VJC H3 ECONS P1

1 VICTORIA JUNIOR COLLEGE JC 2 PRELIMINARY EXAMINATION 2017 H3 Economics 9809/01 3 hours 15 minutes READ THESE INSTRUCTIONS FIRST Write your index number and name on all the work 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. Section A Answer all questions. Section B Answer two questions. At the end of the examination, fasten all your work securely together. The number of marks is given in the brackets [ ] at the end of each question or part question. This document consists of 7 printed pages

2 Section A Answer all questions in this section The Economics of Climate Change – Challenges and Opportunities Extract 1: United States (US) withdrawal from the Paris Agreement "We're getting out." It was with these words that US President Donald Trump signified the United States' decision to break from the Paris Agreement on Climate Change. In 2016, the Paris Agreement marked a turning point in the battle against climate change. World leaders from across the globe united for the first time in history to legally ratify action against pollution through the United Nations Framework Convention. The ultimate purpose of the Paris Agreement was to lowe r emissions to combat global warming. The European Union (EU) has rejected Trump's idea o f re-working the deal around US industry demands. On Wednesday 14 June, European Commission president Jean-Claude Juncker told the EU Parliament in no uncertain terms that “the European Union will not renegotiate the Paris agreement (in the aftermath of the US decision to pull out).” In a statement released by a foreign ministry spokesperson, China has maintained its decision to support for the Paris Accord: "The general trend of green, low-carbon and sustainable development advocated by the Paris Agre ement coincides with China's policy of promoting ecological advancement. However the other countries may change, China will continue to pursue innovative, coordinat ed, green, open and shared development, bear in mind its domestic requirements for sustainable growth, step up concrete efforts to deal with climate change and fa ithfully implement the Paris Agreement." Beijing also sees the opportunity to de velop strategic renewable industries needed to combat climate change. Having famously stated that climate change is a "hoax", Trump promises to resurrect the United States' mining and fossil fuel industry. Source: wired.com.uk, 2017 Figure 1: World Health Organization: Annual levels of PM2.5 (harmful pollutant)

3 Extract 2: Transition to a low-carbon economy? The technological changes we need to transition to an energy infrastructure that does not make the planet hotter will require a fundamental shift in the way we power things, and that transition in already underway. Renewables—especially wind and solar—are already competitive or even cheaper in many countri es with electricity produced by burning coal, oil and gas. But that’s not enough; keeping the power on during cloudy and calm days, and at night requires some way to store electricity which was a significant hurdle a few years ago. Without affordable storage, adding renewable capacity to existing electric grids can be difficult, as power produced during peak times (lik e mid-afternoon on a sunny day) must be dumped if there isn’t demand for it as electricity cannot be stored and in many cases, there must still be fossil fuel fired coal plants to tide us over when the sun and wind are down. In order to take full advantage of the ability of earth’s natural energy endowments like sun and wind, we need to be able to store electrici ty cheaply. There is a lot of effort devoted to finding cheaper ways to store electricity, in everything from ultra-capacitors to better batteries. The other possibility is a reg ion-wide grid to transport energy to where it is needed. Technology development and adoption proceed in what often feels like fits and starts, but in aggregate is often described with an s-shaped or sigmoid curve, with few people adopting new technologies in the early, expensive a nd buggy stages, but with increasing adoption, the kinks and costs are worked out, leading to accelerated adoption, and finally market saturation. While it i s clear that some renewable technologies are already cost-competitive and being adopted, we need cheaper storage technologies to keep that progress on the S -curve, which is why news of promising new technologies is watched so closely. Source: Huffington Post Blog, 16 September 2016 Figure 2: Growth in renewables Source:BP

4 Figure 3: Falling costs of renewables Source: Bloomberg New Energy Finance Figure 4: Battery production boom Source: Benchmark Mineral Intelligence Extract 3: China and India’s Development Strategies China and India’s economic success has been largely interpreted as the result of thriving economic and political reforms. The unpara lleled performance of China and India, and their influence on the world economy, ha s been larger and faster than implied in earlier research. However, the political economy view of such phenome na cannot be overlooked, particularly in the case of China. Therefore, it is pertinent to emphasize the role of the government in designing and implementing successful development policies and structural reforms.

5 First, a key lesson from China’s experience is the adoption of a pragmatic approach to economic reforms. Second, industrial policy has been at the heart of development policies and strategies in developing countries, although not particularly so in India. In the case of strategies and economic reforms, this p olicy’s implementation produced varied outcomes, and with different levels of succe ss. Third, trade and the liberalization of commercial policies have played a primary role in the Southern Engines’ growth success. Needless to say, growth and development strategies are challenged by the multiplicity or non-uniqueness of institutional arrangements nee ded for reforms to succeed and to achieve desirable ends. Source: United Nations University, 2010 Chart 1: “Best scenario” simulation of estimated time required to become high- income countries for middle-income countries in Emerging Asia (years) Note: Based on World Bank’s criterion for classifyi ng economies, high-income countries are defined as having GNI per capita above USD 12 000 in 2013. Growth, CPI and exchange rate prospects in this simulation are in line with MPF-2 014. Population projections are based on UN data. Source: 12OECD Development Centre

6 Table 1: Selected economic statistics of China and India (US$) Source: http://countryeconomy.com accessed on August 2017 Question 1 (a) Explain the need for the Paris Agreement. [6] (b) Assess the rationality of US and China’s decisions with regards to the Paris Agreement. [8] (c) Discuss reasons for the continued growth in renewable energy and its related market. [8] (d) Discuss the policies the Indian and Chinese governm ent should undertake in order to achieve high-income status. [8] [Total: 30]

7 Section B Answer two questions from this section 2 The higher the level of education the more ration al one becomes and the better decisions people make with regards to shoppi ng for clothes and whether to volunteer for a good cause. Discuss this statement. [35] 3 Using academic principles and examples to illustr ate your answer, assess the concept of Porter's Five Forces including its limitations. [35] 4 Foreign workers