WEBVTT 00:00:00.000 --> 00:00:02.520 The following content is provided under a Creative 00:00:02.520 --> 00:00:03.970 Commons license. 00:00:03.970 --> 00:00:06.360 Your support will help MIT OpenCourseWare 00:00:06.360 --> 00:00:10.660 continue to offer high quality educational resources for free. 00:00:10.660 --> 00:00:13.320 To make a donation or view additional materials 00:00:13.320 --> 00:00:17.190 from hundreds of MIT courses, visit MIT OpenCourseWare 00:00:17.190 --> 00:00:18.370 at ocw.mit.edu. 00:00:25.850 --> 00:00:32.330 RICHARD SCHMALENSEE: So I want to start with a small puzzle, 00:00:32.330 --> 00:00:33.680 if I can get this thing to work. 00:00:33.680 --> 00:00:40.640 This is satellite capture of carbon monoxide plumes 00:00:40.640 --> 00:00:41.300 globally. 00:00:41.300 --> 00:00:43.133 I'll let this run for a while, and then I'll 00:00:43.133 --> 00:00:48.440 show you another one that's got more information but harder 00:00:48.440 --> 00:00:50.420 to read. 00:00:50.420 --> 00:00:55.850 So the question is why? 00:00:55.850 --> 00:00:58.970 Why are they where they are, which 00:00:58.970 --> 00:01:02.030 requires you to first figure out where carbon monoxide comes 00:01:02.030 --> 00:01:03.440 from-- 00:01:03.440 --> 00:01:06.290 which I figure most of you probably know. 00:01:06.290 --> 00:01:10.160 Quick response-- how do you get carbon monoxide 00:01:10.160 --> 00:01:13.310 in the atmosphere in quantity. 00:01:13.310 --> 00:01:13.998 Yeah. 00:01:13.998 --> 00:01:15.290 AUDIENCE: Burning hydrocarbons. 00:01:15.290 --> 00:01:17.638 RICHARD SCHMALENSEE: Burning hydrocarbons completely, 00:01:17.638 --> 00:01:18.180 incompletely? 00:01:18.180 --> 00:01:19.050 AUDIENCE: Incompletely. 00:01:19.050 --> 00:01:20.467 RICHARD SCHMALENSEE: Incompletely. 00:01:20.467 --> 00:01:22.940 So it's incomplete combustion of hydrocarbons. 00:01:22.940 --> 00:01:26.150 So you see the red spots is where there's a lot of it. 00:01:30.320 --> 00:01:32.885 A lot of energy is burning hydrocarbons, 00:01:32.885 --> 00:01:34.760 so it's not too surprising we have this here. 00:01:34.760 --> 00:01:38.390 Let me start the other one, which gives you 00:01:38.390 --> 00:01:40.850 a little bit of the same. 00:01:40.850 --> 00:01:49.790 You see a lot over Asia, India, South Asia, Africa, 00:01:49.790 --> 00:01:53.420 some over Latin America. 00:01:53.420 --> 00:01:56.180 Why? 00:01:56.180 --> 00:01:59.150 How come we're seeing incomplete combustion of hydrocarbons 00:01:59.150 --> 00:02:00.500 in those areas? 00:02:00.500 --> 00:02:06.740 A lot of it-- enough to make plumes detectable from space. 00:02:06.740 --> 00:02:08.380 How come? 00:02:08.380 --> 00:02:10.220 Thoughts? 00:02:10.220 --> 00:02:10.965 Yes. 00:02:10.965 --> 00:02:14.050 AUDIENCE: A lot of those are developing areas, 00:02:14.050 --> 00:02:20.405 and they don't have the tissue processes to burn hydrocarbons. 00:02:20.405 --> 00:02:23.200 RICHARD SCHMALENSEE: That's right. 00:02:23.200 --> 00:02:24.550 Let me restart this thing. 00:02:29.030 --> 00:02:30.580 So we're dealing with-- 00:02:30.580 --> 00:02:33.910 a lot of those are developing areas. 00:02:33.910 --> 00:02:35.530 What kind of hydrocarbons do you think 00:02:35.530 --> 00:02:36.697 they're burning in quantity? 00:02:36.697 --> 00:02:42.790 And the plume that you occasionally see over Brazil 00:02:42.790 --> 00:02:46.090 is a fair amount of deforestation in the Amazon, 00:02:46.090 --> 00:02:48.480 just large-scale burning. 00:02:48.480 --> 00:02:51.040 But what kind of hydrocarbons do you 00:02:51.040 --> 00:02:54.476 find being burned in very poor countries? 00:02:54.476 --> 00:02:55.101 AUDIENCE: Coal. 00:02:55.101 --> 00:02:55.220 Coal. 00:02:55.220 --> 00:02:55.695 Coal. 00:02:55.695 --> 00:02:56.195 Coal. 00:02:56.195 --> 00:02:58.070 Wood. 00:02:58.070 --> 00:02:58.700 Coal. 00:02:58.700 --> 00:02:59.820 RICHARD SCHMALENSEE: Coal's one answer. 00:02:59.820 --> 00:03:00.320 What else? 00:03:00.320 --> 00:03:01.755 AUDIENCE: Wood. 00:03:01.755 --> 00:03:02.255 Wood. 00:03:02.255 --> 00:03:02.755 Wood. 00:03:02.755 --> 00:03:04.200 I hear mumbling. 00:03:04.200 --> 00:03:06.090 It's very hard to grade participation 00:03:06.090 --> 00:03:07.620 when you do chorus. 00:03:07.620 --> 00:03:08.850 So just put up a hand. 00:03:08.850 --> 00:03:10.510 Take a shot at it. 00:03:10.510 --> 00:03:13.463 Wood's what I was after. 00:03:13.463 --> 00:03:14.880 They do burn coal, and we're going 00:03:14.880 --> 00:03:21.270 to see a fair amount of that, but this is UN data 00:03:21.270 --> 00:03:27.960 on the fraction of total energy from quote, "primary biomass," 00:03:27.960 --> 00:03:29.790 which is largely wood-- 00:03:29.790 --> 00:03:32.310 wood and brush and stuff like that. 00:03:32.310 --> 00:03:34.860 And you will notice how high it is 00:03:34.860 --> 00:03:36.640 in a number of poor countries. 00:03:36.640 --> 00:03:39.000 I was struck by the Cambodia number, 00:03:39.000 --> 00:03:41.070 just because I was there recently. 00:03:41.070 --> 00:03:42.240 But look at Ethiopia. 00:03:42.240 --> 00:03:45.060 Almost all the energy available. 00:03:45.060 --> 00:03:46.920 And these are estimates. 00:03:46.920 --> 00:03:49.320 You can't measure how much they're doing and cooking 00:03:49.320 --> 00:03:55.470 fires in remote villages, but the dominant energy source 00:03:55.470 --> 00:03:59.340 in those two very poor countries is gathering wood 00:03:59.340 --> 00:04:03.200 and burning it to cook. 00:04:03.200 --> 00:04:09.380 Most of the time, most of the energy data you will see 00:04:09.380 --> 00:04:12.140 does not have that, in part because the best you can do 00:04:12.140 --> 00:04:15.030 is estimate it. 00:04:15.030 --> 00:04:19.589 But historically, this is very important as an energy source, 00:04:19.589 --> 00:04:23.220 and it's still important in a lot of developing countries. 00:04:23.220 --> 00:04:24.840 We will come back to this. 00:04:28.680 --> 00:04:33.960 That's one source of energy that humans 00:04:33.960 --> 00:04:37.680 use to supplement their own before we began 00:04:37.680 --> 00:04:39.570 using fossil fuels in quantity. 00:04:39.570 --> 00:04:41.700 What else did we use? 00:04:41.700 --> 00:04:42.490 Yeah. 00:04:42.490 --> 00:04:43.290 AUDIENCE: Water. 00:04:43.290 --> 00:04:45.840 RICHARD SCHMALENSEE: Water, like water power, 00:04:45.840 --> 00:04:47.350 water wheels of various kinds. 00:04:47.350 --> 00:04:48.470 Anything else? 00:04:48.470 --> 00:04:48.970 Yes. 00:04:48.970 --> 00:04:49.595 AUDIENCE: Wind. 00:04:49.595 --> 00:04:53.250 RICHARD SCHMALENSEE: Wind-- sailing ships, windmills. 