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RICHARD SCHMALENSEE: So I want
to start with a small puzzle,

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00:00:32,330 --> 00:00:33,680
if I can get this thing to work.

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This is satellite capture
of carbon monoxide plumes

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globally.

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I'll let this run for
a while, and then I'll

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show you another one that's
got more information but harder

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00:00:48,440 --> 00:00:50,420
to read.

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So the question is why?

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Why are they where
they are, which

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requires you to first figure
out where carbon monoxide comes

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00:01:02,030 --> 00:01:03,440
from--

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00:01:03,440 --> 00:01:06,290
which I figure most
of you probably know.

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00:01:06,290 --> 00:01:10,160
Quick response-- how do
you get carbon monoxide

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in the atmosphere in quantity.

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Yeah.

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AUDIENCE: Burning hydrocarbons.

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00:01:15,290 --> 00:01:17,638
RICHARD SCHMALENSEE: Burning
hydrocarbons completely,

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00:01:17,638 --> 00:01:18,180
incompletely?

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00:01:18,180 --> 00:01:19,050
AUDIENCE: Incompletely.

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00:01:19,050 --> 00:01:20,467
RICHARD SCHMALENSEE:
Incompletely.

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00:01:20,467 --> 00:01:22,940
So it's incomplete
combustion of hydrocarbons.

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00:01:22,940 --> 00:01:26,150
So you see the red spots is
where there's a lot of it.

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00:01:30,320 --> 00:01:32,885
A lot of energy is
burning hydrocarbons,

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00:01:32,885 --> 00:01:34,760
so it's not too surprising
we have this here.

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00:01:34,760 --> 00:01:38,390
Let me start the other
one, which gives you

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00:01:38,390 --> 00:01:40,850
a little bit of the same.

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00:01:40,850 --> 00:01:49,790
You see a lot over Asia,
India, South Asia, Africa,

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00:01:49,790 --> 00:01:53,420
some over Latin America.

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00:01:53,420 --> 00:01:56,180
Why?

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00:01:56,180 --> 00:01:59,150
How come we're seeing incomplete
combustion of hydrocarbons

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00:01:59,150 --> 00:02:00,500
in those areas?

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00:02:00,500 --> 00:02:06,740
A lot of it-- enough to make
plumes detectable from space.

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00:02:06,740 --> 00:02:08,380
How come?

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00:02:08,380 --> 00:02:10,220
Thoughts?

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00:02:10,220 --> 00:02:10,965
Yes.

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00:02:10,965 --> 00:02:14,050
AUDIENCE: A lot of those
are developing areas,

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00:02:14,050 --> 00:02:20,405
and they don't have the tissue
processes to burn hydrocarbons.

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00:02:20,405 --> 00:02:23,200
RICHARD SCHMALENSEE:
That's right.

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00:02:23,200 --> 00:02:24,550
Let me restart this thing.

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00:02:29,030 --> 00:02:30,580
So we're dealing with--

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00:02:30,580 --> 00:02:33,910
a lot of those are
developing areas.

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00:02:33,910 --> 00:02:35,530
What kind of
hydrocarbons do you think

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00:02:35,530 --> 00:02:36,697
they're burning in quantity?

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00:02:36,697 --> 00:02:42,790
And the plume that you
occasionally see over Brazil

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00:02:42,790 --> 00:02:46,090
is a fair amount of
deforestation in the Amazon,

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00:02:46,090 --> 00:02:48,480
just large-scale burning.

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But what kind of
hydrocarbons do you

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find being burned in
very poor countries?

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00:02:54,476 --> 00:02:55,101
AUDIENCE: Coal.

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Coal.

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Coal.

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Coal.

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00:02:56,195 --> 00:02:58,070
Wood.

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Coal.

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RICHARD SCHMALENSEE:
Coal's one answer.

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What else?

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AUDIENCE: Wood.

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Wood.

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Wood.

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I hear mumbling.

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It's very hard to
grade participation

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when you do chorus.

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So just put up a hand.

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Take a shot at it.

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Wood's what I was after.

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They do burn coal,
and we're going

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to see a fair amount of
that, but this is UN data

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on the fraction of total energy
from quote, "primary biomass,"

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which is largely wood--

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wood and brush and
stuff like that.

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And you will notice
how high it is

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in a number of poor countries.

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I was struck by the
Cambodia number,

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just because I was
there recently.

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But look at Ethiopia.

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Almost all the energy available.

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And these are estimates.

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You can't measure how much
they're doing and cooking

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00:03:49,320 --> 00:03:55,470
fires in remote villages, but
the dominant energy source

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in those two very poor
countries is gathering wood

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and burning it to cook.

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Most of the time, most of
the energy data you will see

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00:04:09,380 --> 00:04:12,140
does not have that, in part
because the best you can do

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is estimate it.

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But historically, this is very
important as an energy source,

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and it's still important in a
lot of developing countries.

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We will come back to this.

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That's one source of
energy that humans

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use to supplement their
own before we began

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using fossil fuels in quantity.

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00:04:39,570 --> 00:04:41,700
What else did we use?

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Yeah.

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00:04:42,490 --> 00:04:43,290
AUDIENCE: Water.

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00:04:43,290 --> 00:04:45,840
RICHARD SCHMALENSEE:
Water, like water power,

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00:04:45,840 --> 00:04:47,350
water wheels of various kinds.

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00:04:47,350 --> 00:04:48,470
Anything else?

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00:04:48,470 --> 00:04:48,970
Yes.

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00:04:48,970 --> 00:04:49,595
AUDIENCE: Wind.

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00:04:49,595 --> 00:04:53,250
RICHARD SCHMALENSEE: Wind--
sailing ships, windmills.

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Anything else?

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David.

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AUDIENCE: Horses.

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RICHARD SCHMALENSEE:
Animals, yeah.

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And the availability of all
of those things varies a lot.

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00:05:05,040 --> 00:05:06,660
I'm sorry about the fly in.

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00:05:06,660 --> 00:05:10,800
I'm a little careless in
setting up the animation.

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00:05:10,800 --> 00:05:13,620
The availability of all
of those energy sources

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00:05:13,620 --> 00:05:15,300
varies enormously globally.

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If you're in a desert, you're
not gathering a lot of wood

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00:05:17,820 --> 00:05:19,470
to burn.

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00:05:19,470 --> 00:05:24,450
If you're in Africa, you're
short of domesticated animals,

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and so on.

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If you look across
pre-industrial economies,

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and you ask what do their
energy systems look like,

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00:05:34,763 --> 00:05:36,180
they're going to
differ, depending

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on available resources.

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They're going to differ
depending on climate.

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Do you really need to heat?

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Is it really important?

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They're going to differ
level of technology, which

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varied a lot in
pre-industrial times,

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particularly because
communication

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00:05:51,570 --> 00:05:56,760
was slow and erratic, and
the level of organization.

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When the Roman Empire fell,
energy systems changed,

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organization changed.

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So I'm sure there are
other differences.

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So today, what we're
going to look at--

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and just briefly, this is a
little bit like Wednesday's.

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This will, I think,
set a record,

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00:06:16,230 --> 00:06:21,450
which I hope not to break,
for the number of slides.

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But this is background
and overview

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00:06:24,840 --> 00:06:29,370
of what the world's
energy systems look like.

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00:06:29,370 --> 00:06:31,830
One of the important
things to think about

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is when you go beyond--

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this is the fancy slide
that I showed you last time

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about national energy
systems in context.

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If you look at the
global energy system,

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00:06:45,460 --> 00:06:48,540
it's more than a set
of national ones.

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There's a global
background-- if you will,

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a social background of cultural
communications, rivalry,

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emulation, and so forth.

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Greenhouse gases
are a global issue.

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There is a set of international
institutions and regimes--

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the World Trade Organization,
climate agreements,

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00:07:09,570 --> 00:07:14,970
NAFTA, et cetera, et cetera,
that affect the global system.

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There are international
energy markets,

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00:07:17,040 --> 00:07:21,510
international
financial markets, and

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transnational
multinational firms

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00:07:23,880 --> 00:07:26,770
that link the global markets.

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So we don't have a
single world energy

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market, and that'll become clear
as we go through the course.

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But we do have a lot of linkages
between national markets.

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So let's look first
at what's the world

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look like in aggregate?

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What does the US look
like in the world?

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Then we'll look at
some differences.

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So that's what the world burns.

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You will notice there really
isn't any biomass up there.

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This is from BP, formerly
known as British Petroleum.

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00:08:03,930 --> 00:08:07,380
This is how the
standard statistics go.

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00:08:07,380 --> 00:08:13,620
You've got oil, natural
gas, nuclear, hydro power,

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00:08:13,620 --> 00:08:17,125
the tiny little non-hydro
renewables, and then coal

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00:08:17,125 --> 00:08:17,625
on top.

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00:08:23,290 --> 00:08:25,060
For the US, coal
was very important.

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For the world, oil is the most
important in terms of energy

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00:08:28,990 --> 00:08:30,480
content.

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00:08:30,480 --> 00:08:34,260
Oil's share has been declining
for some time, however.

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00:08:34,260 --> 00:08:37,380
You'll notice the total
world consumption is growing.

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00:08:37,380 --> 00:08:38,970
Oil looks pretty flat.

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Oil share's declining.

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00:08:41,440 --> 00:08:47,000
Oil share is declining at the
expense of natural gas not too

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00:08:47,000 --> 00:08:48,810
surprising in the US context.

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00:08:48,810 --> 00:08:51,705
But the importance
of coal is growing,

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00:08:51,705 --> 00:08:54,080
which is a little odd if you
think about it, because coal

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was the first of the
fossil fuels that

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00:08:56,030 --> 00:09:02,470
were used to any extent and it's
now on a global basis growing.

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00:09:02,470 --> 00:09:05,680
And we'll come back to that.

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00:09:05,680 --> 00:09:10,590
So in terms of the US--

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00:09:10,590 --> 00:09:13,860
these are a year or two old,
but they're about right,

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00:09:13,860 --> 00:09:16,410
we're about 4 and 1/2% of
the world's population.

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00:09:16,410 --> 00:09:19,350
We produce about 15%
of primary energy.

189
00:09:19,350 --> 00:09:22,050
We consume over 20%.

190
00:09:22,050 --> 00:09:25,050
5% of the world's
population-- less than 5%

191
00:09:25,050 --> 00:09:29,670
consuming more than 20%
of the world's energy.

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00:09:29,670 --> 00:09:34,080
A theme I will sound
today is the whole world

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00:09:34,080 --> 00:09:36,690
can't live like we do.

194
00:09:36,690 --> 00:09:38,880
The arithmetic doesn't work.

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00:09:38,880 --> 00:09:42,270
This is the point that
Tom Friedman makes

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00:09:42,270 --> 00:09:43,690
in the article on the list.

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00:09:43,690 --> 00:09:45,840
He makes it in more
colorful fashion,

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00:09:45,840 --> 00:09:47,820
but the numbers
are pretty clear.

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00:09:47,820 --> 00:09:52,390
And we'll come back to that.

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00:09:52,390 --> 00:09:56,580
This is almost
illegible, but this

201
00:09:56,580 --> 00:10:05,160
is more than five metric
tons of oil equivalent

202
00:10:05,160 --> 00:10:09,480
per capita, and down
to less than 1 and 1/2.

203
00:10:09,480 --> 00:10:12,060
You see enormous
variation in the amount

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00:10:12,060 --> 00:10:17,670
of energy consumed per
capita, with the US, Canada,

205
00:10:17,670 --> 00:10:22,170
Saudi Arabia, and a few European
countries clearly in the lead.

206
00:10:22,170 --> 00:10:24,750
And countries where
there was all that carbon

207
00:10:24,750 --> 00:10:29,400
monoxide-- many of them,
very low down in terms

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00:10:29,400 --> 00:10:33,190
of using commercial energy.

209
00:10:33,190 --> 00:10:37,270
So there's a lot of gathered
wood being done in those areas.

210
00:10:37,270 --> 00:10:38,950
Not a lot of commercial energy.

211
00:10:38,950 --> 00:10:43,060
Russia's high, Norway's high.

212
00:10:43,060 --> 00:10:45,040
I think that's Norwegian.

213
00:10:45,040 --> 00:10:52,210
In any case, lots of
energy, lots of variation.

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00:10:52,210 --> 00:10:56,770
If you look at energy
use per capita over time,

215
00:10:56,770 --> 00:11:01,150
you will see as we saw last time
for the US, it's pretty flat.

216
00:11:01,150 --> 00:11:04,960
Slightly different data source,
slightly different measures,

217
00:11:04,960 --> 00:11:07,750
but flat for the
US for a long time.

218
00:11:07,750 --> 00:11:13,420
Considerably higher than
other rich countries.

219
00:11:13,420 --> 00:11:19,220
And here's the world
average per capita.

220
00:11:19,220 --> 00:11:21,620
Here's the US.

221
00:11:21,620 --> 00:11:26,420
Here's China rapidly growing
toward the world average

222
00:11:26,420 --> 00:11:31,940
per capita, the growth of
China being a very big story

223
00:11:31,940 --> 00:11:35,510
that I'll spend a little
more time on today

224
00:11:35,510 --> 00:11:37,130
and then come back to.

225
00:11:37,130 --> 00:11:40,140
So if any of this stuff
raises questions, by the way,

226
00:11:40,140 --> 00:11:40,850
raise your hand.

227
00:11:40,850 --> 00:11:46,080
This is a session with a
fair amount of me talking.

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00:11:46,080 --> 00:11:48,530
But if I have to just talk
the whole way through,

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00:11:48,530 --> 00:11:50,550
it'll be boring for
both of us-- all of us.

230
00:11:50,550 --> 00:11:51,050
David

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00:11:51,050 --> 00:11:53,900
AUDIENCE: Why are we double what
France and Germany [INAUDIBLE]??

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00:11:53,900 --> 00:11:56,442
RICHARD SCHMALENSEE: That's a
really good question, isn't it?

233
00:11:56,442 --> 00:11:58,190
We're going to want
to explore that.

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00:11:58,190 --> 00:12:01,130
Let me not say an
answer right now,

235
00:12:01,130 --> 00:12:04,216
but have you been to Europe?

236
00:12:04,216 --> 00:12:04,910
AUDIENCE: No.

