MI H1 PU2 Econ Promo Exam 2008 Qs

Class Adm No Candidate Name:_____________________________ Promotional Exam 2008 Pre-university 2 H1 ECONOMICS 8816 PAPER 1 8816/01 Tuesday 9 September 2008 3 hours Additional materials: Answer paper READ THESE INSTRUCTIONS FIRST Write your name, class and admission number in the spaces at the top of this page and on any separate answer paper used. 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. Section A Answer all questions. Section B Answer one question At the end of the examination, answers to Case Study Questions 1, 2 and the essay question will be collected separately. The number of marks is given in brackets [ ] at the end of each question or part question. _____________________________________________________________________ This question paper consists of 8 printed pages. Section A

Answer all questions. Question 1 Energy Conservation Figure 1: Energy efficiency Extract 1: The elusive negawatt Whereas the burning of fossil fuels releases greenhouse gases, which contribute to global warming, and nuclear plants generate life-threatening waste, the only by-product of energy efficiency is wealth, in the form of lower fuel bills and less spending on power stations, pipelines and so forth. No wonder that policy makers now tend to prefer “negawatts” to megawatts as the best method of slaking the world's growing thirst for energy. The Intergovernmental Panel on Climate C hange, a group of scientists advising the United Nations on global warming believes that profitable energy-efficiency investments would allow Pakistan to cut its emissions by almost a third, Greece by a quarter and Britain by more than a fifth. In other words, big investments in energy efficiency would more than pay for themselves, and fairly fast. Although a lot of money would have to be spent—$170 billion a year until 2020. Moreover, with ample prof its to be made, financing should be easy to attract. The problem, analysts explain, is a series of distortions and market failures that discourage investment in efficiency. Often, consumers are poorly informed about the savings on offer. Even when they can do the sums, the transaction costs are high: it is a time-consuming chore for someone to identify the best energy-saving equipment, buy it and get it installed. It does not help that the potential savings, although huge when added up across the world, usually amount to only a small share of the budgets of 2

individual firms and households. Despite recent price increases, spending on energy still accounts for a smaller share of the global economy than it did a few decades ago. Similar stories crop up in the markets for new homes and offices, appliances and vehicles. Builders are not the ones who end up paying the utility bills, so have little reason to add to the construction costs—and hence the price of a home or office—by incorporating energy-saving features. The makers of appliances and cars also know that not all consumers and drivers will think as carefully about running costs as about the purchase price. By the same token, landlords have scant incentive to invest in energy efficiency on their tenants' behalf. And power companies are usually keen to encourage their customers to consume as much power as possible. Financing energy-efficiency investments can also be difficult. In the developing world, capital can be scarce. In rich countries, the savings from making individual homes more efficient are too small and the overheads involved too high to be of much interest to most banks. Source: The Economist, 8 May 2008 Extract 2: First-ever carbon trading deal signed in Singapore A Singapore-based company, ecoWise, has tied up with Japan's Kansai Electric Power Company to tackle climate change. Under the four-year deal, the first to be signed in Singapore, ecoWise will trade carbon credits for Kansai, Japan's second largest power firm. Carbon trading is a market-based mechanism to help mitigate the increase of carbon dioxide in the atmosphere. Countries, which have signed the Kyoto Protocol, are legally bound to meet emissions targets by 2012. The Kyoto Protocol is designed to cut greenhouse gas emissions by making the polluter pay for climate change. A country that needs to fulfil its obligations may need to buy spare credits from another country that is on track to meet its target. But industry players said there are more emission reduction projects coming on-stream in countries like Malaysia, Indonesia and Vietnam, and the sector is set to grow. However, the rate of adoption will depend on the level of confidence and awareness of how carbon credits can benefit businesses. Source: Channel NewsAsia, 5 Nov 2007 3

Extract 3: Sustainable Singapore To help residents make energy efficient choices in their daily lives, National Environment Agency (NEA) has introduced various initiatives below. Mandatory energy labelling informs consumers of the energy efficiencies of different models of an appliance. Green Buildings form an integral part of sustainable development as the building sector account for about 30% of the total electricity consumption in Singapore. In May 2007, NEA launched the 10% Energy Challenge, a national campaign to raise awareness among households on how they can save at least 10% of their home electricity use by adopting simple energy-saving measures at home. Source: Ministry of the Environment and Water Resources, Singapore 26 July 2008 Questions (a) (i) With reference to Figure 1, account for the trend in energy use between 1990 and 2005. [4] (ii) Using Extract 1, explain two possible obstacles to energy efficiency. [4] (b) (i) Identify the sources of market failure mentioned in Extract 1 [2] (ii) Using a diagram, explain why one of the sources identified in b (i) is an example of market failure. [4] (c) Using Extract 2, assess the desirability of carbon trading. [6] (d) Comment on the possible measures that Singapore may undertake to reduce energy consumption and combat global warming. [10] [30 marks] 4

Question 2 Economic Performance Economic indicators among selected countrie