00:04:53.250 --> 00:04:55.970 Anything else? 00:04:55.970 --> 00:04:56.470 David. 00:04:56.470 --> 00:04:57.390 AUDIENCE: Horses. 00:04:57.390 --> 00:04:58.980 RICHARD SCHMALENSEE: Animals, yeah. 00:04:58.980 --> 00:05:05.040 And the availability of all of those things varies a lot. 00:05:05.040 --> 00:05:06.660 I'm sorry about the fly in. 00:05:06.660 --> 00:05:10.800 I'm a little careless in setting up the animation. 00:05:10.800 --> 00:05:13.620 The availability of all of those energy sources 00:05:13.620 --> 00:05:15.300 varies enormously globally. 00:05:15.300 --> 00:05:17.820 If you're in a desert, you're not gathering a lot of wood 00:05:17.820 --> 00:05:19.470 to burn. 00:05:19.470 --> 00:05:24.450 If you're in Africa, you're short of domesticated animals, 00:05:24.450 --> 00:05:26.130 and so on. 00:05:26.130 --> 00:05:32.040 If you look across pre-industrial economies, 00:05:32.040 --> 00:05:34.763 and you ask what do their energy systems look like, 00:05:34.763 --> 00:05:36.180 they're going to differ, depending 00:05:36.180 --> 00:05:38.550 on available resources. 00:05:38.550 --> 00:05:41.130 They're going to differ depending on climate. 00:05:41.130 --> 00:05:42.420 Do you really need to heat? 00:05:42.420 --> 00:05:44.310 Is it really important? 00:05:44.310 --> 00:05:46.920 They're going to differ level of technology, which 00:05:46.920 --> 00:05:50.153 varied a lot in pre-industrial times, 00:05:50.153 --> 00:05:51.570 particularly because communication 00:05:51.570 --> 00:05:56.760 was slow and erratic, and the level of organization. 00:05:56.760 --> 00:06:00.930 When the Roman Empire fell, energy systems changed, 00:06:00.930 --> 00:06:03.190 organization changed. 00:06:03.190 --> 00:06:07.120 So I'm sure there are other differences. 00:06:07.120 --> 00:06:09.930 So today, what we're going to look at-- 00:06:09.930 --> 00:06:14.310 and just briefly, this is a little bit like Wednesday's. 00:06:14.310 --> 00:06:16.230 This will, I think, set a record, 00:06:16.230 --> 00:06:21.450 which I hope not to break, for the number of slides. 00:06:21.450 --> 00:06:24.840 But this is background and overview 00:06:24.840 --> 00:06:29.370 of what the world's energy systems look like. 00:06:29.370 --> 00:06:31.830 One of the important things to think about 00:06:31.830 --> 00:06:34.290 is when you go beyond-- 00:06:34.290 --> 00:06:39.330 this is the fancy slide that I showed you last time 00:06:39.330 --> 00:06:43.140 about national energy systems in context. 00:06:43.140 --> 00:06:45.460 If you look at the global energy system, 00:06:45.460 --> 00:06:48.540 it's more than a set of national ones. 00:06:48.540 --> 00:06:51.090 There's a global background-- if you will, 00:06:51.090 --> 00:06:55.260 a social background of cultural communications, rivalry, 00:06:55.260 --> 00:06:58.260 emulation, and so forth. 00:06:58.260 --> 00:07:01.430 Greenhouse gases are a global issue. 00:07:01.430 --> 00:07:06.090 There is a set of international institutions and regimes-- 00:07:06.090 --> 00:07:09.570 the World Trade Organization, climate agreements, 00:07:09.570 --> 00:07:14.970 NAFTA, et cetera, et cetera, that affect the global system. 00:07:14.970 --> 00:07:17.040 There are international energy markets, 00:07:17.040 --> 00:07:21.510 international financial markets, and 00:07:21.510 --> 00:07:23.880 transnational multinational firms 00:07:23.880 --> 00:07:26.770 that link the global markets. 00:07:26.770 --> 00:07:29.550 So we don't have a single world energy 00:07:29.550 --> 00:07:34.060 market, and that'll become clear as we go through the course. 00:07:34.060 --> 00:07:39.300 But we do have a lot of linkages between national markets. 00:07:39.300 --> 00:07:44.610 So let's look first at what's the world 00:07:44.610 --> 00:07:46.640 look like in aggregate? 00:07:46.640 --> 00:07:48.870 What does the US look like in the world? 00:07:48.870 --> 00:07:51.700 Then we'll look at some differences. 00:07:51.700 --> 00:07:53.340 So that's what the world burns. 00:07:53.340 --> 00:07:57.780 You will notice there really isn't any biomass up there. 00:07:57.780 --> 00:08:03.930 This is from BP, formerly known as British Petroleum. 00:08:03.930 --> 00:08:07.380 This is how the standard statistics go. 00:08:07.380 --> 00:08:13.620 You've got oil, natural gas, nuclear, hydro power, 00:08:13.620 --> 00:08:17.125 the tiny little non-hydro renewables, and then coal 00:08:17.125 --> 00:08:17.625 on top. 00:08:23.290 --> 00:08:25.060 For the US, coal was very important. 00:08:25.060 --> 00:08:28.990 For the world, oil is the most important in terms of energy 00:08:28.990 --> 00:08:30.480 content. 00:08:30.480 --> 00:08:34.260 Oil's share has been declining for some time, however. 00:08:34.260 --> 00:08:37.380 You'll notice the total world consumption is growing. 00:08:37.380 --> 00:08:38.970 Oil looks pretty flat. 00:08:38.970 --> 00:08:41.440 Oil share's declining. 00:08:41.440 --> 00:08:47.000 Oil share is declining at the expense of natural gas not too 00:08:47.000 --> 00:08:48.810 surprising in the US context. 00:08:48.810 --> 00:08:51.705 But the importance of coal is growing, 00:08:51.705 --> 00:08:54.080 which is a little odd if you think about it, because coal 00:08:54.080 --> 00:08:56.030 was the first of the fossil fuels that 00:08:56.030 --> 00:09:02.470 were used to any extent and it's now on a global basis growing. 00:09:02.470 --> 00:09:05.680 And we'll come back to that. 00:09:05.680 --> 00:09:10.590 So in terms of the US-- 00:09:10.590 --> 00:09:13.860 these are a year or two old, but they're about right, 00:09:13.860 --> 00:09:16.410 we're about 4 and 1/2% of the world's population. 00:09:16.410 --> 00:09:19.350 We produce about 15% of primary energy. 00:09:19.350 --> 00:09:22.050 We consume over 20%. 00:09:22.050 --> 00:09:25.050 5% of the world's population-- less than 5% 00:09:25.050 --> 00:09:29.670 consuming more than 20% of the world's energy. 00:09:29.670 --> 00:09:34.080 A theme I will sound today is the whole world 00:09:34.080 --> 00:09:36.690 can't live like we do. 00:09:36.690 --> 00:09:38.880 The arithmetic doesn't work. 00:09:38.880 --> 00:09:42.270 This is the point that Tom Friedman makes 00:09:42.270 --> 00:09:43.690 in the article on the list. 00:09:43.690 --> 00:09:45.840 He makes it in more colorful fashion, 00:09:45.840 --> 00:09:47.820 but the numbers are pretty clear. 00:09:47.820 --> 00:09:52.390 And we'll come back to that. 00:09:52.390 --> 00:09:56.580 This is almost illegible, but this 00:09:56.580 --> 00:10:05.160 is more than five metric tons of oil equivalent 00:10:05.160 --> 00:10:09.480 per capita, and down to less than 1 and 1/2. 