237
00:12:04,910 --> 00:12:05,910
RICHARD SCHMALENSEE: OK.

238
00:12:05,910 --> 00:12:08,750
You will notice that
the houses are smaller.

239
00:12:08,750 --> 00:12:11,210
Many of the cars are smaller.

240
00:12:11,210 --> 00:12:13,310
The cities are denser.

241
00:12:13,310 --> 00:12:15,800
The railroads, the passenger
railroads, are better.

242
00:12:18,630 --> 00:12:20,250
The activity mix is different.

243
00:12:20,250 --> 00:12:22,560
The countries are denser.

244
00:12:22,560 --> 00:12:25,430
There are a whole
set of reasons.

245
00:12:25,430 --> 00:12:27,770
It's not that we're bad
people, although maybe we're

246
00:12:27,770 --> 00:12:28,820
bad people.

247
00:12:28,820 --> 00:12:31,700
But there are
differences in history,

248
00:12:31,700 --> 00:12:33,510
differences in circumstances.

249
00:12:33,510 --> 00:12:36,260
I'll show you how
several of these--

250
00:12:36,260 --> 00:12:38,570
I don't think I
have the UK, what

251
00:12:38,570 --> 00:12:42,650
several of the energy structures
in these countries look like.

252
00:12:42,650 --> 00:12:44,540
We worry about imported oil.

253
00:12:44,540 --> 00:12:47,410
That's all they
have, so you would

254
00:12:47,410 --> 00:12:51,040
think they might act a little
differently toward using

255
00:12:51,040 --> 00:12:52,130
automobiles.

256
00:12:52,130 --> 00:12:53,590
So there are a bunch of reasons.

257
00:12:53,590 --> 00:12:54,820
We'll spend some time on it.

258
00:12:54,820 --> 00:13:00,340
It's important to understand
why countries differ if you want

259
00:13:00,340 --> 00:13:03,233
to change things going forward.

260
00:13:03,233 --> 00:13:04,650
It's important to
see what history

261
00:13:04,650 --> 00:13:07,950
has done to get a sense
of what you can do.

262
00:13:07,950 --> 00:13:11,370
But just think about how
we use energy, how energy

263
00:13:11,370 --> 00:13:12,900
could be used differently.

264
00:13:12,900 --> 00:13:14,490
I mean, people in
those countries

265
00:13:14,490 --> 00:13:17,850
live perfectly pleasant
lives by our standards.

266
00:13:17,850 --> 00:13:19,560
They're just different.

267
00:13:19,560 --> 00:13:20,620
There was another hand.

268
00:13:20,620 --> 00:13:21,120
Yeah.

269
00:13:21,120 --> 00:13:23,370
AUDIENCE: I can't remember
what it was in the reading.

270
00:13:23,370 --> 00:13:24,734
I think it was [INAUDIBLE].

271
00:13:24,734 --> 00:13:29,820
But I remembered [INAUDIBLE]
Japan [INAUDIBLE] was less than

272
00:13:29,820 --> 00:13:30,340
China's.

273
00:13:30,340 --> 00:13:33,210
Or maybe it was in the
units of America [INAUDIBLE]

274
00:13:33,210 --> 00:13:36,630
that Japan had, like, one and
China was [INAUDIBLE] two.

275
00:13:36,630 --> 00:13:41,400
RICHARD SCHMALENSEE: Per
dollar of GDP, Japan is lower.

276
00:13:41,400 --> 00:13:43,560
This is per person.

277
00:13:43,560 --> 00:13:50,070
And China, despite its rapid
increase in wealth and income,

278
00:13:50,070 --> 00:13:53,130
is still a poor
country on average,

279
00:13:53,130 --> 00:13:54,870
and certainly in '07 was.

280
00:13:54,870 --> 00:13:57,360
I mean, that graph
goes up from '07.

281
00:13:57,360 --> 00:13:59,760
Anything else?

282
00:13:59,760 --> 00:14:04,290
OK, this is gives
you a little sense.

283
00:14:04,290 --> 00:14:08,400
Tells you that the world
differs in how it uses energy.

284
00:14:08,400 --> 00:14:12,300
This is from BP, and
this is by region.

285
00:14:12,300 --> 00:14:16,360
So you will notice
that in Asia-Pacific,

286
00:14:16,360 --> 00:14:22,260
which will be heavily China,
Australia, New Zealand, coal

287
00:14:22,260 --> 00:14:24,210
is the dominant fuel.

288
00:14:24,210 --> 00:14:29,030
In the Middle East, not
too surprisingly, it's

289
00:14:29,030 --> 00:14:33,560
oil and natural
gas, and there are

290
00:14:33,560 --> 00:14:35,340
various mixtures in-between.

291
00:14:35,340 --> 00:14:37,010
Here's North America.

292
00:14:37,010 --> 00:14:38,000
We use a lot of oil.

293
00:14:38,000 --> 00:14:39,290
We use a lot of natural gas.

294
00:14:39,290 --> 00:14:43,400
We use a fair amount of coal.

295
00:14:43,400 --> 00:14:45,830
So there are regional
differences in part

296
00:14:45,830 --> 00:14:51,192
because, with the
exception of oil--

297
00:14:51,192 --> 00:14:52,900
well, not even with
the exception of oil,

298
00:14:52,900 --> 00:14:58,060
transporting this stuff
globally is not that easy.

299
00:14:58,060 --> 00:15:01,960
It's easier than it used to
be, but transporting coal,

300
00:15:01,960 --> 00:15:04,900
to transport natural
gas, you either

301
00:15:04,900 --> 00:15:09,190
build a pipeline or
you liquefy it, put it

302
00:15:09,190 --> 00:15:11,330
in a very expensive
ship and move it.

303
00:15:11,330 --> 00:15:16,660
So the regional differences in
patterns of energy use-- again,

304
00:15:16,660 --> 00:15:19,270
we'll come back to
this reflect in part

305
00:15:19,270 --> 00:15:23,575
differences in endowments,
and in part transport costs.

306
00:15:26,140 --> 00:15:37,200
OK, David asked about why France
and the US differ in energy,

307
00:15:37,200 --> 00:15:41,580
or European countries differ
from the US in energy use.

308
00:15:41,580 --> 00:15:43,470
Let me ask a broader question.

309
00:15:46,260 --> 00:15:49,050
What factors determine
differences in structure,

310
00:15:49,050 --> 00:15:50,070
not just in level?

311
00:15:50,070 --> 00:15:52,730
But if you try to compare
two countries, what might

312
00:15:52,730 --> 00:15:55,430
you look at to
compare differences

313
00:15:55,430 --> 00:15:58,910
in where they get energy
and how they use it?

314
00:15:58,910 --> 00:16:01,250
Anybody, take a shot.

315
00:16:01,250 --> 00:16:04,400
Erica, you're writing
very, very diligently,

316
00:16:04,400 --> 00:16:05,842
and I didn't say that much.

317
00:16:05,842 --> 00:16:06,800
What would you look at?

318
00:16:10,800 --> 00:16:11,858
AUDIENCE: [INAUDIBLE]?

319
00:16:11,858 --> 00:16:13,650
RICHARD SCHMALENSEE:
To explain differences

320
00:16:13,650 --> 00:16:16,290
between countries in how they
get and how they use energy.

321
00:16:16,290 --> 00:16:18,910
AUDIENCE: Well, one of
[INAUDIBLE] available resources

322
00:16:18,910 --> 00:16:19,410
[INAUDIBLE].

323
00:16:19,410 --> 00:16:20,930
RICHARD SCHMALENSEE:
Available resources, yeah,

324
00:16:20,930 --> 00:16:21,630
that's a gimme.

325
00:16:21,630 --> 00:16:25,443
I hit the thing too quickly.

326
00:16:25,443 --> 00:16:26,610
Can you give me another one?

327
00:16:26,610 --> 00:16:33,897
AUDIENCE: The standard
government, or [INAUDIBLE]..

328
00:16:33,897 --> 00:16:35,730
RICHARD SCHMALENSEE:
So government policies,

329
00:16:35,730 --> 00:16:37,605
which would come out of
the political system.

330
00:16:37,605 --> 00:16:38,430
That's another one.

331
00:16:38,430 --> 00:16:40,230
Anything else?

332
00:16:40,230 --> 00:16:41,317
Mathoura?

333
00:16:41,317 --> 00:16:42,385
AUDIENCE: Very good.

334
00:16:42,385 --> 00:16:44,385
RICHARD SCHMALENSEE: I
hesitated, you'll notice.

335
00:16:44,385 --> 00:16:46,718
AUDIENCE: One thing would be
also, like, transportation.

336
00:16:46,718 --> 00:16:48,984
Like for example, if
the country's landlocked

337
00:16:48,984 --> 00:16:51,504
or if it has access
to waterways,

338
00:16:51,504 --> 00:16:53,728
it has a good system that
allows the transport of oil

339
00:16:53,728 --> 00:16:55,770
in and out of the country
and to various regions.

340
00:16:55,770 --> 00:16:57,300
RICHARD SCHMALENSEE:
That's a good point.

341
00:16:57,300 --> 00:16:58,620
It's not one that's on my list.

342
00:16:58,620 --> 00:17:01,170
It's the geography
of the country.

343
00:17:01,170 --> 00:17:05,910
Can you get various energy
sources like oil by tanker,

344
00:17:05,910 --> 00:17:11,520
or do you have to pipe it
in or take it in by rail?

345
00:17:11,520 --> 00:17:14,220
Another influence
is geography, which

346
00:17:14,220 --> 00:17:16,230
is in available resources.

347
00:17:16,230 --> 00:17:17,810
Do you have water,
do you have wind?

348
00:17:17,810 --> 00:17:18,630
Yeah, Alex.

349
00:17:18,630 --> 00:17:21,300
AUDIENCE: I was going to
say development history.

350
00:17:21,300 --> 00:17:22,064
RICHARD SCHMALENSEE:
Development history?

351
00:17:22,064 --> 00:17:24,522
AUDIENCE: Yeah, so like what's
happened in the past-- like,

352
00:17:24,522 --> 00:17:26,549
how developed
there's this country?

353
00:17:29,820 --> 00:17:32,442
Was there previous
economic history?

354
00:17:32,442 --> 00:17:34,650
RICHARD SCHMALENSEE: So the
previous economic history

355
00:17:34,650 --> 00:17:38,370
would be both, say, level of
income, level of development,

356
00:17:38,370 --> 00:17:40,980
and you're suggesting how
they got there would matter.

357
00:17:40,980 --> 00:17:41,750
Say a little more.

358
00:17:41,750 --> 00:17:43,500
AUDIENCE: Or like how
fast they got there.

359
00:17:43,500 --> 00:17:45,570
RICHARD SCHMALENSEE: How
fast they got there, OK.

360
00:17:45,570 --> 00:17:50,040
Did they develop in the 19th
century and put a lot of money

361
00:17:50,040 --> 00:17:53,730
into 19th century assets
that are still going,

362
00:17:53,730 --> 00:17:56,280
or did they develop
recently and were

363
00:17:56,280 --> 00:17:57,970
able to use new technology?

364
00:17:57,970 --> 00:18:01,050
That's a very nice point.

365
00:18:01,050 --> 00:18:04,200
The Chinese are building
lots of power plants.

366
00:18:04,200 --> 00:18:05,950
Their power plants
are, on average,

367
00:18:05,950 --> 00:18:09,450
more efficient than ours because
they're much younger than ours

368
00:18:09,450 --> 00:18:10,410
on average.

369
00:18:10,410 --> 00:18:12,000
Anybody else?

370
00:18:12,000 --> 00:18:12,690
Yeah.

371
00:18:12,690 --> 00:18:14,683
AUDIENCE: Like,
population density.

372
00:18:14,683 --> 00:18:16,350
RICHARD SCHMALENSEE:
Population density.

373
00:18:16,350 --> 00:18:17,095
James, OK.

374
00:18:17,095 --> 00:18:18,720
AUDIENCE: It would
be easier per person

375
00:18:18,720 --> 00:18:20,678
to heat, like, an apartment
building in Japan--

376
00:18:20,678 --> 00:18:22,012
RICHARD SCHMALENSEE: So density?

377
00:18:22,012 --> 00:18:22,840
Yes.

378
00:18:22,840 --> 00:18:24,840
AUDIENCE: --as opposed
to a bunch of big houses,

379
00:18:24,840 --> 00:18:26,492
but across Texas, per person.

380
00:18:26,492 --> 00:18:28,575
RICHARD SCHMALENSEE: We
always come back to Texas,

381
00:18:28,575 --> 00:18:29,242
don't we really?

382
00:18:29,242 --> 00:18:38,190
[CHUCKLES] Some of that's
just people per square mile

383
00:18:38,190 --> 00:18:42,000
and some of it
reflects policy, how

384
00:18:42,000 --> 00:18:44,790
you react to sprawl when
you're doing land use

385
00:18:44,790 --> 00:18:46,180
policy and other things.

386
00:18:46,180 --> 00:18:48,250
So both things matter.

387
00:18:48,250 --> 00:18:49,500
Exactly right.

388
00:18:49,500 --> 00:18:51,315
Yeah, Ryan.

389
00:18:51,315 --> 00:18:53,493
AUDIENCE: Well the sort
of products that you make

390
00:18:53,493 --> 00:18:54,910
and the products
that you consume.

391
00:18:54,910 --> 00:19:00,750
So like, an agrarian society
might use so much oil,

392
00:19:00,750 --> 00:19:02,940
but somebody who's going
to be manufacturing

393
00:19:02,940 --> 00:19:05,940
of a certain product would
definitely use a lot more.

394
00:19:05,940 --> 00:19:10,240
Also, if you're making a
product for your own country,

395
00:19:10,240 --> 00:19:13,862
then you're going to make a
product for your own country.

396
00:19:13,862 --> 00:19:15,570
So the consumption is
going to be higher,

397
00:19:15,570 --> 00:19:16,840
so you're going to make more.

398
00:19:16,840 --> 00:19:18,900
RICHARD SCHMALENSEE:
So the activity mix.

399
00:19:18,900 --> 00:19:23,460
So you get less
energy if the country

400
00:19:23,460 --> 00:19:26,460
is a financial
center, like England,

401
00:19:26,460 --> 00:19:29,700
than if it's a manufacturing
center, like China.

