2013 HCI H1 Econs Qn Paper

HWA CHONG INSTITUTION JC2 Preliminary Examinations Higher 1 CANDIDATE NAME CT GROUP 12A/S CENTRE NUMBER INDEX NUMBER ECONOMICS Paper 1 Additional Materials: Answer Paper 8819/01 20 September 2013 3 hours INSTRUCTIONS TO CANDIDATES Write your name and CT class clearly in the spaces at the top of this page and on every page you hand in. Write in dark blue or black pen on both sides of the paper. You may use a soft pencil for any diagrams, graphs or rough working. Do not use staples, paper clips, highlighters, glue or correction fluid and tape. Section A Answer all questions. Section B Answer one out of 2 questions. Begin your answer to each question on a fresh sheet of writing paper. At the end of the examination, fasten the answer scripts to Section A: Questions 1, 2 and Section B separately with the 3 cover pages provided. The number of marks is given in brackets [ ] at the end of each question or part question. You are reminded of the need for good English and clear presentation in your answers. This document consists of 8 printed pages. [Turn over

© Hwa Chong Institution 2013 8819/01/JC2 Prelim 2013 2 Section A Answer all questions. Question 1 Japan and The Future of Energy Extract 1 World energy outlook Without a bold change of policy direction, the world w ill lock itself into an insecure, inefficient and high- carbon energy system. Prosperity and rising populati on will inevitably push up energy needs and energy prices over the coming decades despite much effort to meet the need. Governments urgently need to introduce stronger measures to drive investment in efficient and low-carbon technologies to accelerate the increase in the production of energy. The Fukushima nuclear accident leading to a sharp rebound in the demand of conventional oil-based energy and turmoil in parts of the Middle East and North Africa in 2010 had pushed carbon emissions to a record high. The Fukushima accident has also raised questions about the future role of nuclear power, it seems like oil is the necessary evil. Although the accident provided a boost to other renewables, the heighten energy security concerns is making it harder to combat climate change. Out of the many greener forms of energy sources, the future for natural gas seems to be more certain despite the strong inertia to change. Natural gas is abundant and relatively inexpensive. With technological enhancement, natural gas prices have been presenting itself as a more favorable alternative. Source: International Energy Agency, 2011 Figure 1 Crude Oil prices to Natural Gas Prices (2009-2011) Source: Energy Information Administration, 18 October 2012.

© Hwa Chong Institution 2013 8819/01/JC2 Prelim 2013 3 Extract 2 Golden age of gas Exploiting the world’s vast resources of unconventional natural gas holds the key to a golden age of gas. With the help of technological advancements, natural gas is projected to overtake coal as the second most consumed fuel, after oil by 2025. Liquefied natural gas (LNG) is envisioned as the fuel of choice for many drivers today. A decade ago, there were few examples of the rise of LNG as vehicle fuel. But that is changing quickly, driven largely by the efforts of many in the oil and gas industry committed to making it work and by the increasing realisation of drivers that converting from petrol to gas makes economic sense. Driving cars that run on alternative fuels like LNG can cut emissions and reduce dependence on foreign fuels. Rising diesel costs last year forced Waste Management, largest trash hauler in the United States, to charge customers an extra $169 million, just to keep its garbage trucks fueled. This year, it is buying trucks that will run on cheaper natural gas. In fact, the company says 80% of the trucks it purchases during the next five years will be fueled by natural gas. Though the vehicles cost about $30,000 more than conventional diesel models, ea ch will save $27,000-a-year or more in fuel. By 2017, the company expects to burn more natural gas than diesel. Sources: ExxonMobil Outlook for Energy and The Wall Street Journal, 2012 Extract 3 Future of nuclear power Prior to the Fukushima Daiichi nuclear power plant ac cident in 2011, Japan was the world’s third largest consumer as well as producer of nuclear power. In 2010, nuclear energy consumption and production accounted for 13 percent and 26 percent of total energy respectively. According to the Federation of Electric Power Companies in Japan, nuclear power has made a great contribution to Japan’s energy security by reducing its energy imports requirements. Furthermore, since nuclear energy emits no carbon dioxide, generating electricity via nuclear pow er reduces Japan’s carbon emissions by about 14 percent per year. Besides generating power via nuclear energy, there are alternative energy sources such as hydropower, which is however a relatively small share of generation. The Japanese government has been promoting small hydropower projects to serve local communities through subsidies. In contrast, the American government has proposed a bill to help ensure that cohesive and compatible environmental and energy policies are created and executed. One of the policies includes the imposition of taxes on nucl ear plants, a policy which has been critici zed as ‘bad’ public po licy. Taxes will put upward pressure on electric rates, stunt economic development and job growth. Moreover, like all businesses, electric generators incorporate all costs – including taxes – into the price of their product. Sources: US Energy Information Administration and The Telegraph, 18 March 2011 Extract 4 Effects of the Fukushima disaster The March 11, 2011, earthquake and tsunami that occurred in Japan followed by the nuclear crisis has caused Japan to lose considerable physical and human capital. In excess of 27,000 persons in Japan are killed or missing, and more than 202,000 homes and other buildings have been totally or partially damaged. The quake and tsunami also damaged key ports, and some airports shut briefly. This disrupted the global supply chain of semiconductor equipment and materials. Automakers Toyota, Nissan, Honda, Mitsubishi and Suzuki temporarily suspended production. [Turn over

© Hwa Chong Institution 2013 8819/01/JC2 Prelim 2013 4 Six months after the multiple meltdowns at the Fukushima Daiichi nuclear plant, the streets have been cleared but the psychological damage remains. Millions of people have to re-adjust to levels of radiation that were – until March – considered abnormal. Low-level radiation is an invisible threat with results that do not become apparent for years. Though the vast majority of people remain completely unaffected throughout their lives, others develop cancer. As Japan considers closing the last of its 54 reactors, which marks a dramatic shift in its energy policy, there’s a concern that a nationwide nuclear blackout comes with significant economic and environmental risks attached. Utilities companies woul d have to turn to coal, oil and gas-fired power plants to keep industry and households supplied with more expensive electricity. The International Energy Agency estimates the closure of all nuclear plants will incr ease Japanese demand for oil to 4.5 million barrels a day, at an additional cost of about US$100 million a day. All these imports had contributed to Japan's first trade deficit for more than 30 years last year. In a recent survey, 71% of manufacturers said power shortages could force them to cut production, while 96% said that the additional spectre of higher electricity bills would hit earnin