00:10:09.480 --> 00:10:12.060 You see enormous variation in the amount 00:10:12.060 --> 00:10:17.670 of energy consumed per capita, with the US, Canada, 00:10:17.670 --> 00:10:22.170 Saudi Arabia, and a few European countries clearly in the lead. 00:10:22.170 --> 00:10:24.750 And countries where there was all that carbon 00:10:24.750 --> 00:10:29.400 monoxide-- many of them, very low down in terms 00:10:29.400 --> 00:10:33.190 of using commercial energy. 00:10:33.190 --> 00:10:37.270 So there's a lot of gathered wood being done in those areas. 00:10:37.270 --> 00:10:38.950 Not a lot of commercial energy. 00:10:38.950 --> 00:10:43.060 Russia's high, Norway's high. 00:10:43.060 --> 00:10:45.040 I think that's Norwegian. 00:10:45.040 --> 00:10:52.210 In any case, lots of energy, lots of variation. 00:10:52.210 --> 00:10:56.770 If you look at energy use per capita over time, 00:10:56.770 --> 00:11:01.150 you will see as we saw last time for the US, it's pretty flat. 00:11:01.150 --> 00:11:04.960 Slightly different data source, slightly different measures, 00:11:04.960 --> 00:11:07.750 but flat for the US for a long time. 00:11:07.750 --> 00:11:13.420 Considerably higher than other rich countries. 00:11:13.420 --> 00:11:19.220 And here's the world average per capita. 00:11:19.220 --> 00:11:21.620 Here's the US. 00:11:21.620 --> 00:11:26.420 Here's China rapidly growing toward the world average 00:11:26.420 --> 00:11:31.940 per capita, the growth of China being a very big story 00:11:31.940 --> 00:11:35.510 that I'll spend a little more time on today 00:11:35.510 --> 00:11:37.130 and then come back to. 00:11:37.130 --> 00:11:40.140 So if any of this stuff raises questions, by the way, 00:11:40.140 --> 00:11:40.850 raise your hand. 00:11:40.850 --> 00:11:46.080 This is a session with a fair amount of me talking. 00:11:46.080 --> 00:11:48.530 But if I have to just talk the whole way through, 00:11:48.530 --> 00:11:50.550 it'll be boring for both of us-- all of us. 00:11:50.550 --> 00:11:51.050 David 00:11:51.050 --> 00:11:53.900 AUDIENCE: Why are we double what France and Germany [INAUDIBLE]?? 00:11:53.900 --> 00:11:56.442 RICHARD SCHMALENSEE: That's a really good question, isn't it? 00:11:56.442 --> 00:11:58.190 We're going to want to explore that. 00:11:58.190 --> 00:12:01.130 Let me not say an answer right now, 00:12:01.130 --> 00:12:04.216 but have you been to Europe? 00:12:04.216 --> 00:12:04.910 AUDIENCE: No. 00:12:04.910 --> 00:12:05.910 RICHARD SCHMALENSEE: OK. 00:12:05.910 --> 00:12:08.750 You will notice that the houses are smaller. 00:12:08.750 --> 00:12:11.210 Many of the cars are smaller. 00:12:11.210 --> 00:12:13.310 The cities are denser. 00:12:13.310 --> 00:12:15.800 The railroads, the passenger railroads, are better. 00:12:18.630 --> 00:12:20.250 The activity mix is different. 00:12:20.250 --> 00:12:22.560 The countries are denser. 00:12:22.560 --> 00:12:25.430 There are a whole set of reasons. 00:12:25.430 --> 00:12:27.770 It's not that we're bad people, although maybe we're 00:12:27.770 --> 00:12:28.820 bad people. 00:12:28.820 --> 00:12:31.700 But there are differences in history, 00:12:31.700 --> 00:12:33.510 differences in circumstances. 00:12:33.510 --> 00:12:36.260 I'll show you how several of these-- 00:12:36.260 --> 00:12:38.570 I don't think I have the UK, what 00:12:38.570 --> 00:12:42.650 several of the energy structures in these countries look like. 00:12:42.650 --> 00:12:44.540 We worry about imported oil. 00:12:44.540 --> 00:12:47.410 That's all they have, so you would 00:12:47.410 --> 00:12:51.040 think they might act a little differently toward using 00:12:51.040 --> 00:12:52.130 automobiles. 00:12:52.130 --> 00:12:53.590 So there are a bunch of reasons. 00:12:53.590 --> 00:12:54.820 We'll spend some time on it. 00:12:54.820 --> 00:13:00.340 It's important to understand why countries differ if you want 00:13:00.340 --> 00:13:03.233 to change things going forward. 00:13:03.233 --> 00:13:04.650 It's important to see what history 00:13:04.650 --> 00:13:07.950 has done to get a sense of what you can do. 00:13:07.950 --> 00:13:11.370 But just think about how we use energy, how energy 00:13:11.370 --> 00:13:12.900 could be used differently. 00:13:12.900 --> 00:13:14.490 I mean, people in those countries 00:13:14.490 --> 00:13:17.850 live perfectly pleasant lives by our standards. 00:13:17.850 --> 00:13:19.560 They're just different. 00:13:19.560 --> 00:13:20.620 There was another hand. 00:13:20.620 --> 00:13:21.120 Yeah. 00:13:21.120 --> 00:13:23.370 AUDIENCE: I can't remember what it was in the reading. 00:13:23.370 --> 00:13:24.734 I think it was [INAUDIBLE]. 00:13:24.734 --> 00:13:29.820 But I remembered [INAUDIBLE] Japan [INAUDIBLE] was less than 00:13:29.820 --> 00:13:30.340 China's. 00:13:30.340 --> 00:13:33.210 Or maybe it was in the units of America [INAUDIBLE] 00:13:33.210 --> 00:13:36.630 that Japan had, like, one and China was [INAUDIBLE] two. 00:13:36.630 --> 00:13:41.400 RICHARD SCHMALENSEE: Per dollar of GDP, Japan is lower. 00:13:41.400 --> 00:13:43.560 This is per person. 00:13:43.560 --> 00:13:50.070 And China, despite its rapid increase in wealth and income, 00:13:50.070 --> 00:13:53.130 is still a poor country on average, 00:13:53.130 --> 00:13:54.870 and certainly in '07 was. 00:13:54.870 --> 00:13:57.360 I mean, that graph goes up from '07. 00:13:57.360 --> 00:13:59.760 Anything else? 00:13:59.760 --> 00:14:04.290 OK, this is gives you a little sense. 00:14:04.290 --> 00:14:08.400 Tells you that the world differs in how it uses energy. 00:14:08.400 --> 00:14:12.300 This is from BP, and this is by region. 00:14:12.300 --> 00:14:16.360 So you will notice that in Asia-Pacific, 00:14:16.360 --> 00:14:22.260 which will be heavily China, Australia, New Zealand, coal 00:14:22.260 --> 00:14:24.210 is the dominant fuel. 00:14:24.210 --> 00:14:29.030 In the Middle East, not too surprisingly, it's 00:14:29.030 --> 00:14:33.560 oil and natural gas, and there are 00:14:33.560 --> 00:14:35.340 various mixtures in-between. 00:14:35.340 --> 00:14:37.010 Here's North America. 00:14:37.010 --> 00:14:38.000 We use a lot of oil. 00:14:38.000 --> 00:14:39.290 We use a lot of natural gas. 00:14:39.290 --> 00:14:43.400 We use a fair amount of coal. 00:14:43.400 --> 00:14:45.830 So there are regional differences in part 00:14:45.830 --> 00:14:51.192 because, with the exception of oil-- 00:14:51.192 --> 00:14:52.900 well, not even with the exception of oil, 00:14:52.900 --> 00:14:58.060 transporting this stuff globally is not that easy. 00:14:58.060 --> 00:15:01.960 It's easier than it used to be, but transporting coal, 00:15:01.960 --> 00:15:04.900 to transport natural gas, you either 00:15:04.900 --> 00:15:09.190 build a pipeline or you liquefy it, put it 00:15:09.190 --> 00:15:11.330 in a very expensive ship and move it. 00:15:11.330 --> 00:15:16.660 So the regional differences in patterns of energy use-- again, 00:15:16.660 --> 00:15:19.270 we'll come back to this reflect in part 00:15:19.270 --> 00:15:23.575 differences in endowments, and in part transport costs. 