402
00:19:29,700 --> 00:19:34,800
When we looked at the variation
in energy use across US states,

403
00:19:34,800 --> 00:19:36,840
Wyoming was very high.

404
00:19:36,840 --> 00:19:38,640
And I neglected to
mention last time

405
00:19:38,640 --> 00:19:41,370
that one of the big things
that goes on in Wyoming

406
00:19:41,370 --> 00:19:43,800
is strip mining of coal
in huge quantities,

407
00:19:43,800 --> 00:19:46,830
using very, very
large machinery,

408
00:19:46,830 --> 00:19:49,320
and not a lot of
people doing this.

409
00:19:49,320 --> 00:19:53,730
So that's rather different
from what goes on in Manhattan.

410
00:19:53,730 --> 00:19:54,850
So, yeah.

411
00:19:54,850 --> 00:19:58,320
AUDIENCE: I would say political
and geographical relations

412
00:19:58,320 --> 00:20:00,735
with foreign exporters.

413
00:20:00,735 --> 00:20:03,210
RICHARD SCHMALENSEE: So
how you can get your access

414
00:20:03,210 --> 00:20:06,210
to the world markets, the terms
on which you can access them.

415
00:20:06,210 --> 00:20:08,490
Who is nearby, not
just what do you have.

416
00:20:08,490 --> 00:20:11,940
So China can get coal from
Australia, for instance,

417
00:20:11,940 --> 00:20:15,540
in ways that would be
more complicated if they

418
00:20:15,540 --> 00:20:18,240
were farther away and
Australia didn't speak to them.

419
00:20:18,240 --> 00:20:23,220
And actually, I was talking
to somebody about getting--

420
00:20:23,220 --> 00:20:26,850
the country of Lebanon
evidently built its power plants

421
00:20:26,850 --> 00:20:31,950
assuming it would get
natural gas to run them.

422
00:20:31,950 --> 00:20:34,740
It has to run them on oil
because it can no longer get

423
00:20:34,740 --> 00:20:36,660
natural gas from its neighbors.

424
00:20:36,660 --> 00:20:39,580
And as a result,
efficiency is cut in half.

425
00:20:39,580 --> 00:20:41,970
So these things do matter.

426
00:20:41,970 --> 00:20:42,926
Orson, you were--

427
00:20:42,926 --> 00:20:47,690
AUDIENCE: I think
that, [INAUDIBLE]

428
00:20:47,690 --> 00:20:51,708
if you're going to try and
develop a type of engine that's

429
00:20:51,708 --> 00:20:53,890
going to be sustainable
for your own country,

430
00:20:53,890 --> 00:20:57,960
you want to try to do
something that the technology

431
00:20:57,960 --> 00:21:01,530
in your country is
there, and there's

432
00:21:01,530 --> 00:21:04,710
the people who are
educated to develop

433
00:21:04,710 --> 00:21:06,000
those types of technologies.

434
00:21:06,000 --> 00:21:08,375
RICHARD SCHMALENSEE: So what
you're saying is you could--

435
00:21:08,375 --> 00:21:10,530
we talked about policy
just in general terms.

436
00:21:10,530 --> 00:21:12,750
But you're saying
very specifically,

437
00:21:12,750 --> 00:21:15,960
energy policy could focus
on a particular technology,

438
00:21:15,960 --> 00:21:18,360
develop local expertise
in that technology--

439
00:21:18,360 --> 00:21:23,130
develop a cluster of people
who could then advance it,

440
00:21:23,130 --> 00:21:25,530
and make it more efficient
and more usable and more

441
00:21:25,530 --> 00:21:30,720
friendly for you, and
more economical for you.

442
00:21:30,720 --> 00:21:34,550
I think that's a good list.

443
00:21:34,550 --> 00:21:38,990
And for an economist,
it's a great list.

444
00:21:38,990 --> 00:21:44,520
I would, however, add one
other thing, which is culture--

445
00:21:44,520 --> 00:21:45,620
culture and habits.

446
00:21:45,620 --> 00:21:49,550
I mean, the Germans
recycle relentlessly.

447
00:21:49,550 --> 00:21:50,630
We don't.

448
00:21:50,630 --> 00:21:54,410
I mean, we do, but it's nothing
like recycling in Germany.

449
00:21:54,410 --> 00:21:58,310
It's nothing like concern
for materials and packaging

450
00:21:58,310 --> 00:21:59,270
in Germany.

451
00:21:59,270 --> 00:22:04,250
It's nothing like concern
for efficiency in Japan

452
00:22:04,250 --> 00:22:05,660
or in Germany.

453
00:22:05,660 --> 00:22:09,230
The culture does matter
and does affect--

454
00:22:09,230 --> 00:22:12,110
let's see, I think I've
got everything we said.

455
00:22:12,110 --> 00:22:16,310
Everything that people
decide to do-- the habits.

456
00:22:16,310 --> 00:22:21,890
Americans are persuaded,
we should drive.

457
00:22:21,890 --> 00:22:23,550
Automobiles are important.

458
00:22:23,550 --> 00:22:25,910
Well, that's not God-given.

459
00:22:25,910 --> 00:22:28,500
That's just part of the culture.

460
00:22:28,500 --> 00:22:31,550
So those things do matter.

461
00:22:31,550 --> 00:22:34,040
And one of the
things I mentioned

462
00:22:34,040 --> 00:22:37,460
when I talked about
pre-industrial is

463
00:22:37,460 --> 00:22:41,810
climate in the sense of
how hot and how cold.

464
00:22:41,810 --> 00:22:48,320
This is an old graph on heating
and cooling requirements.

465
00:22:48,320 --> 00:22:50,845
I don't want to go into how
do you measure a degree day,

466
00:22:50,845 --> 00:22:52,220
in part because
I don't remember.

467
00:22:52,220 --> 00:22:57,980
But it's a measure of how
much you need to spend cooling

468
00:22:57,980 --> 00:23:00,020
and how much you need
to spend heating.

469
00:23:00,020 --> 00:23:02,810
Obviously, Russia
spends a lot-- has

470
00:23:02,810 --> 00:23:04,460
to spend a fair
amount of energy.

471
00:23:04,460 --> 00:23:08,220
Heating, Bangladesh,
not so much.

472
00:23:08,220 --> 00:23:13,640
And of course, before the advent
of economical air conditioning,

473
00:23:13,640 --> 00:23:18,050
these countries did very
little to deal with the weather

474
00:23:18,050 --> 00:23:19,310
because they couldn't.

475
00:23:19,310 --> 00:23:22,640
Now that you can,
India in particular,

476
00:23:22,640 --> 00:23:24,920
you do see more
air conditioning,

477
00:23:24,920 --> 00:23:28,320
and it is an important
use of energy.

478
00:23:28,320 --> 00:23:35,520
Another way, just to do some
more of these comparisons,

479
00:23:35,520 --> 00:23:37,070
this is requirements.

480
00:23:37,070 --> 00:23:42,110
This is a little
bit of the influence

481
00:23:42,110 --> 00:23:44,580
of a couple of things--

482
00:23:44,580 --> 00:23:50,170
first, activity mix,
and second, efficiency.

483
00:23:53,030 --> 00:23:54,710
This is energy intensity.

484
00:23:54,710 --> 00:23:58,190
Basically, tons of oil
equivalent per dollar of GDP.

485
00:23:58,190 --> 00:23:59,250
It's an old graph.

486
00:23:59,250 --> 00:24:01,100
It hasn't changed that much.

487
00:24:01,100 --> 00:24:04,160
You'll notice that Kenya
uses a lot of energy

488
00:24:04,160 --> 00:24:06,710
per dollar of GDP.

489
00:24:06,710 --> 00:24:09,380
Is that because Kenya is
doing massive high-energy

490
00:24:09,380 --> 00:24:13,730
manufacturing, or is that
because Kenyan technology tends

491
00:24:13,730 --> 00:24:15,750
to be old and inefficient?

492
00:24:15,750 --> 00:24:20,810
So per dollar of GDP, they end
up wasting a lot of energy.

493
00:24:20,810 --> 00:24:24,200
Japan, you will notice, uses
less per dollar of GDP--

494
00:24:24,200 --> 00:24:27,620
and this may be what
you remember than China.

495
00:24:27,620 --> 00:24:32,620
Less than the US, Japan
has very expensive energy

496
00:24:32,620 --> 00:24:35,290
for a variety of reasons--
very high prices,

497
00:24:35,290 --> 00:24:40,390
very dense cities, very small
residences by our standards,

498
00:24:40,390 --> 00:24:43,030
and per dollar of
GDP, even though it

499
00:24:43,030 --> 00:24:48,210
does a fair amount of
manufacturing a lot less.

500
00:24:48,210 --> 00:24:51,700
The Russian story
is a combination.

501
00:24:51,700 --> 00:24:53,740
Again, this is 2003.

502
00:24:53,740 --> 00:24:56,350
It's a combination
of historically lots

503
00:24:56,350 --> 00:25:01,060
of heavy industry and
cheap energy that led

504
00:25:01,060 --> 00:25:03,560
to inefficient capital stock.

505
00:25:03,560 --> 00:25:06,830
In Soviet times, they built
some of the most amazingly

506
00:25:06,830 --> 00:25:08,810
inefficient stuff
you could imagine

507
00:25:08,810 --> 00:25:12,200
because energy was subsidized.

508
00:25:12,200 --> 00:25:14,570
Anyplace else you worry
about energy costs,

509
00:25:14,570 --> 00:25:16,070
they worried less.

510
00:25:16,070 --> 00:25:18,980
So Germany does a
lot of manufacturing.

511
00:25:18,980 --> 00:25:20,450
It's more efficient than we are.

512
00:25:20,450 --> 00:25:22,670
Its energy is more expensive.

513
00:25:22,670 --> 00:25:28,670
So I will pause there
to see if anything

514
00:25:28,670 --> 00:25:31,910
strikes you or anything
you'd want to comment on.

515
00:25:31,910 --> 00:25:37,650
I mean, you can run these data
we'll do a little bit of this

516
00:25:37,650 --> 00:25:39,630
later.

517
00:25:39,630 --> 00:25:40,950
This is a bizarre graph.

518
00:25:40,950 --> 00:25:42,600
This shows changes over time.

519
00:25:42,600 --> 00:25:44,880
You may wonder why
the Russian Federation

520
00:25:44,880 --> 00:25:47,490
jumps up right after 1990.

521
00:25:47,490 --> 00:25:50,670
That's, of course, because the
Russian Federation didn't exist

522
00:25:50,670 --> 00:25:55,290
before 1990, and whoever did
this graph couldn't quite

523
00:25:55,290 --> 00:25:57,030
do a not present.

524
00:25:57,030 --> 00:26:01,130
But you'll see a
couple of things.

525
00:26:01,130 --> 00:26:02,280
There's the US.

526
00:26:02,280 --> 00:26:04,380
Again, this is energy
per dollar of GDP.

527
00:26:04,380 --> 00:26:07,350
We showed last time a decline.

528
00:26:07,350 --> 00:26:10,960
Look at the decline in China.

529
00:26:10,960 --> 00:26:14,200
Look at the decline in energy
per dollar of GDP in China.

530
00:26:14,200 --> 00:26:16,950
This is just getting
more efficient

531
00:26:16,950 --> 00:26:18,360
because GDP is rising.

532
00:26:18,360 --> 00:26:19,770
They're using new equipment.

533
00:26:19,770 --> 00:26:22,380
This is just an enormous
increase in efficiency.

534
00:26:22,380 --> 00:26:25,440
This is not doing
less manufacturing.

535
00:26:25,440 --> 00:26:27,220
It's just becoming
more efficient.

536
00:26:27,220 --> 00:26:30,870
There's a general-- and again,
Russia, enormously inefficient,

537
00:26:30,870 --> 00:26:35,550
coming down over time as
they begin to modernize

538
00:26:35,550 --> 00:26:37,410
their industrial plant.

539
00:26:37,410 --> 00:26:40,620
The others, there's a
general downward trend

540
00:26:40,620 --> 00:26:43,140
if you've got an eye for it
among most of these developed

541
00:26:43,140 --> 00:26:45,900
countries, but it's slight.

542
00:26:45,900 --> 00:26:49,440
In Russia and China,
they had a lot

543
00:26:49,440 --> 00:26:51,330
of inefficient heavy industry.

544
00:26:51,330 --> 00:26:54,780
The trend is very
pronounced, but China

545
00:26:54,780 --> 00:27:00,110
is a very energy-intensive
operation.

546
00:27:00,110 --> 00:27:06,290
One of the things, of course,
that drives energy structure

547
00:27:06,290 --> 00:27:11,580
is prices faced by
people making decisions.

548
00:27:11,580 --> 00:27:13,800
We didn't mention prices
on the earlier list

549
00:27:13,800 --> 00:27:17,310
because prices don't
drop out of the sky.

550
00:27:17,310 --> 00:27:20,070
They come from,
among other things,

551
00:27:20,070 --> 00:27:21,870
most of the things on the list.

552
00:27:21,870 --> 00:27:28,860
These are gasoline prices, 2006.

553
00:27:28,860 --> 00:27:34,380
The units are
dollars per gallon.

554
00:27:34,380 --> 00:27:36,540
I assume a US gallon.

555
00:27:36,540 --> 00:27:40,320
But you'll notice the big
difference between Germany here

556
00:27:40,320 --> 00:27:46,290
at $6, the US at $2.50 at
that point, China $2.11.

557
00:27:46,290 --> 00:27:49,320
And if the graph
had more countries,

558
00:27:49,320 --> 00:27:54,600
I'm sure we'd see around $1 in
Venezuela, maybe $1 and a half

559
00:27:54,600 --> 00:27:56,220
in Egypt.

560
00:27:56,220 --> 00:27:59,710
Huge range of
prices for gasoline,

561
00:27:59,710 --> 00:28:02,250
which is traded
internationally, which gets

562
00:28:02,250 --> 00:28:05,810
shipped around the
world on large tankers.

563
00:28:05,810 --> 00:28:07,490
That's policy.

564
00:28:07,490 --> 00:28:10,890
That's mostly policy.

565
00:28:10,890 --> 00:28:14,250
The Europeans and the
Koreans don't have oil.

566
00:28:14,250 --> 00:28:15,090
They tax it.

567
00:28:15,090 --> 00:28:18,210
The Japanese tax it.

