HCI H1 ECONS P1

© Hwa Chong Institution 2015 8819/01/C2 Prelim 2016 HWA CHONG INSTITUTION C2 Preliminary Examination Higher 1 CANDIDATE NAME CT GROUP 15 CENTRE NUMBER INDEX NUMBER ECONOMICS Paper 1 Additional Material: Answer Paper 8819/01 29 August 2016 3 hours READ THESE INSTRUCTIONS FIRST Write your Name, CT group, Centre number and A level Index number 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 question. Begin each question on a fresh sheet of writing paper. At the end of the examination, fasten the answer scripts to Section A Question 1, Section A Question 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 advised to spend several minutes reading through the questions before you begin writing your answers. You are reminded of the need for good English and clear presentation in your answers. This document consists of 9 printed pages and 1 blank page. [Turn over

© Hwa Chong Institution 2016 8819/01/C2 Prelim 2016 2 Section A Answer all questions. Question 1 The Coal Industry and Housing Market in the United Kingdom (UK) Extract 1: Decline of the UK coal industry In 1970, 292 UK mines employed 287,000 miners and produced 145 million tonnes of coal a year. Today, the UK has just 4,000 miners, and 13 million tonnes of annual output. Domestic production accounts for less than 25% of the 60 million tonnes used in the UK, with the rest mostly imported from the United States (US), Russia, Australia and Columbia. Yet soon, there will be only one deep mine and fewer than 20 surface mines left in the UK after the UK’s largest coal producer, UK Coal, announced plans to close two of the three remaining deep pits because they are no longer financially viable. The closures will affect a total of 1300 workers. The UK coal industry didn't just collapse overnight. The decline started since the First World War. The UK mines came under increasing competition from alternative power sources and cheap coal produced elsewhere in the world. Coal-fuelled power stations provided 80 per cent of UK's energy in 1961. Things changed during the 1990s. Government invested in nuclear energy and by the middle of the decade, gas had overtaken coal. In 1990, gas powered less than 1 per cent of UK's electricity. By 2011, it powered 40 per cent, with coal down to 32 per cent. If 21st Century market forces are less favourable to the UK coal industry, so too is the green agenda. Coal produces electricity more cheaply than gas, but it is the dirtiest fossil fuel and emits more carbon emissions. In 2013, the government introduced a carbon price support tax. The European Union (EU) directives require coal-fired power stations to reduce their carbon emissions by 2023 or face closures. Concern has mounted that the UK efforts to prom ote low-carbon energy are hampering competitiveness and leading to higher energy bills. “Getting coal off the grid as soon as possible makes energy more expensive, and you lose the diversity of the generation mix.  Security of supply and affordability have been placed behind carbon emissions targets,” says Phil Garner, director-general of Confederation of UK Coal Producers (CoalPro). Sources: Energy & Technology Magazine, 14 April 2014 and The Financial Times, 12 March 2014 Extract 2: UK’s Battered Coal Industry Sees Glimmer of Hope in Carbon Capture UK sits atop significant coal resources. In September 2013, the British Geological Survey estimated that over 17 billion tonnes of coal remain in UK’s coalfields, enough to provide power for 300 years. This could potentially create thousands of jobs and reduce the UK's balance of trade deficit. Supporters of the coal industry are counting on the UK government's drive to support a new and untested Carbon Capture and Storage (CCS) technology, which could enable coal-fired power stations to trap and pipe harmful emissions underground out to under the seabed during the production of electricity. "That means there is a future for the UK coal industry; it won't be particularly massive but it will be the retention of perhaps 10 million tonnes a year of output," said Tony Lodge, research fellow at the London-based Centre for Policy Studies If CCS does take off, UK’s deep mines will need to find a way to cut production costs. They are in fierce competition with cheaper suppliers from Colombia, Russia, India, China, and the US. The coal industry is urging the government to require domestically-produced coal to be used in future CCS plants.

© Hwa Chong Institution 2016 8819/01/C2 Prelim 2016 3 Source: Reuters, 17 October 2014 Extract 3: UK House Building Soars Amid Housing Market Revival House building in the UK is rapidly on the rise amid the economic recovery. But the pace of house building continues to fall well short of what is needed to keep up with demand. Construction firms are now chasing profits from higher house prices. But building in the short term is held up by a lack of materials and labour. The surge in demand in late 2013 and early 2014 led to materials such as bricks running out. Construction workers left the industry during the financial crisis and the industry has struggled to recruit enough skilled labour to catch up with increasing demand. In November 2014, the government set out a range of steps to try to recruit new construction workers. One of the proposals suggested bringing former military personnel on to building sites. The House Builders Federation also pointed out that suppliers have responded to short term pressures through increased training schemes and gave examples of brick makers reopening plants. The housing crisis in the UK is not just one of a shortage of houses. The housing stock is among the oldest and coldest in Europe due to poor insulation and the cost of heating leaking properties is leading to a rise in fuel consumption. Sources: International Business Times, 15 May 2014 and BBC News Magazine, 13 January 2015 Table 1: Selected data related to housing in UK, 2013 Region in the UK Average house price 1 Average annual income of borrowers1 Population (in millions) Area km2 Electricity Tariff2 Day (pence per kWh) Night (pence per kWh) North West 186,000 50,000 7.1 14,165 16.91 8.46 Yorkshire 181,000 49,000 5.4 15,420 16.28 8.36 East 277,000 63,000 6.0 19,120 15.83 8.59 London (Capital) 362,000 79,000 8.5 1,572 16.19 8.64 South East 318,000 69,000 8.8 19,095 16.63 8.43 1 figures rounded to the nearest £1,000s; 2 electricity charges by the electricity company, Good Energy Source: Various Extract 4: The UK's Climate Change Act The Climate Change Act contained the world's first legally binding national commitment to cut greenhouse gas emissions. The headline target is to cut emissions by at least 80% from 1990 levels by the year 2050. Power and Industry The power sector comprises the large-scale production of electricity while industry activity includes manufacturing, construction, and extraction of fossil fuels (e.g. coals, oil, etc) and refining. Emissions from power and industry accounted for 26% and 23% respectively of total UK greenhouse gas emissions in 2013. The UK applies carbon pricing under both EU and national schemes. The EU Emissions Trading Scheme (EU ETS) forces all big factories