00:15:26.140 --> 00:15:37.200 OK, David asked about why France and the US differ in energy, 00:15:37.200 --> 00:15:41.580 or European countries differ from the US in energy use. 00:15:41.580 --> 00:15:43.470 Let me ask a broader question. 00:15:46.260 --> 00:15:49.050 What factors determine differences in structure, 00:15:49.050 --> 00:15:50.070 not just in level? 00:15:50.070 --> 00:15:52.730 But if you try to compare two countries, what might 00:15:52.730 --> 00:15:55.430 you look at to compare differences 00:15:55.430 --> 00:15:58.910 in where they get energy and how they use it? 00:15:58.910 --> 00:16:01.250 Anybody, take a shot. 00:16:01.250 --> 00:16:04.400 Erica, you're writing very, very diligently, 00:16:04.400 --> 00:16:05.842 and I didn't say that much. 00:16:05.842 --> 00:16:06.800 What would you look at? 00:16:10.800 --> 00:16:11.858 AUDIENCE: [INAUDIBLE]? 00:16:11.858 --> 00:16:13.650 RICHARD SCHMALENSEE: To explain differences 00:16:13.650 --> 00:16:16.290 between countries in how they get and how they use energy. 00:16:16.290 --> 00:16:18.910 AUDIENCE: Well, one of [INAUDIBLE] available resources 00:16:18.910 --> 00:16:19.410 [INAUDIBLE]. 00:16:19.410 --> 00:16:20.930 RICHARD SCHMALENSEE: Available resources, yeah, 00:16:20.930 --> 00:16:21.630 that's a gimme. 00:16:21.630 --> 00:16:25.443 I hit the thing too quickly. 00:16:25.443 --> 00:16:26.610 Can you give me another one? 00:16:26.610 --> 00:16:33.897 AUDIENCE: The standard government, or [INAUDIBLE].. 00:16:33.897 --> 00:16:35.730 RICHARD SCHMALENSEE: So government policies, 00:16:35.730 --> 00:16:37.605 which would come out of the political system. 00:16:37.605 --> 00:16:38.430 That's another one. 00:16:38.430 --> 00:16:40.230 Anything else? 00:16:40.230 --> 00:16:41.317 Mathoura? 00:16:41.317 --> 00:16:42.385 AUDIENCE: Very good. 00:16:42.385 --> 00:16:44.385 RICHARD SCHMALENSEE: I hesitated, you'll notice. 00:16:44.385 --> 00:16:46.718 AUDIENCE: One thing would be also, like, transportation. 00:16:46.718 --> 00:16:48.984 Like for example, if the country's landlocked 00:16:48.984 --> 00:16:51.504 or if it has access to waterways, 00:16:51.504 --> 00:16:53.728 it has a good system that allows the transport of oil 00:16:53.728 --> 00:16:55.770 in and out of the country and to various regions. 00:16:55.770 --> 00:16:57.300 RICHARD SCHMALENSEE: That's a good point. 00:16:57.300 --> 00:16:58.620 It's not one that's on my list. 00:16:58.620 --> 00:17:01.170 It's the geography of the country. 00:17:01.170 --> 00:17:05.910 Can you get various energy sources like oil by tanker, 00:17:05.910 --> 00:17:11.520 or do you have to pipe it in or take it in by rail? 00:17:11.520 --> 00:17:14.220 Another influence is geography, which 00:17:14.220 --> 00:17:16.230 is in available resources. 00:17:16.230 --> 00:17:17.810 Do you have water, do you have wind? 00:17:17.810 --> 00:17:18.630 Yeah, Alex. 00:17:18.630 --> 00:17:21.300 AUDIENCE: I was going to say development history. 00:17:21.300 --> 00:17:22.064 RICHARD SCHMALENSEE: Development history? 00:17:22.064 --> 00:17:24.522 AUDIENCE: Yeah, so like what's happened in the past-- like, 00:17:24.522 --> 00:17:26.549 how developed there's this country? 00:17:29.820 --> 00:17:32.442 Was there previous economic history? 00:17:32.442 --> 00:17:34.650 RICHARD SCHMALENSEE: So the previous economic history 00:17:34.650 --> 00:17:38.370 would be both, say, level of income, level of development, 00:17:38.370 --> 00:17:40.980 and you're suggesting how they got there would matter. 00:17:40.980 --> 00:17:41.750 Say a little more. 00:17:41.750 --> 00:17:43.500 AUDIENCE: Or like how fast they got there. 00:17:43.500 --> 00:17:45.570 RICHARD SCHMALENSEE: How fast they got there, OK. 00:17:45.570 --> 00:17:50.040 Did they develop in the 19th century and put a lot of money 00:17:50.040 --> 00:17:53.730 into 19th century assets that are still going, 00:17:53.730 --> 00:17:56.280 or did they develop recently and were 00:17:56.280 --> 00:17:57.970 able to use new technology? 00:17:57.970 --> 00:18:01.050 That's a very nice point. 00:18:01.050 --> 00:18:04.200 The Chinese are building lots of power plants. 00:18:04.200 --> 00:18:05.950 Their power plants are, on average, 00:18:05.950 --> 00:18:09.450 more efficient than ours because they're much younger than ours 00:18:09.450 --> 00:18:10.410 on average. 00:18:10.410 --> 00:18:12.000 Anybody else? 00:18:12.000 --> 00:18:12.690 Yeah. 00:18:12.690 --> 00:18:14.683 AUDIENCE: Like, population density. 00:18:14.683 --> 00:18:16.350 RICHARD SCHMALENSEE: Population density. 00:18:16.350 --> 00:18:17.095 James, OK. 00:18:17.095 --> 00:18:18.720 AUDIENCE: It would be easier per person 00:18:18.720 --> 00:18:20.678 to heat, like, an apartment building in Japan-- 00:18:20.678 --> 00:18:22.012 RICHARD SCHMALENSEE: So density? 00:18:22.012 --> 00:18:22.840 Yes. 00:18:22.840 --> 00:18:24.840 AUDIENCE: --as opposed to a bunch of big houses, 00:18:24.840 --> 00:18:26.492 but across Texas, per person. 00:18:26.492 --> 00:18:28.575 RICHARD SCHMALENSEE: We always come back to Texas, 00:18:28.575 --> 00:18:29.242 don't we really? 00:18:29.242 --> 00:18:38.190 [CHUCKLES] Some of that's just people per square mile 00:18:38.190 --> 00:18:42.000 and some of it reflects policy, how 00:18:42.000 --> 00:18:44.790 you react to sprawl when you're doing land use 00:18:44.790 --> 00:18:46.180 policy and other things. 00:18:46.180 --> 00:18:48.250 So both things matter. 00:18:48.250 --> 00:18:49.500 Exactly right. 00:18:49.500 --> 00:18:51.315 Yeah, Ryan. 00:18:51.315 --> 00:18:53.493 AUDIENCE: Well the sort of products that you make 00:18:53.493 --> 00:18:54.910 and the products that you consume. 00:18:54.910 --> 00:19:00.750 So like, an agrarian society might use so much oil, 00:19:00.750 --> 00:19:02.940 but somebody who's going to be manufacturing 00:19:02.940 --> 00:19:05.940 of a certain product would definitely use a lot more. 00:19:05.940 --> 00:19:10.240 Also, if you're making a product for your own country, 00:19:10.240 --> 00:19:13.862 then you're going to make a product for your own country. 