14.44 | Spring 2007 | Undergraduate

Energy Economics


Course Meeting Times

Lectures: 2 sessions / week, 1.5 hours / session

Recitations: 1 session / week, 1.5 hours / session


14.01 Principles of Microeconomics or an equivalent intermediate microeconomics course taken elsewhere.


There are three hours of lectures each week (Monday and Wednesday) and a one hour section (Friday). Two or three lectures will also be given during the section on Friday. For students taking the subject as 14.44 there will be a midterm examination and a final examination. For students taking the subject as 14.444 there will be extra readings and a separate required question on the midterm and the final exams. There will also be approximately five problem sets for all students. The course will have quite a bit of background reading and an understanding of some basic material not covered in 14.01 will be necessary and require additional work.


This course is an energy economics course not a general energy policy course. It will cover a variety of theoretical and empirical topics related to energy demand, energy supply, energy prices, environmental consequences of energy consumption and production, and various public policies affecting energy demand, supply, prices, and environmental effects. It is a new course and, as a result, it will have an experimental character to it. We have developed a preliminary reading list but we consider it to be dynamic. We will be seeking feedback from the students taking the course to help us to make it better. There is no textbook for this course.

Enrollment Restriction

The enrollment in the course is limited to 30 students. We have limited the enrollment primarily because this is a new course and we want to encourage active student participation and feedback to refine the content and general quality of the course. We feel that we can do so best if we limit the size of the class. During the first class we will ask you to complete a form that provides us with information about you and your background. If there is excess demand for the course we will apply a rationing system. First priority will be given to MIT undergraduates who have completed 14.01 and are scheduled to graduate in Spring 2007. We will then take a stratified random group of the students meeting the pre-requisites to fill the remaining slots. You will be notified by email as to whether you can take the course.

Academic Honesty

We expect each student to complete his or her assignments and exams independently. If group work is permitted for specific assignments you will be informed about the relevant terms and conditions.


The grading for the course will be as follows:

Midterm Examination 30%
Final Examination 40%
Problem Sets 20%
Class Participation 10%


There is no textbook for this course. However, we will be assigning a few sections from Pindyck, R., and D. Rubinfeld (2005) primarily for review purposes:

Pindyck, R., and D. Rubinfeld. Microeconomics. 6th ed. Upper Saddle River, NJ: Prentice Hall, 2005. ISBN: 0130084611.

Many of you used this book in 14.01. If you used a previous edition you will find equivalent sections there. If you used a different intermediate microeconomics textbook you should find equivalent sections in it. If in doubt ask the TA. If you did not retain your intermediate economics textbook, we suggest that you buy a used copy for reference purposes. It will be useful.



Introduction and Background

Review of the Basics of Supply, Demand and Price Formation in Competitive Markets


Energy Demand: Short Run and Long Run Price and Income Elasticities

Introduction to Multivariate Regression Analysis

3 Energy Supply and the Economics of Depletable Resources
4 World Oil Markets and Energy Security
5 Natural Gas Price Regulation, Deregulation and Markets
6 Electricity
7 Risk Management, Futures Markets and Derivatives
8 Energy and Climate Change
9 Internalizing Environmental Externalities with a Focus on CO2 Emissions Cap and Trade Mechanisms
10 Coal
11 Nuclear Power
12 Energy Efficiency Policies
13 Renewable Energy Policies

Course Info

As Taught In
Spring 2007