PE/23 Extract 4: Policies towards a fossil fuel-free economy To mitigate climate change and create a fossil fuel-free economy, the global community has agreed that greenhouse gas emissions must be reduced rapidly and significantly. Lithium-ion batteries have been a promising clean technology in two sectors most responsible for greenhouse gas emissions: transport and electricity generation. This is be cause the battery stores energy in its cells, as opposed to generating energy by combusting fossil fuels in a gasoline and diesel engine, to power a vehicle or provide electricity to a building. By recharging batteries with fossil fuel-free electricity, lithium-ion batteries fully contribute to a fossil fuel-free economy. Further decline in prices of lithium-ion battery and its improved energy capacity would partly depend on continued research and development (R&D) efforts. Fiscal support can c atalyse such efforts by improving their financial returns, but governments must also account for the significant uncertainty of the cost of such support. While subsidies give governments more control in terms of the recipients of the support as well as the direction of innovation, its effectiveness relies on how well governments can target their subsidies, based on relevant information on the size and reach of direct and spillover effects of selected R&D activities. Furthermore, direct subsidy or preferential tax treatment can be given to firms when lithium-ion batteries are installed in their produc ts. For example, levy and grid tariff exemptions can be given to electrical grid operators when they use lithium-ion batteries to increase renewable energy capacity. For EVs, countries introduced measures such a s exemptions or rebates on road toll to accelerate their adoption. Besides market-based instruments, non-market-based instruments that involve imposing obligations or introducing non-monetary incentives also play a role in supporting lithium-ion battery installation. In some areas such as EVs, there has been a recent shift from market-bas ed instruments such as direct subsidies to non-market-based instruments. Authorities in some countries have introduced zero-emission vehicle mandates. Others established low-emission zones, where only electric or hybrid cars are allowed. However, the expansion of the charging infrastructure remains a key challenge for the widespread adoption of EVs. For electricity, governments c ould require electrical grid operators to install a minimum capacity of battery storage. Lithium-ion batteries have indeed become the critical pillar for building a fos sil fuel-free economy. The bat