00:19:13.862 --> 00:19:15.570 So the consumption is going to be higher, 00:19:15.570 --> 00:19:16.840 so you're going to make more. 00:19:16.840 --> 00:19:18.900 RICHARD SCHMALENSEE: So the activity mix. 00:19:18.900 --> 00:19:23.460 So you get less energy if the country 00:19:23.460 --> 00:19:26.460 is a financial center, like England, 00:19:26.460 --> 00:19:29.700 than if it's a manufacturing center, like China. 00:19:29.700 --> 00:19:34.800 When we looked at the variation in energy use across US states, 00:19:34.800 --> 00:19:36.840 Wyoming was very high. 00:19:36.840 --> 00:19:38.640 And I neglected to mention last time 00:19:38.640 --> 00:19:41.370 that one of the big things that goes on in Wyoming 00:19:41.370 --> 00:19:43.800 is strip mining of coal in huge quantities, 00:19:43.800 --> 00:19:46.830 using very, very large machinery, 00:19:46.830 --> 00:19:49.320 and not a lot of people doing this. 00:19:49.320 --> 00:19:53.730 So that's rather different from what goes on in Manhattan. 00:19:53.730 --> 00:19:54.850 So, yeah. 00:19:54.850 --> 00:19:58.320 AUDIENCE: I would say political and geographical relations 00:19:58.320 --> 00:20:00.735 with foreign exporters. 00:20:00.735 --> 00:20:03.210 RICHARD SCHMALENSEE: So how you can get your access 00:20:03.210 --> 00:20:06.210 to the world markets, the terms on which you can access them. 00:20:06.210 --> 00:20:08.490 Who is nearby, not just what do you have. 00:20:08.490 --> 00:20:11.940 So China can get coal from Australia, for instance, 00:20:11.940 --> 00:20:15.540 in ways that would be more complicated if they 00:20:15.540 --> 00:20:18.240 were farther away and Australia didn't speak to them. 00:20:18.240 --> 00:20:23.220 And actually, I was talking to somebody about getting-- 00:20:23.220 --> 00:20:26.850 the country of Lebanon evidently built its power plants 00:20:26.850 --> 00:20:31.950 assuming it would get natural gas to run them. 00:20:31.950 --> 00:20:34.740 It has to run them on oil because it can no longer get 00:20:34.740 --> 00:20:36.660 natural gas from its neighbors. 00:20:36.660 --> 00:20:39.580 And as a result, efficiency is cut in half. 00:20:39.580 --> 00:20:41.970 So these things do matter. 00:20:41.970 --> 00:20:42.926 Orson, you were-- 00:20:42.926 --> 00:20:47.690 AUDIENCE: I think that, [INAUDIBLE] 00:20:47.690 --> 00:20:51.708 if you're going to try and develop a type of engine that's 00:20:51.708 --> 00:20:53.890 going to be sustainable for your own country, 00:20:53.890 --> 00:20:57.960 you want to try to do something that the technology 00:20:57.960 --> 00:21:01.530 in your country is there, and there's 00:21:01.530 --> 00:21:04.710 the people who are educated to develop 00:21:04.710 --> 00:21:06.000 those types of technologies. 00:21:06.000 --> 00:21:08.375 RICHARD SCHMALENSEE: So what you're saying is you could-- 00:21:08.375 --> 00:21:10.530 we talked about policy just in general terms. 00:21:10.530 --> 00:21:12.750 But you're saying very specifically, 00:21:12.750 --> 00:21:15.960 energy policy could focus on a particular technology, 00:21:15.960 --> 00:21:18.360 develop local expertise in that technology-- 00:21:18.360 --> 00:21:23.130 develop a cluster of people who could then advance it, 00:21:23.130 --> 00:21:25.530 and make it more efficient and more usable and more 00:21:25.530 --> 00:21:30.720 friendly for you, and more economical for you. 00:21:30.720 --> 00:21:34.550 I think that's a good list. 00:21:34.550 --> 00:21:38.990 And for an economist, it's a great list. 00:21:38.990 --> 00:21:44.520 I would, however, add one other thing, which is culture-- 00:21:44.520 --> 00:21:45.620 culture and habits. 00:21:45.620 --> 00:21:49.550 I mean, the Germans recycle relentlessly. 00:21:49.550 --> 00:21:50.630 We don't. 00:21:50.630 --> 00:21:54.410 I mean, we do, but it's nothing like recycling in Germany. 00:21:54.410 --> 00:21:58.310 It's nothing like concern for materials and packaging 00:21:58.310 --> 00:21:59.270 in Germany. 00:21:59.270 --> 00:22:04.250 It's nothing like concern for efficiency in Japan 00:22:04.250 --> 00:22:05.660 or in Germany. 00:22:05.660 --> 00:22:09.230 The culture does matter and does affect-- 00:22:09.230 --> 00:22:12.110 let's see, I think I've got everything we said. 00:22:12.110 --> 00:22:16.310 Everything that people decide to do-- the habits. 00:22:16.310 --> 00:22:21.890 Americans are persuaded, we should drive. 00:22:21.890 --> 00:22:23.550 Automobiles are important. 00:22:23.550 --> 00:22:25.910 Well, that's not God-given. 00:22:25.910 --> 00:22:28.500 That's just part of the culture. 00:22:28.500 --> 00:22:31.550 So those things do matter. 00:22:31.550 --> 00:22:34.040 And one of the things I mentioned 00:22:34.040 --> 00:22:37.460 when I talked about pre-industrial is 00:22:37.460 --> 00:22:41.810 climate in the sense of how hot and how cold. 00:22:41.810 --> 00:22:48.320 This is an old graph on heating and cooling requirements. 00:22:48.320 --> 00:22:50.845 I don't want to go into how do you measure a degree day, 00:22:50.845 --> 00:22:52.220 in part because I don't remember. 00:22:52.220 --> 00:22:57.980 But it's a measure of how much you need to spend cooling 00:22:57.980 --> 00:23:00.020 and how much you need to spend heating. 00:23:00.020 --> 00:23:02.810 Obviously, Russia spends a lot-- has 00:23:02.810 --> 00:23:04.460 to spend a fair amount of energy. 00:23:04.460 --> 00:23:08.220 Heating, Bangladesh, not so much. 00:23:08.220 --> 00:23:13.640 And of course, before the advent of economical air conditioning, 00:23:13.640 --> 00:23:18.050 these countries did very little to deal with the weather 00:23:18.050 --> 00:23:19.310 because they couldn't. 00:23:19.310 --> 00:23:22.640 Now that you can, India in particular, 00:23:22.640 --> 00:23:24.920 you do see more air conditioning, 00:23:24.920 --> 00:23:28.320 and it is an important use of energy. 00:23:28.320 --> 00:23:35.520 Another way, just to do some more of these comparisons, 00:23:35.520 --> 00:23:37.070 this is requirements. 00:23:37.070 --> 00:23:42.110 This is a little bit of the influence 00:23:42.110 --> 00:23:44.580 of a couple of things-- 00:23:44.580 --> 00:23:50.170 first, activity mix, and second, efficiency. 00:23:53.030 --> 00:23:54.710 This is energy intensity. 00:23:54.710 --> 00:23:58.190 Basically, tons of oil equivalent per dollar of GDP. 00:23:58.190 --> 00:23:59.250 It's an old graph. 00:23:59.250 --> 00:24:01.100 It hasn't changed that much. 00:24:01.100 --> 00:24:04.160 You'll notice that Kenya uses a lot of energy 00:24:04.160 --> 00:24:06.710 per dollar of GDP. 00:24:06.710 --> 00:24:09.380 Is that because Kenya is doing massive high-energy 00:24:09.380 --> 00:24:13.730 manufacturing, or is that because Kenyan technology tends 00:24:13.730 --> 00:24:15.750 to be old and inefficient? 