568
00:28:18,210 --> 00:28:19,710
We tax it, but not so much.

569
00:28:19,710 --> 00:28:22,790
Mexico has a fair amount of oil.

570
00:28:22,790 --> 00:28:25,760
They tax it less, and
other countries actively

571
00:28:25,760 --> 00:28:30,730
subsidize the
consumption of gasoline,

572
00:28:30,730 --> 00:28:38,600
Venezuela being the most
glaring that I'm aware of.

573
00:28:38,600 --> 00:28:40,850
You may ask politically--

574
00:28:40,850 --> 00:28:42,440
and this is the kind
of question we're

575
00:28:42,440 --> 00:28:47,160
going to come to, how come?

576
00:28:47,160 --> 00:28:50,820
How come Germany makes a
political decision to tax

577
00:28:50,820 --> 00:28:54,540
the heck out of
gasoline, and Venezuela,

578
00:28:54,540 --> 00:28:59,610
even before the Chavez regime,
makes a political decision

579
00:28:59,610 --> 00:29:03,930
to spend tax money to
subsidize gasoline?

580
00:29:03,930 --> 00:29:05,760
I'm not going to
answer that question.

581
00:29:05,760 --> 00:29:08,200
But it is the question.

582
00:29:08,200 --> 00:29:12,150
It is a social science of energy
question-- kind of a basic one.

583
00:29:12,150 --> 00:29:15,030
How does that decision get made?

584
00:29:15,030 --> 00:29:17,200
Here's another one.

585
00:29:17,200 --> 00:29:20,070
These are electricity
prices, and you'll

586
00:29:20,070 --> 00:29:24,090
see there are two
bars for each country.

587
00:29:24,090 --> 00:29:27,570
The darker one is
household prices.

588
00:29:27,570 --> 00:29:32,490
And again, there's
an effective policy.

589
00:29:32,490 --> 00:29:36,990
Prices differ between
countries that are nearby.

590
00:29:36,990 --> 00:29:38,430
Let's see if I
can find a couple.

591
00:29:38,430 --> 00:29:42,540
Here's the Czech Republic
and here's Germany.

592
00:29:42,540 --> 00:29:44,730
That difference in
residential prices

593
00:29:44,730 --> 00:29:49,080
presumably reflects
policy, among other things.

594
00:29:49,080 --> 00:29:52,850
The lighter-colored bar
is what industry pays.

595
00:29:52,850 --> 00:29:56,300
Now, industry will always
pay less than households,

596
00:29:56,300 --> 00:29:58,985
typically because it'll take
power at higher voltages,

597
00:29:58,985 --> 00:30:04,010
there are lower costs, lots of
reasons why the light bar is

598
00:30:04,010 --> 00:30:07,070
always below the dark bar.

599
00:30:07,070 --> 00:30:08,900
But look at how
big the differences

600
00:30:08,900 --> 00:30:10,970
are in some countries
and how small in others.

601
00:30:14,010 --> 00:30:18,450
That's just a-- compare
what happens in Norway,

602
00:30:18,450 --> 00:30:21,150
where that's got to
be more than double,

603
00:30:21,150 --> 00:30:23,760
with what we got
here, Italy, where

604
00:30:23,760 --> 00:30:25,110
those prices are quite close.

605
00:30:30,050 --> 00:30:33,830
That is, in many of
these countries--

606
00:30:33,830 --> 00:30:38,900
most of these countries, the
outcome of a political process.

607
00:30:38,900 --> 00:30:43,700
Electricity prices are
importantly political.

608
00:30:43,700 --> 00:30:47,490
Many of these are government-run
electricity companies.

609
00:30:47,490 --> 00:30:52,150
The ones that aren't in
the US are least regulated,

610
00:30:52,150 --> 00:30:54,400
and the outcome of
the regulatory process

611
00:30:54,400 --> 00:30:57,220
is, as we will
discuss, political.

612
00:31:01,320 --> 00:31:12,430
So when we talk about prices,
where do prices come from?

613
00:31:12,430 --> 00:31:16,678
I'll just list a few
here, rather than

614
00:31:16,678 --> 00:31:18,220
spend a while on
this, because I want

615
00:31:18,220 --> 00:31:23,590
to make sure I get through this
massive collection of slides.

616
00:31:23,590 --> 00:31:27,650
Sometimes, prices
reflect cost differences.

617
00:31:27,650 --> 00:31:28,750
We have a lot of coal.

618
00:31:28,750 --> 00:31:30,520
Other people don't.

619
00:31:30,520 --> 00:31:32,320
Electricity is
cheaper in the Midwest

620
00:31:32,320 --> 00:31:35,910
because there's a lot of coal
and coal-fired power plants.

621
00:31:35,910 --> 00:31:40,060
OK, that's local resources.

622
00:31:40,060 --> 00:31:42,230
People use oil to
generate electricity.

623
00:31:42,230 --> 00:31:46,240
The price of electricity varies
with the world price of oil.

624
00:31:46,240 --> 00:31:48,520
Some countries, capital
and labor are cheap.

625
00:31:48,520 --> 00:31:51,280
Some countries are expensive.

626
00:31:51,280 --> 00:31:54,360
We talked about some countries
have efficient technology,

627
00:31:54,360 --> 00:31:55,300
some countries don't.

628
00:31:55,300 --> 00:32:00,360
And it's not just
level of development--

629
00:32:00,360 --> 00:32:03,120
not just level of development.

630
00:32:03,120 --> 00:32:04,700
It is, for instance,
house size--

631
00:32:04,700 --> 00:32:08,660
how large your house is,
how well-insulated are they.

632
00:32:08,660 --> 00:32:10,670
Different rich countries
have different answers

633
00:32:10,670 --> 00:32:12,800
to that question.

634
00:32:12,800 --> 00:32:14,593
Taxes and subsidies,
that's political.

635
00:32:14,593 --> 00:32:16,010
And one thing we
haven't mentioned

636
00:32:16,010 --> 00:32:19,620
is environmental policy.

637
00:32:19,620 --> 00:32:23,250
US, Europe, pretty tight
environmental policies.

638
00:32:23,250 --> 00:32:24,600
Lots to debate.

639
00:32:24,600 --> 00:32:27,420
China, not so much.

640
00:32:27,420 --> 00:32:29,850
Russia, not so much.

641
00:32:29,850 --> 00:32:35,560
Those policies affect the costs
of producing and using energy.

642
00:32:35,560 --> 00:32:39,070
You can think of other
things that affect prices,

643
00:32:39,070 --> 00:32:43,230
but I think those
are the big ones.

644
00:32:48,390 --> 00:32:53,700
You could do this whole
session on electricity.

645
00:32:53,700 --> 00:32:56,130
There are lots of
people in this world who

646
00:32:56,130 --> 00:32:59,640
are off-grid who don't have
any electricity at all.

647
00:32:59,640 --> 00:33:02,540
So we don't have
electricity prices for them.

648
00:33:02,540 --> 00:33:03,650
And this isn't price.

649
00:33:03,650 --> 00:33:06,110
This is consumption per capita.

650
00:33:06,110 --> 00:33:09,140
Notice the world
leader is Iceland.

651
00:33:09,140 --> 00:33:11,690
Does anybody know why?

652
00:33:11,690 --> 00:33:13,970
Anybody know how electricity
is produced in Iceland?

653
00:33:13,970 --> 00:33:14,470
Yeah.

654
00:33:14,470 --> 00:33:16,360
AUDIENCE: Thermoelectric
generation.

655
00:33:16,360 --> 00:33:18,070
RICHARD SCHMALENSEE:
It's geothermal.

656
00:33:18,070 --> 00:33:22,130
They use geothermal heat.

657
00:33:22,130 --> 00:33:25,540
It's really cheap--
really cheap,

658
00:33:25,540 --> 00:33:28,060
and that's a local resource.

659
00:33:28,060 --> 00:33:33,880
Norway-- anybody know what the
dominant method for producing

660
00:33:33,880 --> 00:33:35,120
electricity in Norway is?

661
00:33:35,120 --> 00:33:35,380
Yeah.

662
00:33:35,380 --> 00:33:36,380
AUDIENCE: Hydroelectricity.

663
00:33:36,380 --> 00:33:37,963
RICHARD SCHMALENSEE:
Hydroelectricity.

664
00:33:37,963 --> 00:33:40,360
Norway has a lot of hydropower.

665
00:33:40,360 --> 00:33:44,950
And again, if you're
lucky in geography,

666
00:33:44,950 --> 00:33:48,470
you can have cheap
electricity from hydropower.

667
00:33:48,470 --> 00:33:50,470
Are you willing to
build a lot of dams?

668
00:33:50,470 --> 00:33:52,300
Norwegians are also
environmentalists,

669
00:33:52,300 --> 00:33:55,390
so they do worry about the dams.

670
00:33:55,390 --> 00:33:58,180
And Qatar is third.

671
00:33:58,180 --> 00:34:01,600
What do you think they
do, or what do they have?

672
00:34:01,600 --> 00:34:03,620
It's a tiny little country
in the Persian Gulf.

673
00:34:03,620 --> 00:34:04,120
Yeah.

674
00:34:04,120 --> 00:34:04,510
AUDIENCE: Oil.

675
00:34:04,510 --> 00:34:05,260
RICHARD SCHMALENSEE: What?

676
00:34:05,260 --> 00:34:06,032
AUDIENCE: Oil?

677
00:34:06,032 --> 00:34:07,990
RICHARD SCHMALENSEE:
Well, oil is a good guess.

678
00:34:07,990 --> 00:34:08,679
It's close.

679
00:34:08,679 --> 00:34:10,659
It's natural gas.

680
00:34:10,659 --> 00:34:12,850
They have literally
boatloads of natural gas.

681
00:34:12,850 --> 00:34:15,190
They liquefy it and
export it in quantity,

682
00:34:15,190 --> 00:34:18,402
and they use it locally
to generate electricity.

683
00:34:18,402 --> 00:34:20,110
Back in the bad old
days, they would just

684
00:34:20,110 --> 00:34:22,060
burn it to get rid of it.

685
00:34:22,060 --> 00:34:25,420
Now they spend a lot of money
freezing it, liquefying it,

686
00:34:25,420 --> 00:34:26,500
and selling it.

687
00:34:29,179 --> 00:34:31,270
But look at the world number.

688
00:34:31,270 --> 00:34:34,540
Compare how much electricity we
consume with the world average.

689
00:34:34,540 --> 00:34:37,090
We're not among the leaders.

690
00:34:37,090 --> 00:34:40,179
We're pretty high, but we're
not the top two or three.

691
00:34:42,770 --> 00:34:47,070
But the world average,
my heavens, my heavens,

692
00:34:47,070 --> 00:34:48,929
less than a quarter--

693
00:34:48,929 --> 00:34:50,820
less than a quarter.

694
00:34:50,820 --> 00:34:55,440
OK, what I want to do
for a little while--

695
00:34:55,440 --> 00:34:59,070
you may remember this
picture from last time.

696
00:34:59,070 --> 00:35:03,090
This is one of those
great visual displays

697
00:35:03,090 --> 00:35:06,450
of quantitative information
from Lawrence Livermore.

698
00:35:06,450 --> 00:35:09,450
Lawrence Livermore, if
you go on their website,

699
00:35:09,450 --> 00:35:14,250
you can find these for 2007,
which is why I have 2007,

700
00:35:14,250 --> 00:35:16,660
for something like
100 countries.

701
00:35:16,660 --> 00:35:20,130
So if you're curious about what
energy looks like in country X,

702
00:35:20,130 --> 00:35:23,530
you can find a bunch of them.

703
00:35:23,530 --> 00:35:27,360
And I'm going to show
you some variation.

704
00:35:27,360 --> 00:35:30,600
I do want to make a couple
of points about the US,

705
00:35:30,600 --> 00:35:33,690
because it'll relate
to others we will see.

706
00:35:37,080 --> 00:35:40,680
Notice most of our
natural gas is domestic.

707
00:35:40,680 --> 00:35:42,570
Most of our coal is domestic.

708
00:35:42,570 --> 00:35:45,450
In fact, our exports for coal in
that year exceeded our imports.

709
00:35:48,330 --> 00:35:49,500
We import biomass.

710
00:35:49,500 --> 00:35:57,120
I have no idea what that is, but
our worry about imports is oil.

711
00:35:57,120 --> 00:36:02,460
You'll notice for electricity,
we do a lot of coal

712
00:36:02,460 --> 00:36:06,680
and nuclear and gas,
a little bit of wind

713
00:36:06,680 --> 00:36:07,850
and a little bit of solar.

714
00:36:07,850 --> 00:36:11,990
Now, you may wonder what this
little yellow line, which is

715
00:36:11,990 --> 00:36:15,380
solar going into residential.

716
00:36:15,380 --> 00:36:18,100
What is that?

717
00:36:18,100 --> 00:36:19,970
Solar energy used
in the household.

718
00:36:19,970 --> 00:36:20,715
Yeah.

719
00:36:20,715 --> 00:36:24,730
AUDIENCE: Is that where people
have their own solar panels

720
00:36:24,730 --> 00:36:28,765
and use that to keep their
homes, pools, et cetera,

721
00:36:28,765 --> 00:36:30,140
potentially
[INAUDIBLE] the grid?

722
00:36:30,140 --> 00:36:33,520
RICHARD SCHMALENSEE:
Well, probably in 2007,

723
00:36:33,520 --> 00:36:35,680
it's a little bit
too big for that.

724
00:36:35,680 --> 00:36:37,930
But you're right about the
rooftop, at least in part--

725
00:36:40,540 --> 00:36:42,070
solar hot water heaters.

726
00:36:42,070 --> 00:36:47,800
And we actually lead the
world in use of solar energy

727
00:36:47,800 --> 00:36:52,300
because we do a lot of swimming
pools heated with solar energy.

728
00:36:52,300 --> 00:36:54,040
If you take that out,
we're not so good.

729
00:36:54,040 --> 00:37:00,910
But a lot of this is solar
heating of swimming pools--

730
00:37:00,910 --> 00:37:03,490
a critical thing.

731
00:37:03,490 --> 00:37:05,840
OK, so let me do a few.

732
00:37:05,840 --> 00:37:09,070
And again, raise
questions if weird things

733
00:37:09,070 --> 00:37:12,490
strike you or don't strike you.