00:24:15.750 --> 00:24:20.810 So per dollar of GDP, they end up wasting a lot of energy. 00:24:20.810 --> 00:24:24.200 Japan, you will notice, uses less per dollar of GDP-- 00:24:24.200 --> 00:24:27.620 and this may be what you remember than China. 00:24:27.620 --> 00:24:32.620 Less than the US, Japan has very expensive energy 00:24:32.620 --> 00:24:35.290 for a variety of reasons-- very high prices, 00:24:35.290 --> 00:24:40.390 very dense cities, very small residences by our standards, 00:24:40.390 --> 00:24:43.030 and per dollar of GDP, even though it 00:24:43.030 --> 00:24:48.210 does a fair amount of manufacturing a lot less. 00:24:48.210 --> 00:24:51.700 The Russian story is a combination. 00:24:51.700 --> 00:24:53.740 Again, this is 2003. 00:24:53.740 --> 00:24:56.350 It's a combination of historically lots 00:24:56.350 --> 00:25:01.060 of heavy industry and cheap energy that led 00:25:01.060 --> 00:25:03.560 to inefficient capital stock. 00:25:03.560 --> 00:25:06.830 In Soviet times, they built some of the most amazingly 00:25:06.830 --> 00:25:08.810 inefficient stuff you could imagine 00:25:08.810 --> 00:25:12.200 because energy was subsidized. 00:25:12.200 --> 00:25:14.570 Anyplace else you worry about energy costs, 00:25:14.570 --> 00:25:16.070 they worried less. 00:25:16.070 --> 00:25:18.980 So Germany does a lot of manufacturing. 00:25:18.980 --> 00:25:20.450 It's more efficient than we are. 00:25:20.450 --> 00:25:22.670 Its energy is more expensive. 00:25:22.670 --> 00:25:28.670 So I will pause there to see if anything 00:25:28.670 --> 00:25:31.910 strikes you or anything you'd want to comment on. 00:25:31.910 --> 00:25:37.650 I mean, you can run these data we'll do a little bit of this 00:25:37.650 --> 00:25:39.630 later. 00:25:39.630 --> 00:25:40.950 This is a bizarre graph. 00:25:40.950 --> 00:25:42.600 This shows changes over time. 00:25:42.600 --> 00:25:44.880 You may wonder why the Russian Federation 00:25:44.880 --> 00:25:47.490 jumps up right after 1990. 00:25:47.490 --> 00:25:50.670 That's, of course, because the Russian Federation didn't exist 00:25:50.670 --> 00:25:55.290 before 1990, and whoever did this graph couldn't quite 00:25:55.290 --> 00:25:57.030 do a not present. 00:25:57.030 --> 00:26:01.130 But you'll see a couple of things. 00:26:01.130 --> 00:26:02.280 There's the US. 00:26:02.280 --> 00:26:04.380 Again, this is energy per dollar of GDP. 00:26:04.380 --> 00:26:07.350 We showed last time a decline. 00:26:07.350 --> 00:26:10.960 Look at the decline in China. 00:26:10.960 --> 00:26:14.200 Look at the decline in energy per dollar of GDP in China. 00:26:14.200 --> 00:26:16.950 This is just getting more efficient 00:26:16.950 --> 00:26:18.360 because GDP is rising. 00:26:18.360 --> 00:26:19.770 They're using new equipment. 00:26:19.770 --> 00:26:22.380 This is just an enormous increase in efficiency. 00:26:22.380 --> 00:26:25.440 This is not doing less manufacturing. 00:26:25.440 --> 00:26:27.220 It's just becoming more efficient. 00:26:27.220 --> 00:26:30.870 There's a general-- and again, Russia, enormously inefficient, 00:26:30.870 --> 00:26:35.550 coming down over time as they begin to modernize 00:26:35.550 --> 00:26:37.410 their industrial plant. 00:26:37.410 --> 00:26:40.620 The others, there's a general downward trend 00:26:40.620 --> 00:26:43.140 if you've got an eye for it among most of these developed 00:26:43.140 --> 00:26:45.900 countries, but it's slight. 00:26:45.900 --> 00:26:49.440 In Russia and China, they had a lot 00:26:49.440 --> 00:26:51.330 of inefficient heavy industry. 00:26:51.330 --> 00:26:54.780 The trend is very pronounced, but China 00:26:54.780 --> 00:27:00.110 is a very energy-intensive operation. 00:27:00.110 --> 00:27:06.290 One of the things, of course, that drives energy structure 00:27:06.290 --> 00:27:11.580 is prices faced by people making decisions. 00:27:11.580 --> 00:27:13.800 We didn't mention prices on the earlier list 00:27:13.800 --> 00:27:17.310 because prices don't drop out of the sky. 00:27:17.310 --> 00:27:20.070 They come from, among other things, 00:27:20.070 --> 00:27:21.870 most of the things on the list. 00:27:21.870 --> 00:27:28.860 These are gasoline prices, 2006. 00:27:28.860 --> 00:27:34.380 The units are dollars per gallon. 00:27:34.380 --> 00:27:36.540 I assume a US gallon. 00:27:36.540 --> 00:27:40.320 But you'll notice the big difference between Germany here 00:27:40.320 --> 00:27:46.290 at $6, the US at $2.50 at that point, China $2.11. 00:27:46.290 --> 00:27:49.320 And if the graph had more countries, 00:27:49.320 --> 00:27:54.600 I'm sure we'd see around $1 in Venezuela, maybe $1 and a half 00:27:54.600 --> 00:27:56.220 in Egypt. 00:27:56.220 --> 00:27:59.710 Huge range of prices for gasoline, 00:27:59.710 --> 00:28:02.250 which is traded internationally, which gets 00:28:02.250 --> 00:28:05.810 shipped around the world on large tankers. 00:28:05.810 --> 00:28:07.490 That's policy. 00:28:07.490 --> 00:28:10.890 That's mostly policy. 00:28:10.890 --> 00:28:14.250 The Europeans and the Koreans don't have oil. 00:28:14.250 --> 00:28:15.090 They tax it. 00:28:15.090 --> 00:28:18.210 The Japanese tax it. 00:28:18.210 --> 00:28:19.710 We tax it, but not so much. 00:28:19.710 --> 00:28:22.790 Mexico has a fair amount of oil. 00:28:22.790 --> 00:28:25.760 They tax it less, and other countries actively 00:28:25.760 --> 00:28:30.730 subsidize the consumption of gasoline, 00:28:30.730 --> 00:28:38.600 Venezuela being the most glaring that I'm aware of. 00:28:38.600 --> 00:28:40.850 You may ask politically-- 00:28:40.850 --> 00:28:42.440 and this is the kind of question we're 00:28:42.440 --> 00:28:47.160 going to come to, how come? 00:28:47.160 --> 00:28:50.820 How come Germany makes a political decision to tax 00:28:50.820 --> 00:28:54.540 the heck out of gasoline, and Venezuela, 00:28:54.540 --> 00:28:59.610 even before the Chavez regime, makes a political decision 00:28:59.610 --> 00:29:03.930 to spend tax money to subsidize gasoline? 00:29:03.930 --> 00:29:05.760 I'm not going to answer that question. 00:29:05.760 --> 00:29:08.200 But it is the question. 00:29:08.200 --> 00:29:12.150 It is a social science of energy question-- kind of a basic one. 00:29:12.150 --> 00:29:15.030 How does that decision get made? 00:29:15.030 --> 00:29:17.200 Here's another one. 00:29:17.200 --> 00:29:20.070 These are electricity prices, and you'll 00:29:20.070 --> 00:29:24.090 see there are two bars for each country. 00:29:24.090 --> 00:29:27.570 The darker one is household prices. 00:29:27.570 --> 00:29:32.490 And again, there's an effective policy. 00:29:32.490 --> 00:29:36.990 Prices differ between countries that are nearby. 00:29:36.990 --> 00:29:38.430 Let's see if I can find a couple. 00:29:38.430 --> 00:29:42.540 Here's the Czech Republic and here's Germany. 00:29:42.540 --> 00:29:44.730 That difference in residential prices 00:29:44.730 --> 00:29:49.080 presumably reflects policy, among other things. 00:29:49.080 --> 00:29:52.850 The lighter-colored bar is what industry pays. 00:29:52.850 --> 00:29:56.300 Now, industry will always pay less than households, 00:29:56.300 --> 00:29:58.985 typically because it'll take power at higher voltages, 00:29:58.985 --> 00:30:04.010 there are lower costs, lots of reasons why the light bar is 00:30:04.010 --> 00:30:07.070 always below the dark bar. 00:30:07.070 --> 00:30:08.900 But look at how big the differences 00:30:08.900 --> 00:30:10.970 are in some countries and how small in others. 00:30:14.010 --> 00:30:18.450 That's just a-- compare what happens in Norway, 00:30:18.450 --> 00:30:21.150 where that's got to be more than double, 00:30:21.150 --> 00:30:23.760 with what we got here, Italy, where 00:30:23.760 --> 00:30:25.110 those prices are quite close. 00:30:30.050 --> 00:30:33.830 That is, in many of these countries-- 00:30:33.830 --> 00:30:38.900 most of these countries, the outcome of a political process. 00:30:38.900 --> 00:30:43.700 Electricity prices are importantly political. 00:30:43.700 --> 00:30:47.490 Many of these are government-run electricity companies. 00:30:47.490 --> 00:30:52.150 The ones that aren't in the US are least regulated, 00:30:52.150 --> 00:30:54.400 and the outcome of the regulatory process 00:30:54.400 --> 00:30:57.220 is, as we will discuss, political. 00:31:01.320 --> 00:31:12.430 So when we talk about prices, where do prices come from? 00:31:12.430 --> 00:31:16.678 I'll just list a few here, rather than 00:31:16.678 --> 00:31:18.220 spend a while on this, because I want 00:31:18.220 --> 00:31:23.590 to make sure I get through this massive collection of slides. 00:31:23.590 --> 00:31:27.650 Sometimes, prices reflect cost differences. 00:31:27.650 --> 00:31:28.750 We have a lot of coal. 00:31:28.750 --> 00:31:30.520 Other people don't. 00:31:30.520 --> 00:31:32.320 Electricity is cheaper in the Midwest 00:31:32.320 --> 00:31:35.910 because there's a lot of coal and coal-fired power plants. 00:31:35.910 --> 00:31:40.060 OK, that's local resources. 00:31:40.060 --> 00:31:42.230 People use oil to generate electricity. 00:31:42.230 --> 00:31:46.240 The price of electricity varies with the world price of oil. 00:31:46.240 --> 00:31:48.520 Some countries, capital and labor are cheap. 00:31:48.520 --> 00:31:51.280 Some countries are expensive. 00:31:51.280 --> 00:31:54.360 We talked about some countries have efficient technology, 00:31:54.360 --> 00:31:55.300 some countries don't. 00:31:55.300 --> 00:32:00.360 And it's not just level of development-- 00:32:00.360 --> 00:32:03.120 not just level of development. 00:32:03.120 --> 00:32:04.700 It is, for instance, house size-- 00:32:04.700 --> 00:32:08.660 how large your house is, how well-insulated are they. 00:32:08.660 --> 00:32:10.670 Different rich countries have different answers 00:32:10.670 --> 00:32:12.800 to that question. 00:32:12.800 --> 00:32:14.593 Taxes and subsidies, that's political. 00:32:14.593 --> 00:32:16.010 And one thing we haven't mentioned 00:32:16.010 --> 00:32:19.620 is environmental policy. 00:32:19.620 --> 00:32:23.250 US, Europe, pretty tight environmental policies. 00:32:23.250 --> 00:32:24.600 Lots to debate. 00:32:24.600 --> 00:32:27.420 China, not so much. 00:32:27.420 --> 00:32:29.850 Russia, not so much. 00:32:29.850 --> 00:32:35.560 Those policies affect the costs of producing and using energy. 00:32:35.560 --> 00:32:39.070 You can think of other things that affect prices, 00:32:39.070 --> 00:32:43.230 but I think those are the big ones. 00:32:48.390 --> 00:32:53.700 You could do this whole session on electricity. 00:32:53.700 --> 00:32:56.130 There are lots of people in this world who 00:32:56.130 --> 00:32:59.640 are off-grid who don't have any electricity at all. 00:32:59.640 --> 00:33:02.540 So we don't have electricity prices for them. 00:33:02.540 --> 00:33:03.650 And this isn't price. 00:33:03.650 --> 00:33:06.110 This is consumption per capita. 00:33:06.110 --> 00:33:09.140 Notice the world leader is Iceland. 00:33:09.140 --> 00:33:11.690 Does anybody know why? 00:33:11.690 --> 00:33:13.970 Anybody know how electricity is produced in Iceland? 00:33:13.970 --> 00:33:14.470 Yeah. 00:33:14.470 --> 00:33:16.360 AUDIENCE: Thermoelectric generation. 00:33:16.360 --> 00:33:18.070 RICHARD SCHMALENSEE: It's geothermal. 00:33:18.070 --> 00:33:22.130 They use geothermal heat. 00:33:22.130 --> 00:33:25.540 It's really cheap-- really cheap, 00:33:25.540 --> 00:33:28.060 and that's a local resource. 00:33:28.060 --> 00:33:33.880 Norway-- anybody know what the dominant method for producing 00:33:33.880 --> 00:33:35.120 electricity in Norway is? 00:33:35.120 --> 00:33:35.380 Yeah. 00:33:35.380 --> 00:33:36.380 AUDIENCE: Hydroelectricity. 00:33:36.380 --> 00:33:37.963 RICHARD SCHMALENSEE: Hydroelectricity. 00:33:37.963 --> 00:33:40.360 Norway has a lot of hydropower. 00:33:40.360 --> 00:33:44.950 And again, if you're lucky in geography, 00:33:44.950 --> 00:33:48.470 you can have cheap electricity from hydropower. 00:33:48.470 --> 00:33:50.470 Are you willing to build a lot of dams? 00:33:50.470 --> 00:33:52.300 Norwegians are also environmentalists, 00:33:52.300 --> 00:33:55.390 so they do worry about the dams. 00:33:55.390 --> 00:33:58.180 And Qatar is third. 00:33:58.180 --> 00:34:01.600 What do you think they do, or what do they have? 00:34:01.600 --> 00:34:03.620 It's a tiny little country in the Persian Gulf. 00:34:03.620 --> 00:34:04.120 Yeah. 00:34:04.120 --> 00:34:04.510 AUDIENCE: Oil. 00:34:04.510 --> 00:34:05.260 RICHARD SCHMALENSEE: What? 00:34:05.260 --> 00:34:06.032 AUDIENCE: Oil? 00:34:06.032 --> 00:34:07.990 RICHARD SCHMALENSEE: Well, oil is a good guess. 00:34:07.990 --> 00:34:08.679 It's close. 00:34:08.679 --> 00:34:10.659 It's natural gas. 00:34:10.659 --> 00:34:12.850 They have literally boatloads of natural gas. 00:34:12.850 --> 00:34:15.190 They liquefy it and export it in quantity, 00:34:15.190 --> 00:34:18.402 and they use it locally to generate electricity. 00:34:18.402 --> 00:34:20.110 Back in the bad old days, they would just 00:34:20.110 --> 00:34:22.060 burn it to get rid of it. 00:34:22.060 --> 00:34:25.420 Now they spend a lot of money freezing it, liquefying it, 00:34:25.420 --> 00:34:26.500 and selling it. 00:34:29.179 --> 00:34:31.270 But look at the world number. 