734
00:37:12,490 --> 00:37:13,465
This is France.

735
00:37:18,250 --> 00:37:21,700
What do you see in the
electricity side for France?

736
00:37:21,700 --> 00:37:22,200
Yeah.

737
00:37:22,200 --> 00:37:23,240
AUDIENCE: A lot of nuclear.

738
00:37:23,240 --> 00:37:24,865
RICHARD SCHMALENSEE:
A lot of nuclear--

739
00:37:24,865 --> 00:37:27,740
a lot of nuclear.

740
00:37:27,740 --> 00:37:31,550
France made a
strategic commitment

741
00:37:31,550 --> 00:37:35,520
to nuclear power years ago.

742
00:37:35,520 --> 00:37:37,740
Those plants are very expensive.

743
00:37:37,740 --> 00:37:40,290
They're going to
last a long time.

744
00:37:40,290 --> 00:37:42,210
There they are.

745
00:37:42,210 --> 00:37:45,352
You don't turn them off.

746
00:37:45,352 --> 00:37:46,810
You don't turn them
off right away.

747
00:37:49,960 --> 00:37:52,030
Almost all the coal
they use is imported.

748
00:37:52,030 --> 00:37:54,130
Almost all the natural
gas is imported.

749
00:37:54,130 --> 00:37:57,910
Almost all the oil is imported.

750
00:37:57,910 --> 00:38:00,610
Nuclear has energy
security benefits

751
00:38:00,610 --> 00:38:03,850
for France, which is
an important reason

752
00:38:03,850 --> 00:38:06,320
for that decision.

753
00:38:06,320 --> 00:38:09,970
It also makes France a
leader in nuclear technology.

754
00:38:09,970 --> 00:38:13,720
To come back to Everson's point
about building an industry

755
00:38:13,720 --> 00:38:16,150
and building a critical
mass, it's had that effect.

756
00:38:16,150 --> 00:38:20,700
France exports reactors,
exports designs--

757
00:38:20,700 --> 00:38:24,750
a decision, but also a
decision based on the fact

758
00:38:24,750 --> 00:38:29,440
that the natural endowment of
these fossil fuels is terrible.

759
00:38:29,440 --> 00:38:32,590
You can drill a long time and
you're not going to find oil.

760
00:38:32,590 --> 00:38:33,970
They apparently have some.

761
00:38:33,970 --> 00:38:38,920
I have no idea where it
is, but not a lot of it.

762
00:38:38,920 --> 00:38:42,920
OK, let's look at
another country.

763
00:38:42,920 --> 00:38:43,565
This is Norway.

764
00:38:46,600 --> 00:38:49,640
And as we saw up here, the big--

765
00:38:49,640 --> 00:38:52,870
unfortunately,
different countries

766
00:38:52,870 --> 00:38:55,300
have different sized
bars on everything.

767
00:38:55,300 --> 00:38:58,870
But you'll see the big
thing in electricity

768
00:38:58,870 --> 00:39:02,110
is hydro, as we
discussed earlier.

769
00:39:02,110 --> 00:39:03,610
Norway is lucky.

770
00:39:03,610 --> 00:39:06,490
They have a lot of natural
gas, most of which they export.

771
00:39:06,490 --> 00:39:10,500
They have a lot of oil,
most of which they export.

772
00:39:10,500 --> 00:39:13,200
That's a country with lots
of natural endowments.

773
00:39:13,200 --> 00:39:16,500
They use some of
the natural gas.

774
00:39:16,500 --> 00:39:20,670
They use some of the oil
to generate electricity.

775
00:39:20,670 --> 00:39:24,050
And apparently, they
even burn some wood.

776
00:39:24,050 --> 00:39:27,680
But mostly, they
rely on hydropower,

777
00:39:27,680 --> 00:39:30,530
and they export the
natural gas and the oil.

778
00:39:30,530 --> 00:39:31,690
Yeah.

779
00:39:31,690 --> 00:39:35,625
AUDIENCE: So Norway has really
high electricity consumption.

780
00:39:35,625 --> 00:39:38,035
And he explained that the
reason's mostly due to hydro?

781
00:39:38,035 --> 00:39:39,410
RICHARD SCHMALENSEE:
Cheap hydro.

782
00:39:39,410 --> 00:39:39,910
Yes.

783
00:39:39,910 --> 00:39:44,750
AUDIENCE: Right, but Brazil also
has a cost of 70% to 80% hydro.

784
00:39:44,750 --> 00:39:48,110
But we looked at the
electricity consumption graph,

785
00:39:48,110 --> 00:39:49,345
it was not even listed.

786
00:39:49,345 --> 00:39:51,770
Is there a reason for that?

787
00:39:51,770 --> 00:39:54,020
RICHARD SCHMALENSEE: I don't
know electricity prices

788
00:39:54,020 --> 00:39:54,930
in Brazil.

789
00:39:54,930 --> 00:39:58,030
I did look at this
thing for Brazil.

790
00:39:58,030 --> 00:40:01,013
Brazil is running
about 30% hydro

791
00:40:01,013 --> 00:40:02,180
maybe-- something like that.

792
00:40:02,180 --> 00:40:04,160
It's pretty high.

793
00:40:04,160 --> 00:40:07,790
But they may also tax it.

794
00:40:07,790 --> 00:40:11,600
In a country like Brazil,
where a lot of poor people

795
00:40:11,600 --> 00:40:14,390
don't have electricity,
electricity becomes--

796
00:40:14,390 --> 00:40:17,480
as it was in the United
States, say, through the '20s,

797
00:40:17,480 --> 00:40:21,860
it becomes predominantly
consumed by wealthier people.

798
00:40:21,860 --> 00:40:23,660
So it becomes something
you might want

799
00:40:23,660 --> 00:40:25,070
to tax for political reasons.

800
00:40:25,070 --> 00:40:25,820
I'm just guessing.

801
00:40:25,820 --> 00:40:31,640
I don't know that, and
I don't know the cost

802
00:40:31,640 --> 00:40:34,430
of Brazil's fossil fuel plants.

803
00:40:34,430 --> 00:40:36,770
They don't have
coal, so I assume

804
00:40:36,770 --> 00:40:38,300
the fossil is mostly oil.

805
00:40:38,300 --> 00:40:40,055
AUDIENCE: [INAUDIBLE].

806
00:40:40,055 --> 00:40:43,640
RICHARD SCHMALENSEE: And
oil is not that cheap.

807
00:40:43,640 --> 00:40:47,120
Oil is not that cheap to
generate electricity with.

808
00:40:47,120 --> 00:40:48,210
Yeah.

809
00:40:48,210 --> 00:40:50,060
AUDIENCE: For the
right-hand side,

810
00:40:50,060 --> 00:40:55,797
for the uses of the energy, what
does the non-energy box mean?

811
00:40:55,797 --> 00:40:57,380
RICHARD SCHMALENSEE:
Chemicals mostly.

812
00:40:57,380 --> 00:40:58,302
AUDIENCE: OK.

813
00:40:58,302 --> 00:40:59,510
RICHARD SCHMALENSEE: Use oil.

814
00:40:59,510 --> 00:41:02,957
I mean, in the later US graph
that I showed last time,

815
00:41:02,957 --> 00:41:03,665
it didn't appear.

816
00:41:06,830 --> 00:41:09,410
Lawrence Livermore kept
it until quite recently.

817
00:41:09,410 --> 00:41:12,650
And I read that-- since
the only thing that

818
00:41:12,650 --> 00:41:15,500
ever goes in there is
oil and natural gas,

819
00:41:15,500 --> 00:41:17,302
I view that as the
chemical industry.

820
00:41:17,302 --> 00:41:18,260
They're not burning it.

821
00:41:18,260 --> 00:41:20,120
They're using it
for petrochemicals.

822
00:41:20,120 --> 00:41:20,620
Yeah.

823
00:41:20,620 --> 00:41:22,470
AUDIENCE: Why does
it [INAUDIBLE]??

824
00:41:26,700 --> 00:41:29,010
RICHARD SCHMALENSEE: Different
parts of the country.

825
00:41:29,010 --> 00:41:32,220
Maybe it's that they've got--

826
00:41:32,220 --> 00:41:36,220
I would guess this
is refined product.

827
00:41:36,220 --> 00:41:40,350
So maybe there is a
refinery in Sweden, say,

828
00:41:40,350 --> 00:41:43,560
that happens to be
close to a major source,

829
00:41:43,560 --> 00:41:47,220
so it's just easier to
import some from Sweden.

830
00:41:47,220 --> 00:41:52,360
Normally, this happens, and
you see it a lot of places--

831
00:41:52,360 --> 00:41:54,073
well, you see it
here in electricity.

832
00:41:54,073 --> 00:41:55,615
For instance, they
import electricity

833
00:41:55,615 --> 00:41:57,810
and they export electricity.

834
00:41:57,810 --> 00:41:59,010
That's geography.

835
00:41:59,010 --> 00:42:02,340
You've got a line going here
where demand exceeds supply.

836
00:42:02,340 --> 00:42:05,130
You got a line over here
where supply exceeds demand,

837
00:42:05,130 --> 00:42:06,240
and we do too.

838
00:42:06,240 --> 00:42:08,670
You import one energy
export at the other.

839
00:42:08,670 --> 00:42:13,710
I would assume that
this is refined product

840
00:42:13,710 --> 00:42:14,820
that they're getting.

841
00:42:14,820 --> 00:42:17,190
There happens to be a
convenient refinery that's

842
00:42:17,190 --> 00:42:22,560
willing to sell, and they're
exporting mostly crude.

843
00:42:22,560 --> 00:42:25,470
But normally, that's
what this will be.

844
00:42:25,470 --> 00:42:26,140
Yeah.

845
00:42:26,140 --> 00:42:29,580
AUDIENCE: Do most countries have
the same breakdown of energy

846
00:42:29,580 --> 00:42:31,380
services in rejected energy?

847
00:42:31,380 --> 00:42:33,045
Are there some type
of [INAUDIBLE]??

848
00:42:33,045 --> 00:42:34,878
RICHARD SCHMALENSEE: I
haven't looked at it.

849
00:42:34,878 --> 00:42:38,470
I assume they're similar,
because it has to do with--

850
00:42:38,470 --> 00:42:40,620
I mean, it's inefficiency.

851
00:42:40,620 --> 00:42:42,690
So you're going to
lose a bunch up here,

852
00:42:42,690 --> 00:42:45,840
depending on how efficient
your generation plant is.

853
00:42:45,840 --> 00:42:48,480
And how you do the efficiency
for hydro and nuclear

854
00:42:48,480 --> 00:42:51,630
is just a tricky
definitional issue.

855
00:42:54,180 --> 00:42:55,980
Everybody's going
to have more reject.

856
00:42:55,980 --> 00:42:58,860
I thought you'd have
more rejected than used.

857
00:42:58,860 --> 00:43:00,720
I think that's what
we have, isn't it?

858
00:43:00,720 --> 00:43:03,300
Let's take a look.

859
00:43:03,300 --> 00:43:07,490
There's France with
more rejected than used.

860
00:43:07,490 --> 00:43:10,170
There's the US is more
rejected than used.

861
00:43:10,170 --> 00:43:11,640
And there are the Norwegians.

862
00:43:11,640 --> 00:43:13,440
Aside from the
size of the blocs,

863
00:43:13,440 --> 00:43:16,740
the numbers say more
used than rejected.

864
00:43:16,740 --> 00:43:18,670
Got me.

865
00:43:18,670 --> 00:43:19,230
You got me.

866
00:43:19,230 --> 00:43:19,590
Yeah.

867
00:43:19,590 --> 00:43:21,090
AUDIENCE: Maybe
it's due to the fact

868
00:43:21,090 --> 00:43:23,880
that, like, hydroelectricity
is a lot more efficient, as

869
00:43:23,880 --> 00:43:27,960
opposed to, like, nuclear
coal burns off a lot,

870
00:43:27,960 --> 00:43:29,835
and a lot of heat is
lost or not transferred.

871
00:43:29,835 --> 00:43:32,610
RICHARD SCHMALENSEE: That may
just be how you define it.

872
00:43:35,280 --> 00:43:38,490
How do you define the
efficiency of a hydro plant?

873
00:43:38,490 --> 00:43:42,570
I don't know what they do
in terms of the efficiency.

874
00:43:42,570 --> 00:43:44,190
I'd have to look.

875
00:43:44,190 --> 00:43:48,660
In transportation, you've
got more waste than used.

876
00:43:48,660 --> 00:43:52,560
In industrial, the reverse.

877
00:43:52,560 --> 00:44:01,440
In household, in commercial,
yeah, if I read--

878
00:44:01,440 --> 00:44:03,510
I can't tell how much
is going down here.

879
00:44:03,510 --> 00:44:06,930
I can't sort it out by sector.

880
00:44:06,930 --> 00:44:08,340
That's a departure.

881
00:44:08,340 --> 00:44:10,930
Most countries have
more rejected than used.

882
00:44:10,930 --> 00:44:12,792
It might be the hydro.

883
00:44:12,792 --> 00:44:14,130
Yeah, Matthew.

884
00:44:14,130 --> 00:44:15,860
AUDIENCE: What would
cause a country that

885
00:44:15,860 --> 00:44:20,373
has such large domestic amounts
of natural gas and petroleum

886
00:44:20,373 --> 00:44:22,235
to develop hydro like they do?

887
00:44:22,235 --> 00:44:25,220
RICHARD SCHMALENSEE: They
developed the hydro earlier.

888
00:44:25,220 --> 00:44:29,920
So the hydro is earlier, and
then they found the natural gas

889
00:44:29,920 --> 00:44:33,940
and petroleum offshore later.

890
00:44:33,940 --> 00:44:37,000
And they worked very
hard at learning

891
00:44:37,000 --> 00:44:39,250
how to manage hydro systems.

892
00:44:39,250 --> 00:44:43,120
It's actually a little tricky
because it doesn't always rain

893
00:44:43,120 --> 00:44:46,360
and the snow doesn't always
melt when you want it to.

894
00:44:46,360 --> 00:44:50,620
And they also worked very
hard to develop hydro

895
00:44:50,620 --> 00:44:54,460
without wrecking
the environment.

896
00:44:54,460 --> 00:44:56,350
So once you've got
that capability

897
00:44:56,350 --> 00:44:59,860
and you're good at it, and
you've got the geography

898
00:44:59,860 --> 00:45:02,470
and you discover you've got
a lot of natural gas and oil

899
00:45:02,470 --> 00:45:05,290
offshore, it may make
more sense to export

900
00:45:05,290 --> 00:45:07,670
that than to burn it locally.

901
00:45:07,670 --> 00:45:08,170
Yeah.

902
00:45:08,170 --> 00:45:10,900
AUDIENCE: Could you please give
examples of energy services

903
00:45:10,900 --> 00:45:13,992
which is [INAUDIBLE]?

904
00:45:13,992 --> 00:45:15,700
RICHARD SCHMALENSEE:
Oh, energy services?

905
00:45:18,310 --> 00:45:24,740
Driving, running factories.

906
00:45:24,740 --> 00:45:30,020
And this is mostly
heating, ventilating,

907
00:45:30,020 --> 00:45:33,790
and air conditioning, but
electric ranges, refrigerators,

908
00:45:33,790 --> 00:45:36,790
running your computer,
et cetera, et cetera,

909
00:45:36,790 --> 00:45:40,600
all the things you use it for.

910
00:45:40,600 --> 00:45:41,410
This is puzzling.

911
00:45:41,410 --> 00:45:44,260
AUDIENCE: But doesn't it come
from the electricity and heat?

912
00:45:44,260 --> 00:45:47,716
I would [INAUDIBLE] it on
the left side of that box.

913
00:45:47,716 --> 00:45:49,510
RICHARD SCHMALENSEE:
Well, your computer

914
00:45:49,510 --> 00:45:53,110
doesn't use 100% of the
energy and the electricity

915
00:45:53,110 --> 00:45:54,310
for useful work.

916
00:45:54,310 --> 00:45:56,290
There's waste heat.

917
00:45:56,290 --> 00:45:59,290
Your refrigerator wastes--
there's waste heat that

918
00:45:59,290 --> 00:46:00,415
comes off the refrigerator.

919
00:46:00,415 --> 00:46:01,832
AUDIENCE: There's
more [INAUDIBLE]

920
00:46:01,832 --> 00:46:03,360
services than
electricity and heat.

921
00:46:03,360 --> 00:46:04,955
There's 640 versus--

922
00:46:04,955 --> 00:46:08,930
RICHARD SCHMALENSEE: Well,
here you're running machinery.

923
00:46:08,930 --> 00:46:10,760
I mean-- oh, I see
what you're saying.

924
00:46:10,760 --> 00:46:13,670
I mean, here you're running
a car from gasoline.

925
00:46:13,670 --> 00:46:18,570
Here, you are running
machinery of various kinds.

926
00:46:18,570 --> 00:46:19,200
I don't know.

927
00:46:19,200 --> 00:46:21,680
I'd have to list it.

928
00:46:21,680 --> 00:46:29,307
And you're also burning
oil directly to heat.

929
00:46:29,307 --> 00:46:31,640
You're burning oil directly
to heat in all these places.

930
00:46:37,300 --> 00:46:39,070
We'll go through
some other examples,

931
00:46:39,070 --> 00:46:41,650
but I'm not sure
what you're missing.

932
00:46:41,650 --> 00:46:46,240
I guess the thing to think of
is what do you use energy for.

933
00:46:46,240 --> 00:46:49,300
I used it for my electric
toothbrush this morning.

934
00:46:49,300 --> 00:46:50,410
That's an energy service.

935
00:46:53,560 --> 00:46:56,445
Energy powered that
little machine.

936
00:46:56,445 --> 00:46:57,820
That's something
that energy did.

937
00:46:57,820 --> 00:47:00,760
I mean, you don't
want electricity.

938
00:47:00,760 --> 00:47:04,850
You want things that
electricity runs.

939
00:47:04,850 --> 00:47:07,130
I care about keeping
the food cold.

940
00:47:07,130 --> 00:47:09,890
I get no utility from
the electricity that

941
00:47:09,890 --> 00:47:12,140
runs through the refrigerator.

942
00:47:12,140 --> 00:47:15,550
The service is
keeping the food cold.

943
00:47:15,550 --> 00:47:18,400
The service is
the refrigeration.

944
00:47:18,400 --> 00:47:20,470
The energy input is
the energy input.

945
00:47:20,470 --> 00:47:22,840
That's produced by
energy and capital.

946
00:47:22,840 --> 00:47:27,470
Capital in the refrigerator
energy comes into it.

947
00:47:27,470 --> 00:47:31,572
Now, we'll come back.

948
00:47:31,572 --> 00:47:32,780
What else have I got for you?

949
00:47:32,780 --> 00:47:33,613
Oh, there's Germany.

950
00:47:36,350 --> 00:47:39,860
Germany also uses a fair
amount of nuclear, which it

951
00:47:39,860 --> 00:47:41,210
says it's going to shut down.

952
00:47:43,960 --> 00:47:46,430
And it has shut
down a fair amount.

953
00:47:46,430 --> 00:47:49,174
It also uses coal.

954
00:47:49,174 --> 00:47:51,700
It also buys electricity,
and will probably

955
00:47:51,700 --> 00:47:54,400
buy more electricity
from France if it shuts

956
00:47:54,400 --> 00:47:58,000
those nuclear plants down fast.

957
00:47:58,000 --> 00:48:01,990
Germany, again, has coal,
but doesn't really--

958
00:48:01,990 --> 00:48:05,860
it does have coal, but it
really doesn't have natural gas

959
00:48:05,860 --> 00:48:09,520
and it doesn't have
any oil to speak of.

960
00:48:09,520 --> 00:48:12,040
There again, you'll see
it's importing a ton of oil

961
00:48:12,040 --> 00:48:13,450
and exporting some.

962
00:48:13,450 --> 00:48:17,020
And this has got to
be refined product,

963
00:48:17,020 --> 00:48:19,690
and less stuff just gets shipped
through on a tanker somehow.

964
00:48:22,700 --> 00:48:29,310
But actually,
that's interesting.

965
00:48:29,310 --> 00:48:33,150
This has got to be heat.

966
00:48:33,150 --> 00:48:35,370
You'll notice it uses
this particular color

967
00:48:35,370 --> 00:48:36,480
for electricity.

968
00:48:36,480 --> 00:48:40,590
And then coming out of
here is this red band.

969
00:48:40,590 --> 00:48:45,360
In a lot of countries,
much more than in the US,

970
00:48:45,360 --> 00:48:49,860
power plants provide
heat to nearby buildings.

971
00:48:49,860 --> 00:48:52,880
So it's called district heating
or combined heat and power.

972
00:48:52,880 --> 00:48:58,250
And that has to be what this red
is, because it's not nuclear.

973
00:48:58,250 --> 00:49:01,475
This has got to be heat
going to nearby industry.

974
00:49:04,650 --> 00:49:07,670
Anything else weird here?

975
00:49:07,670 --> 00:49:12,630
Not much, except you'll see
solar going into commercial.

976
00:49:12,630 --> 00:49:17,670
Germany has big solar
subsidies, and that may actually

977
00:49:17,670 --> 00:49:21,570
be solar panels on the roofs
of warehouses and stores.

978
00:49:21,570 --> 00:49:26,920
It may be big enough to
register, even in 2007.

979
00:49:26,920 --> 00:49:28,950
Anything else here?

980
00:49:28,950 --> 00:49:32,670
Oh, and the natural gas export--
most of Germany's natural gas

981
00:49:32,670 --> 00:49:35,190
comes from Russia.

982
00:49:35,190 --> 00:49:38,710
So if you want to worry
about energy security,

983
00:49:38,710 --> 00:49:41,470
worry about energy security.

984
00:49:41,470 --> 00:49:44,170
And that's just transshipment
of some Russian gas.

985
00:49:46,890 --> 00:49:48,810
This is Japan.

986
00:49:48,810 --> 00:49:50,880
Now if you want to worry
about energy security,

987
00:49:50,880 --> 00:49:54,360
look over on the left.

988
00:49:54,360 --> 00:49:56,600
Everything is imported.

989
00:49:56,600 --> 00:50:00,780
Nuclear power's important.

990
00:50:00,780 --> 00:50:03,018
Nuclear plants are being
shut down, or are shut down.

991
00:50:03,018 --> 00:50:05,310
I'm not sure whether there's
anything currently running

992
00:50:05,310 --> 00:50:05,893
at the moment.

993
00:50:08,310 --> 00:50:12,510
You wonder why Japan
is energy efficient.

994
00:50:12,510 --> 00:50:14,880
Suppose you're having
a political debate

995
00:50:14,880 --> 00:50:17,790
about energy policy, and you
look at the left-hand side

996
00:50:17,790 --> 00:50:19,520
of this graph.

997
00:50:19,520 --> 00:50:22,210
And you worry about
energy security,

998
00:50:22,210 --> 00:50:25,837
and you say, well, we
can build nuclear plants

999
00:50:25,837 --> 00:50:28,420
and develop an efficient nuclear
industry, which they've done.

1000
00:50:31,420 --> 00:50:36,210
Not clear what else you can do
but be efficient in energy use.

1001
00:50:36,210 --> 00:50:41,700
Small houses, taxes on energy
to hold down consumption,

1002
00:50:41,700 --> 00:50:43,480
and so on and so forth.

1003
00:50:43,480 --> 00:50:48,070
So to some extent, the natural
endowment and other things

1004
00:50:48,070 --> 00:50:54,280
will drive the local policy,
will drive the energy mix.

1005
00:50:54,280 --> 00:50:57,880
So let's leave the
developed world.

1006
00:50:57,880 --> 00:51:02,320
There is a middle
income neighbor, Mexico.

1007
00:51:02,320 --> 00:51:04,740
Mexico has oil.

1008
00:51:04,740 --> 00:51:08,490
Mexico is a significant
oil exporter.

1009
00:51:08,490 --> 00:51:11,710
Mexico's oil production
is declining.

1010
00:51:11,710 --> 00:51:18,150
So Mexico has a
long-term problem,

1011
00:51:18,150 --> 00:51:21,780
but it heavily uses its
oil and its natural gas

1012
00:51:21,780 --> 00:51:23,475
to generate electricity.

1013
00:51:26,730 --> 00:51:29,020
What else do I want to say?

1014
00:51:29,020 --> 00:51:32,760
Oh, all of these
have electricity

1015
00:51:32,760 --> 00:51:36,000
going into transportation.

1016
00:51:36,000 --> 00:51:41,340
And that's not electric
cars in Mexico in 2007.

1017
00:51:41,340 --> 00:51:43,005
That's railroads
and mass transit.

1018
00:51:45,760 --> 00:51:52,380
So what else do
we see in Mexico?

1019
00:51:52,380 --> 00:51:56,280
Not too much.

1020
00:51:56,280 --> 00:51:57,670
Anything grab you?

1021
00:51:57,670 --> 00:51:58,912
Yeah.

1022
00:51:58,912 --> 00:52:00,870
AUDIENCE: I noticed that
all their solar energy

1023
00:52:00,870 --> 00:52:03,110
is going directly to
commercial, and that [INAUDIBLE]

1024
00:52:03,110 --> 00:52:04,080
use electricity.

1025
00:52:04,080 --> 00:52:06,480
What do you think that
they might be using it for,

1026
00:52:06,480 --> 00:52:08,160
on the commercial level?

1027
00:52:08,160 --> 00:52:11,760
RICHARD SCHMALENSEE: Hot
water would be my guess.

1028
00:52:11,760 --> 00:52:16,680
Solar hot water is a pretty
mature, pretty widespread

1029
00:52:16,680 --> 00:52:17,190
technology.

1030
00:52:17,190 --> 00:52:18,930
I'm surprised we
don't see more of it

1031
00:52:18,930 --> 00:52:22,410
residential, because that's
a pretty good climate for it.

1032
00:52:22,410 --> 00:52:25,200
And electricity is not that
cheap or reliable in Mexico.

1033
00:52:25,200 --> 00:52:25,890
Yeah.

1034
00:52:25,890 --> 00:52:29,078
AUDIENCE: [INAUDIBLE] had
my hand raised before that.

1035
00:52:29,078 --> 00:52:31,170
I'm just going to ask
something more general.

1036
00:52:31,170 --> 00:52:32,253
RICHARD SCHMALENSEE: Sure.

1037
00:52:32,253 --> 00:52:34,470
AUDIENCE: I noticed that
for Germany, [INAUDIBLE]

1038
00:52:34,470 --> 00:52:36,470
in Japan [INAUDIBLE] nuclear.

1039
00:52:36,470 --> 00:52:39,850
I just though, given
their endowments,

1040
00:52:39,850 --> 00:52:43,890
that especially for Germany,
making such a hard decision

1041
00:52:43,890 --> 00:52:48,830
about closing all their
nuclear, I just didn't know--

1042
00:52:48,830 --> 00:52:50,730
a general comment
about countries.

1043
00:52:50,730 --> 00:52:55,980
Why would you just go ahead
and purchase a huge blow

1044
00:52:55,980 --> 00:52:56,850
to yourself?

1045
00:52:56,850 --> 00:52:59,916
Because you don't have
so many other resources?

1046
00:52:59,916 --> 00:53:04,390
[INAUDIBLE] so maybe
they're scared,

1047
00:53:04,390 --> 00:53:07,500
so they want to veer
away from the nuclear.

1048
00:53:07,500 --> 00:53:10,200
But given their situation,
as you said other,

1049
00:53:10,200 --> 00:53:13,620
than being extra
efficient, you may be

1050
00:53:13,620 --> 00:53:16,720
forced to go down some roads.

1051
00:53:16,720 --> 00:53:21,150
And I'm just curious to see
why any political process,

1052
00:53:21,150 --> 00:53:23,728
or lobbying, or whatever could
have happened to lead you

1053
00:53:23,728 --> 00:53:26,210
down the quite tricky
road, especially

1054
00:53:26,210 --> 00:53:30,420
with nuclear generators shutting
down on a very small fraction,

1055
00:53:30,420 --> 00:53:31,420
if I remember correctly.

1056
00:53:31,420 --> 00:53:33,380
And they have to
replace that with,

1057
00:53:33,380 --> 00:53:35,310
what, the natural gas in Russia.

1058
00:53:35,310 --> 00:53:37,010
[INAUDIBLE] Russia [INAUDIBLE].

1059
00:53:37,010 --> 00:53:40,080
RICHARD SCHMALENSEE: It's caused
a lot of people outside Germany

1060
00:53:40,080 --> 00:53:42,480
to scratch their heads.

1061
00:53:42,480 --> 00:53:47,160
But you got to remember, Germany
has a very, very powerful Green

1062
00:53:47,160 --> 00:53:48,390
Party.

1063
00:53:48,390 --> 00:53:49,950
The environmental
movement in Germany

1064
00:53:49,950 --> 00:53:54,270
is stronger than here--
stronger than a lot of places.

1065
00:53:54,270 --> 00:53:57,150
It was a political calculation.

1066
00:53:57,150 --> 00:54:02,820
Mrs. Merkel is not crazy
and she's not dumb.

1067
00:54:02,820 --> 00:54:05,130
So to answer that question--

1068
00:54:05,130 --> 00:54:06,307
I mean, I've read answers.

1069
00:54:06,307 --> 00:54:07,890
I can't reproduce
them because I don't

1070
00:54:07,890 --> 00:54:10,650
know the German
system that well,

1071
00:54:10,650 --> 00:54:12,390
but that's a
political calculation.

1072
00:54:16,620 --> 00:54:20,780
It remains to be seen how
quickly they do it, in fact.

1073
00:54:20,780 --> 00:54:23,800
It remains to be seen what
the public reaction is going

1074
00:54:23,800 --> 00:54:26,740
to be when they realize how
much nuclear electricity

1075
00:54:26,740 --> 00:54:30,580
they're importing from
France right next door

1076
00:54:30,580 --> 00:54:34,900
and elsewhere to fill the gap.

1077
00:54:34,900 --> 00:54:39,610
They are also heavily committed
to renewables, and have been.

1078
00:54:39,610 --> 00:54:42,610
They're going to spend
a lot of money building

1079
00:54:42,610 --> 00:54:46,870
offshore windmills, which won't
replace nuclear power plants,

1080
00:54:46,870 --> 00:54:50,290
because the wind
doesn't always blow,

1081
00:54:50,290 --> 00:54:55,210
but that's part of the
political calculus.

1082
00:54:55,210 --> 00:55:01,210
If you were a green eyeshade
economist, and you said,

1083
00:55:01,210 --> 00:55:05,530
well, the public
overstates the risk--

1084
00:55:05,530 --> 00:55:09,430
Germany doesn't have
that many tidal waves,

1085
00:55:09,430 --> 00:55:13,060
these reactors are inland,
we're not earthquake prone,

1086
00:55:13,060 --> 00:55:19,810
these facilities are much
safer, what we really should do

1087
00:55:19,810 --> 00:55:26,510
is take a deep breath, review
our safety considerations,

1088
00:55:26,510 --> 00:55:28,970
and go on, and
reconsider how much we

1089
00:55:28,970 --> 00:55:32,390
want to do with nuclear versus
renewables going forward.

1090
00:55:32,390 --> 00:55:37,790
But that's a green eyeshade
cost-benefit calculation.

1091
00:55:37,790 --> 00:55:42,290
The political world, as
we will discuss next week,

1092
00:55:42,290 --> 00:55:45,600
is not always the
green eyeshade world.

1093
00:55:45,600 --> 00:55:52,510
It's a world in which you may do
things because of their impact

1094
00:55:52,510 --> 00:55:55,990
on your political
situation, on your ability

1095
00:55:55,990 --> 00:55:59,530
to get something else done, or
your ability to maintain office

1096
00:55:59,530 --> 00:56:03,700
or a variety of other things
that have economic costs.

1097
00:56:03,700 --> 00:56:08,370
Not irrational, but a
different kind of calculation,

1098
00:56:08,370 --> 00:56:11,390
which I hope at the end
of this semester we all

1099
00:56:11,390 --> 00:56:14,060
come a little closer
to understanding.

1100
00:56:14,060 --> 00:56:15,550
But that's a hard one.

1101
00:56:15,550 --> 00:56:18,140
That one in particular is hard.

1102
00:56:18,140 --> 00:56:19,460
People gasped.

1103
00:56:19,460 --> 00:56:22,040
Even knowledgeable
people gasped.

1104
00:56:22,040 --> 00:56:26,960
The current, or is he former,
German foreign minister,

1105
00:56:26,960 --> 00:56:29,930
who came from the Green
Party, spoke at MIT

1106
00:56:29,930 --> 00:56:34,130
toward the end of last
semester about that.

1107
00:56:34,130 --> 00:56:36,470
And I went to the talk, and
I actually went to dinner

1108
00:56:36,470 --> 00:56:39,440
with him afterward.

1109
00:56:39,440 --> 00:56:44,990
And it still isn't clear to
say what they were thinking

1110
00:56:44,990 --> 00:56:49,340
and why, because I don't know
German politics well enough.

1111
00:56:49,340 --> 00:56:51,650
OK, good question.

1112
00:56:51,650 --> 00:56:54,240
There's China.

1113
00:56:54,240 --> 00:56:59,530
China, you'll notice,
has a lot of coal,

1114
00:56:59,530 --> 00:57:01,480
and their electricity
is driven--

1115
00:57:01,480 --> 00:57:06,323
2007 is true, still
true, driven by coal.

1116
00:57:06,323 --> 00:57:07,240
We have a lot of coal.

1117
00:57:07,240 --> 00:57:09,220
China has a lot of coal.

1118
00:57:09,220 --> 00:57:10,810
They burn the coal.

1119
00:57:10,810 --> 00:57:16,050
Building power plants
at a rapid rate.

1120
00:57:16,050 --> 00:57:20,310
That's the main
story here I think

1121
00:57:20,310 --> 00:57:21,825
that's of any interesting.

1122
00:57:24,800 --> 00:57:27,000
This is India.

1123
00:57:27,000 --> 00:57:28,460
India is not as
wealthy as China.

1124
00:57:28,460 --> 00:57:30,960
India has some coal.

1125
00:57:30,960 --> 00:57:32,060
Oil is imported.

1126
00:57:32,060 --> 00:57:37,940
Now you see biomass in
the residential area,

1127
00:57:37,940 --> 00:57:39,800
oddly enough, much
more important in India

1128
00:57:39,800 --> 00:57:45,550
than in China, structure
of villages and so forth.

1129
00:57:45,550 --> 00:57:47,470
But this is an estimate
now, basically,

1130
00:57:47,470 --> 00:57:50,980
of wood being burned
to cook, rather than

1131
00:57:50,980 --> 00:57:54,370
other fuels being used.

1132
00:57:54,370 --> 00:57:59,068
And electricity is
again dominated by coal.

1133
00:57:59,068 --> 00:58:00,235
Most of the oil is imported.

1134
00:58:04,090 --> 00:58:08,540
with again, some exports, which
have to be refined product.

1135
00:58:08,540 --> 00:58:09,040
Yeah.

1136
00:58:09,040 --> 00:58:10,880
AUDIENCE: So a lot
of the breakdowns

1137
00:58:10,880 --> 00:58:12,805
we've been looking at
are all by the country.

1138
00:58:12,805 --> 00:58:13,420
RICHARD SCHMALENSEE: Yes.

1139
00:58:13,420 --> 00:58:15,700
AUDIENCE: But some of these
countries are really big.

1140
00:58:15,700 --> 00:58:19,700
Would it make sense,
especially for internal policy,

1141
00:58:19,700 --> 00:58:22,010
to look at different
regions, especially

1142
00:58:22,010 --> 00:58:23,160
like in India and China?

1143
00:58:23,160 --> 00:58:26,375
I feel like this big picture
blurs things together.

1144
00:58:26,375 --> 00:58:28,460
RICHARD SCHMALENSEE:
Well, you're right.

1145
00:58:28,460 --> 00:58:30,150
These are the data we have.

1146
00:58:30,150 --> 00:58:32,840
There's some work
ongoing at MIT,

1147
00:58:32,840 --> 00:58:35,660
in the joint program on
the Science and Policy

1148
00:58:35,660 --> 00:58:39,410
of Global Change to
model China regionally.

1149
00:58:39,410 --> 00:58:41,420
And of course, you can
model the US regionally.

1150
00:58:41,420 --> 00:58:44,660
That model exists.

1151
00:58:44,660 --> 00:58:46,820
And when you do Europe,
you're modeling,

1152
00:58:46,820 --> 00:58:48,380
to some extent,
bite-sized countries.

1153
00:58:48,380 --> 00:58:49,100
But you're right.

1154
00:58:49,100 --> 00:58:51,050
India and China are anomalous.

1155
00:58:51,050 --> 00:58:56,630
I think that the
basic story, coal

1156
00:58:56,630 --> 00:58:59,990
is the big driver, that's true.

1157
00:58:59,990 --> 00:59:02,720
They're putting photovoltaics
in Western China,

1158
00:59:02,720 --> 00:59:08,120
but the big story is coal
and some offshore oil.

1159
00:59:08,120 --> 00:59:11,180
Similarly in India,
but of course,

1160
00:59:11,180 --> 00:59:14,810
you don't have cooking
fires in downtown Mumbai.

1161
00:59:14,810 --> 00:59:17,060
So this notion
that there's a lot

1162
00:59:17,060 --> 00:59:21,410
of mass going into residential
use, that's true in aggregate.

1163
00:59:21,410 --> 00:59:22,580
It's not true everywhere.

1164
00:59:22,580 --> 00:59:23,930
Can't be true everywhere.

1165
00:59:23,930 --> 00:59:25,640
There are places in
the deserts where

1166
00:59:25,640 --> 00:59:27,830
there isn't that
much wind, and there

1167
00:59:27,830 --> 00:59:29,480
are metropolitan
areas where it's

1168
00:59:29,480 --> 00:59:32,330
tough to gather wood to cook.

1169
00:59:32,330 --> 00:59:36,080
So you're right, these
are big countries.

1170
00:59:36,080 --> 00:59:37,205
Doing this was heroic.

1171
00:59:42,720 --> 00:59:48,150
As I say, there are projects
on now to disaggregate China.

1172
00:59:48,150 --> 00:59:50,790
But they aren't that good--

1173
00:59:50,790 --> 00:59:51,780
they aren't that good.

1174
00:59:51,780 --> 00:59:53,040
Yeah.

1175
00:59:53,040 --> 00:59:56,430
AUDIENCE: I noticed that almost
all the electricity and heat

1176
00:59:56,430 --> 00:59:59,010
that India generates goes
to this rejected energy.

1177
00:59:59,010 --> 01:00:00,840
Is that just because
they're using

1178
01:00:00,840 --> 01:00:04,725
inefficient,
outdated generators?

1179
01:00:04,725 --> 01:00:06,943
RICHARD SCHMALENSEE: That
would be my guess, yeah.

1180
01:00:06,943 --> 01:00:08,110
Yeah, I hadn't noticed that.

1181
01:00:08,110 --> 01:00:12,390
But you're right, as
compared to-- let's see.

1182
01:00:12,390 --> 01:00:15,390
Yeah, just by i
the relative size

1183
01:00:15,390 --> 01:00:21,150
of the useful and the wasted
are different in China,

1184
01:00:21,150 --> 01:00:24,210
where the plants are
newer than in India.

1185
01:00:24,210 --> 01:00:26,766
Yeah, I think that's right.

1186
01:00:26,766 --> 01:00:29,460
AUDIENCE: [INAUDIBLE] stay
there, the electricity grid.

1187
01:00:29,460 --> 01:00:31,293
RICHARD SCHMALENSEE:
Yeah, that's true, too.

1188
01:00:31,293 --> 01:00:33,060
The Chinese grid is
much more modern.

1189
01:00:33,060 --> 01:00:36,330
China has a lot of
very high voltage lines

1190
01:00:36,330 --> 01:00:37,320
that are quite new.

1191
01:00:37,320 --> 01:00:39,150
Their losses are less.

1192
01:00:39,150 --> 01:00:42,690
So also, often, you
measure rejected

1193
01:00:42,690 --> 01:00:46,140
as the difference between
stuff that's generated

1194
01:00:46,140 --> 01:00:48,060
and stuff that gets paid for.

1195
01:00:48,060 --> 01:00:52,560
So a lot of these countries
have huge numbers for losses,

1196
01:00:52,560 --> 01:00:53,820
and a lot of that's theft.

1197
01:00:53,820 --> 01:00:55,890
I don't know if
that's true here,

1198
01:00:55,890 --> 01:00:58,140
but I know it's
true in some places.

1199
01:00:58,140 --> 01:01:00,270
OK, there's India.

1200
01:01:00,270 --> 01:01:01,860
Just for humor,
here's Saudi Arabia.

1201
01:01:04,842 --> 01:01:06,410
[CHUCKLES]

1202
01:01:06,410 --> 01:01:07,957
They use oil and
gas for everything.

1203
01:01:07,957 --> 01:01:09,290
Don't bother with anything else.

1204
01:01:09,290 --> 01:01:11,870
And they appear to
import wood for fires.

1205
01:01:11,870 --> 01:01:13,490
I don't know what that's about.

1206
01:01:13,490 --> 01:01:16,310
But you notice all the
biomass is, imported

1207
01:01:16,310 --> 01:01:17,690
and it's all residential.

1208
01:01:17,690 --> 01:01:20,090
And I assume that
fires for show.

1209
01:01:20,090 --> 01:01:23,330
I don't know what that is.

1210
01:01:23,330 --> 01:01:26,810
And there is a poor
country, and poor countries

1211
01:01:26,810 --> 01:01:29,410
tend to look like that.

1212
01:01:29,410 --> 01:01:33,020
A lot of biomass, all
the oil is imported,

1213
01:01:33,020 --> 01:01:38,470
all the coal's imported, little
snippets of other things.

1214
01:01:38,470 --> 01:01:44,050
And then just to really get
there, there's Cambodia.

1215
01:01:44,050 --> 01:01:46,120
Some hydro, I don't
know where it is.

1216
01:01:46,120 --> 01:01:49,870
Well, I do know where
it is-- not much of it.

1217
01:01:49,870 --> 01:01:54,790
Domestic biomass
used in residences.

1218
01:01:54,790 --> 01:01:59,420
All the oil is imported,
used to power motorbikes.

1219
01:01:59,420 --> 01:01:59,920
Yeah.

1220
01:01:59,920 --> 01:02:03,190
AUDIENCE: Do you
know what biomass is?

1221
01:02:03,190 --> 01:02:06,325
I know it shows it on the left
side of the box [INAUDIBLE]

1222
01:02:06,325 --> 01:02:08,950
domestic, but it doesn't do that
for wood, [INAUDIBLE],, hydro,

1223
01:02:08,950 --> 01:02:10,658
and solar energy.

1224
01:02:10,658 --> 01:02:12,700
RICHARD SCHMALENSEE: Well,
here, there isn't any.

1225
01:02:12,700 --> 01:02:15,160
Hydro is domestic.

1226
01:02:15,160 --> 01:02:17,832
If you import electricity as
they do, it shows up here.

1227
01:02:17,832 --> 01:02:18,790
AUDIENCE: Right, right.

1228
01:02:18,790 --> 01:02:21,082
So biomass always comes up
on the left side of the box,

1229
01:02:21,082 --> 01:02:24,116
even though it's still domestic,
whereas like solar and hydro

1230
01:02:24,116 --> 01:02:25,810
[INAUDIBLE].

1231
01:02:25,810 --> 01:02:28,440
RICHARD SCHMALENSEE:
I'm not sure.

1232
01:02:28,440 --> 01:02:31,950
There is some-- I'm
not sure what you mean.

1233
01:02:31,950 --> 01:02:34,560
AUDIENCE: The source is biomass
as domestic, as well as solar,

1234
01:02:34,560 --> 01:02:35,712
or geothermal, or--

1235
01:02:35,712 --> 01:02:37,920
RICHARD SCHMALENSEE: I think
solar and geothermal are

1236
01:02:37,920 --> 01:02:39,660
by definition
domestic, since these

1237
01:02:39,660 --> 01:02:43,720
are used except for solar,
for hot water, and so forth.

1238
01:02:43,720 --> 01:02:46,260
These are used for electricity
and they're domestic.

1239
01:02:46,260 --> 01:02:49,340
You don't import sun.

1240
01:02:49,340 --> 01:02:52,110
You import electricity.

1241
01:02:52,110 --> 01:02:54,000
So I don't know how
this is powered,

1242
01:02:54,000 --> 01:02:55,570
but you import electricity.

1243
01:02:55,570 --> 01:02:57,030
You don't import.

1244
01:02:57,030 --> 01:02:59,467
I mean, if you had a
line to a nuclear plant

1245
01:02:59,467 --> 01:03:01,050
across the border,
you might count it.

1246
01:03:01,050 --> 01:03:04,440
But electricity is electricity.

1247
01:03:04,440 --> 01:03:08,430
OK, so I want to close
with a little bit of data

1248
01:03:08,430 --> 01:03:10,813
on rich countries
and poor countries.

1249
01:03:10,813 --> 01:03:11,730
And this is something.

1250
01:03:11,730 --> 01:03:15,600
You should see you will
see data lots of places,

1251
01:03:15,600 --> 01:03:18,840
in some of the assignments,
that relate to the OECD.

1252
01:03:18,840 --> 01:03:20,310
This is just for
your background.

1253
01:03:20,310 --> 01:03:21,690
This is who the OECD is.

1254
01:03:21,690 --> 01:03:24,900
It's basically a
rich countries club,

1255
01:03:24,900 --> 01:03:28,050
Organization for Economic
Cooperation and Development,

1256
01:03:28,050 --> 01:03:31,530
with a few not quite
so rich countries

1257
01:03:31,530 --> 01:03:35,820
that have entered recently
under US and other sponsorship.

1258
01:03:35,820 --> 01:03:39,630
So we pulled in
Mexico and Chile.

1259
01:03:42,360 --> 01:03:44,347
We probably pulled
in Korea as well.

1260
01:03:44,347 --> 01:03:45,930
Korea is getting to
be a rich country.

1261
01:03:45,930 --> 01:03:50,640
It began, it was Japan, Western
Europe, and North America.

1262
01:03:50,640 --> 01:03:55,855
But you see, it's just under
18% of the world population,

1263
01:03:55,855 --> 01:03:58,640
almost half of the
world's energy use.

1264
01:03:58,640 --> 01:04:00,950
You don't go too far
wrong thinking of this

1265
01:04:00,950 --> 01:04:03,200
is the rich countries club.

1266
01:04:03,200 --> 01:04:07,190
So I want to do a little rich
and poor here going forward

1267
01:04:07,190 --> 01:04:10,310
in aggregate, not
country by country.

1268
01:04:10,310 --> 01:04:13,880
This is energy use.

1269
01:04:13,880 --> 01:04:16,160
This is from the EIA assignment.

1270
01:04:16,160 --> 01:04:19,850
This is energy use actual,
the first three bars,

1271
01:04:19,850 --> 01:04:20,750
and projected.

1272
01:04:20,750 --> 01:04:23,090
But this is a pretty
standard projection.

1273
01:04:23,090 --> 01:04:27,890
The growth is expected
to come outside the OECD.

1274
01:04:27,890 --> 01:04:30,320
17 and 1/2% rich
country population

1275
01:04:30,320 --> 01:04:32,630
of the world, half
the energy use.

1276
01:04:32,630 --> 01:04:35,720
You see by the time
you get to 2030, 2035,

1277
01:04:35,720 --> 01:04:38,180
it's well under
half the energy use.

1278
01:04:38,180 --> 01:04:44,150
Some growth in rich countries,
most of the growth outside.

1279
01:04:44,150 --> 01:04:48,380
If you do the numbers,
this is one of those--

1280
01:04:48,380 --> 01:04:53,690
suppose the world had actual
OECD energy per capita.

1281
01:04:53,690 --> 01:04:56,720
All else equal, that
would increase world

1282
01:04:56,720 --> 01:04:58,820
use-- this is just
doing percentages.

1283
01:04:58,820 --> 01:05:00,560
This would increase
world consumption

1284
01:05:00,560 --> 01:05:02,840
by a factor of almost 3.

1285
01:05:02,840 --> 01:05:05,900
If the whole world had
us energy per capita,

1286
01:05:05,900 --> 01:05:08,645
it would increase world
consumption by a factor of 4.

1287
01:05:11,270 --> 01:05:15,320
No growth-- just take
a snapshot of 2009.

1288
01:05:15,320 --> 01:05:18,450
Those are scary numbers.

1289
01:05:18,450 --> 01:05:21,810
And of course, there
will be growth.

1290
01:05:21,810 --> 01:05:25,950
This is where is
it going to happen.

1291
01:05:25,950 --> 01:05:28,320
And you'll see the
projection-- and again,

1292
01:05:28,320 --> 01:05:33,030
up to 2008, the actual, and
we're getting close to 2015,

1293
01:05:33,030 --> 01:05:36,030
is non-OECD Asia.

1294
01:05:36,030 --> 01:05:37,890
What is non-OECD Asia?

1295
01:05:37,890 --> 01:05:41,970
Non-OECD Asia is
mainly India and China,

1296
01:05:41,970 --> 01:05:44,340
and Indonesia for that
matter, but it's mainly

1297
01:05:44,340 --> 01:05:46,720
India and China.

1298
01:05:46,720 --> 01:05:48,840
So here's coal consumption.

1299
01:05:48,840 --> 01:05:52,830
Recall, I said the coal
market share has been growing.

1300
01:05:52,830 --> 01:05:54,210
Where is that coming from?

1301
01:05:54,210 --> 01:05:59,480
Non-OECD Asia-- India and China.

1302
01:05:59,480 --> 01:06:03,060
You will recall India and
China have a lot of coal.

1303
01:06:03,060 --> 01:06:11,390
India and China, as they move
out of poverty, are burning it.

1304
01:06:11,390 --> 01:06:14,990
Not unreasonable at
one level, but that's

1305
01:06:14,990 --> 01:06:18,770
how you get CO2
emissions growth.

1306
01:06:18,770 --> 01:06:26,120
This is world energy-related
CO2 emissions, OECD, non-OECD.

1307
01:06:26,120 --> 01:06:27,060
What's the growth?

1308
01:06:27,060 --> 01:06:31,511
The growth is non-OECD
Asia burning coal largely--

1309
01:06:31,511 --> 01:06:32,780
largely.

1310
01:06:32,780 --> 01:06:36,980
So again, if you run
these kinds of numbers,

1311
01:06:36,980 --> 01:06:41,000
suppose the world got to
where the OECD is, or suppose

1312
01:06:41,000 --> 01:06:44,930
the world got to where
the US is, forget growth.

1313
01:06:44,930 --> 01:06:49,655
After that, you'd have CO2
emissions up by a multiple.

1314
01:06:54,650 --> 01:06:57,450
As we will discuss when
we talk about climate--

1315
01:06:57,450 --> 01:06:59,600
we'll talk about climate
a little bit next time

1316
01:06:59,600 --> 01:07:03,062
and more later, that's scary.

1317
01:07:03,062 --> 01:07:08,300
If you go to double CO2
emissions, that's scary.

1318
01:07:08,300 --> 01:07:13,940
But if I'm a poor country,
I say, wait a minute.

1319
01:07:13,940 --> 01:07:16,770
You guys burned your coal.

1320
01:07:16,770 --> 01:07:19,830
You're using much more energy
than we are per capita.

1321
01:07:22,480 --> 01:07:24,450
You got rich.

1322
01:07:24,450 --> 01:07:27,340
Don't we get a
chance to get rich?

1323
01:07:27,340 --> 01:07:30,030
You guys sit in fancy
classrooms at MIT

1324
01:07:30,030 --> 01:07:33,930
and try hard to stay
awake and all of that.

1325
01:07:33,930 --> 01:07:36,340
Don't we get to do that?

1326
01:07:36,340 --> 01:07:41,100
So we'll come back
to this, because I

1327
01:07:41,100 --> 01:07:45,120
think this is one of the
great issues of the day.

1328
01:07:45,120 --> 01:07:47,400
I'm going to close with
some final thoughts.

1329
01:07:47,400 --> 01:07:50,790
I hope you got that
there's a lot of diversity.

1330
01:07:50,790 --> 01:07:52,950
Some of it comes from resources.

1331
01:07:52,950 --> 01:07:54,960
But some of it comes from
culture and some of it

1332
01:07:54,960 --> 01:07:56,640
comes from politics,
and some of it

1333
01:07:56,640 --> 01:07:59,160
comes from a variety of
technology, efficiency,

1334
01:07:59,160 --> 01:08:03,280
history-- a variety of reasons.

1335
01:08:03,280 --> 01:08:06,550
The last point, which will be
a very important point going

1336
01:08:06,550 --> 01:08:09,970
forward, which is we
expect the growth to come

1337
01:08:09,970 --> 01:08:13,000
in the future,
absent anything else,

1338
01:08:13,000 --> 01:08:15,690
from the developing world--

1339
01:08:15,690 --> 01:08:19,680
if the rest of the world gets
rich the way we got rich,

1340
01:08:19,680 --> 01:08:23,970
there will be enormous increases
in energy use, which may not

1341
01:08:23,970 --> 01:08:28,859
be feasible, and in
CO2 emissions, which

1342
01:08:28,859 --> 01:08:31,229
at least your children
and grandchildren will not

1343
01:08:31,229 --> 01:08:33,140
like much.

1344
01:08:33,140 --> 01:08:34,700
I know that's an
impossible thought,

1345
01:08:34,700 --> 01:08:40,529
but you will have children
and grandchildren.

1346
01:08:40,529 --> 01:08:45,439
And this is something
we'll be talking about.

1347
01:08:45,439 --> 01:08:46,310
That's hard.

1348
01:08:46,310 --> 01:08:48,529
We know how we got rich.

1349
01:08:48,529 --> 01:08:51,590
We burned fossil
fuels, and we used

1350
01:08:51,590 --> 01:08:54,170
that to acquire capital
stock and knowledge,

1351
01:08:54,170 --> 01:08:58,410
and build universities and
do all those great things.

1352
01:08:58,410 --> 01:09:00,979
But that won't work--

1353
01:09:00,979 --> 01:09:03,960
that won't work.

1354
01:09:03,960 --> 01:09:07,412
What will work, you got me.

1355
01:09:07,412 --> 01:09:08,620
That's what you guys are for.

1356
01:09:08,620 --> 01:09:14,830
OK, any questions or
comments, reactions, thoughts?

1357
01:09:14,830 --> 01:09:15,525
Yeah.

1358
01:09:15,525 --> 01:09:17,483
AUDIENCE: You said
something in the last class.

1359
01:09:17,483 --> 01:09:20,527
Most of the US
energy [INAUDIBLE]..

1360
01:09:20,527 --> 01:09:21,610
RICHARD SCHMALENSEE: Yeah.

1361
01:09:21,610 --> 01:09:22,970
AUDIENCE: So that's true, right?

1362
01:09:22,970 --> 01:09:23,680
RICHARD SCHMALENSEE:
That's true, right.

1363
01:09:23,680 --> 01:09:26,880
AUDIENCE: Are you going to
explain that more as you go on?

1364
01:09:30,065 --> 01:09:33,020
RICHARD SCHMALENSEE: Yeah.

1365
01:09:33,020 --> 01:09:34,520
Which part would
you like explained?

1366
01:09:34,520 --> 01:09:38,402
AUDIENCE: [INAUDIBLE]

1367
01:09:38,402 --> 01:09:40,319
RICHARD SCHMALENSEE: OK,
we'll talk about that

1368
01:09:40,319 --> 01:09:41,640
when we go sector by sector.

1369
01:09:41,640 --> 01:09:44,609
But an awful lot of
the infrastructure

1370
01:09:44,609 --> 01:09:47,609
is in regulated areas.

1371
01:09:47,609 --> 01:09:50,910
So part of the reason you
could raise private capital

1372
01:09:50,910 --> 01:09:54,790
was the capital
wasn't hugely at risk.

1373
01:09:54,790 --> 01:09:58,090
So for electric
power, for instance,

1374
01:09:58,090 --> 01:10:01,570
if you build a power plant, the
regulator says yeah go ahead,

1375
01:10:01,570 --> 01:10:03,780
you would get a return
on your investment.

1376
01:10:03,780 --> 01:10:05,430
That makes it easier.

1377
01:10:05,430 --> 01:10:07,200
We'll come back to that.

1378
01:10:07,200 --> 01:10:09,410
OK, thank you.