00:34:31.270 --> 00:34:34.540 Compare how much electricity we consume with the world average. 00:34:34.540 --> 00:34:37.090 We're not among the leaders. 00:34:37.090 --> 00:34:40.179 We're pretty high, but we're not the top two or three. 00:34:42.770 --> 00:34:47.070 But the world average, my heavens, my heavens, 00:34:47.070 --> 00:34:48.929 less than a quarter-- 00:34:48.929 --> 00:34:50.820 less than a quarter. 00:34:50.820 --> 00:34:55.440 OK, what I want to do for a little while-- 00:34:55.440 --> 00:34:59.070 you may remember this picture from last time. 00:34:59.070 --> 00:35:03.090 This is one of those great visual displays 00:35:03.090 --> 00:35:06.450 of quantitative information from Lawrence Livermore. 00:35:06.450 --> 00:35:09.450 Lawrence Livermore, if you go on their website, 00:35:09.450 --> 00:35:14.250 you can find these for 2007, which is why I have 2007, 00:35:14.250 --> 00:35:16.660 for something like 100 countries. 00:35:16.660 --> 00:35:20.130 So if you're curious about what energy looks like in country X, 00:35:20.130 --> 00:35:23.530 you can find a bunch of them. 00:35:23.530 --> 00:35:27.360 And I'm going to show you some variation. 00:35:27.360 --> 00:35:30.600 I do want to make a couple of points about the US, 00:35:30.600 --> 00:35:33.690 because it'll relate to others we will see. 00:35:37.080 --> 00:35:40.680 Notice most of our natural gas is domestic. 00:35:40.680 --> 00:35:42.570 Most of our coal is domestic. 00:35:42.570 --> 00:35:45.450 In fact, our exports for coal in that year exceeded our imports. 00:35:48.330 --> 00:35:49.500 We import biomass. 00:35:49.500 --> 00:35:57.120 I have no idea what that is, but our worry about imports is oil. 00:35:57.120 --> 00:36:02.460 You'll notice for electricity, we do a lot of coal 00:36:02.460 --> 00:36:06.680 and nuclear and gas, a little bit of wind 00:36:06.680 --> 00:36:07.850 and a little bit of solar. 00:36:07.850 --> 00:36:11.990 Now, you may wonder what this little yellow line, which is 00:36:11.990 --> 00:36:15.380 solar going into residential. 00:36:15.380 --> 00:36:18.100 What is that? 00:36:18.100 --> 00:36:19.970 Solar energy used in the household. 00:36:19.970 --> 00:36:20.715 Yeah. 00:36:20.715 --> 00:36:24.730 AUDIENCE: Is that where people have their own solar panels 00:36:24.730 --> 00:36:28.765 and use that to keep their homes, pools, et cetera, 00:36:28.765 --> 00:36:30.140 potentially [INAUDIBLE] the grid? 00:36:30.140 --> 00:36:33.520 RICHARD SCHMALENSEE: Well, probably in 2007, 00:36:33.520 --> 00:36:35.680 it's a little bit too big for that. 00:36:35.680 --> 00:36:37.930 But you're right about the rooftop, at least in part-- 00:36:40.540 --> 00:36:42.070 solar hot water heaters. 00:36:42.070 --> 00:36:47.800 And we actually lead the world in use of solar energy 00:36:47.800 --> 00:36:52.300 because we do a lot of swimming pools heated with solar energy. 00:36:52.300 --> 00:36:54.040 If you take that out, we're not so good. 00:36:54.040 --> 00:37:00.910 But a lot of this is solar heating of swimming pools-- 00:37:00.910 --> 00:37:03.490 a critical thing. 00:37:03.490 --> 00:37:05.840 OK, so let me do a few. 00:37:05.840 --> 00:37:09.070 And again, raise questions if weird things 00:37:09.070 --> 00:37:12.490 strike you or don't strike you. 00:37:12.490 --> 00:37:13.465 This is France. 00:37:18.250 --> 00:37:21.700 What do you see in the electricity side for France? 00:37:21.700 --> 00:37:22.200 Yeah. 00:37:22.200 --> 00:37:23.240 AUDIENCE: A lot of nuclear. 00:37:23.240 --> 00:37:24.865 RICHARD SCHMALENSEE: A lot of nuclear-- 00:37:24.865 --> 00:37:27.740 a lot of nuclear. 00:37:27.740 --> 00:37:31.550 France made a strategic commitment 00:37:31.550 --> 00:37:35.520 to nuclear power years ago. 00:37:35.520 --> 00:37:37.740 Those plants are very expensive. 00:37:37.740 --> 00:37:40.290 They're going to last a long time. 00:37:40.290 --> 00:37:42.210 There they are. 00:37:42.210 --> 00:37:45.352 You don't turn them off. 00:37:45.352 --> 00:37:46.810 You don't turn them off right away. 00:37:49.960 --> 00:37:52.030 Almost all the coal they use is imported. 00:37:52.030 --> 00:37:54.130 Almost all the natural gas is imported. 00:37:54.130 --> 00:37:57.910 Almost all the oil is imported. 00:37:57.910 --> 00:38:00.610 Nuclear has energy security benefits 00:38:00.610 --> 00:38:03.850 for France, which is an important reason 00:38:03.850 --> 00:38:06.320 for that decision. 00:38:06.320 --> 00:38:09.970 It also makes France a leader in nuclear technology. 00:38:09.970 --> 00:38:13.720 To come back to Everson's point about building an industry 00:38:13.720 --> 00:38:16.150 and building a critical mass, it's had that effect. 00:38:16.150 --> 00:38:20.700 France exports reactors, exports designs-- 00:38:20.700 --> 00:38:24.750 a decision, but also a decision based on the fact 00:38:24.750 --> 00:38:29.440 that the natural endowment of these fossil fuels is terrible. 00:38:29.440 --> 00:38:32.590 You can drill a long time and you're not going to find oil. 00:38:32.590 --> 00:38:33.970 They apparently have some. 00:38:33.970 --> 00:38:38.920 I have no idea where it is, but not a lot of it. 00:38:38.920 --> 00:38:42.920 OK, let's look at another country. 00:38:42.920 --> 00:38:43.565 This is Norway. 00:38:46.600 --> 00:38:49.640 And as we saw up here, the big-- 00:38:49.640 --> 00:38:52.870 unfortunately, different countries 00:38:52.870 --> 00:38:55.300 have different sized bars on everything. 00:38:55.300 --> 00:38:58.870 But you'll see the big thing in electricity 00:38:58.870 --> 00:39:02.110 is hydro, as we discussed earlier. 00:39:02.110 --> 00:39:03.610 Norway is lucky. 00:39:03.610 --> 00:39:06.490 They have a lot of natural gas, most of which they export. 00:39:06.490 --> 00:39:10.500 They have a lot of oil, most of which they export. 00:39:10.500 --> 00:39:13.200 That's a country with lots of natural endowments. 00:39:13.200 --> 00:39:16.500 They use some of the natural gas. 00:39:16.500 --> 00:39:20.670 They use some of the oil to generate electricity. 00:39:20.670 --> 00:39:24.050 And apparently, they even burn some wood. 00:39:24.050 --> 00:39:27.680 But mostly, they rely on hydropower, 00:39:27.680 --> 00:39:30.530 and they export the natural gas and the oil. 00:39:30.530 --> 00:39:31.690 Yeah. 00:39:31.690 --> 00:39:35.625 AUDIENCE: So Norway has really high electricity consumption. 00:39:35.625 --> 00:39:38.035 And he explained that the reason's mostly due to hydro? 00:39:38.035 --> 00:39:39.410 RICHARD SCHMALENSEE: Cheap hydro. 00:39:39.410 --> 00:39:39.910 Yes. 00:39:39.910 --> 00:39:44.750 AUDIENCE: Right, but Brazil also has a cost of 70% to 80% hydro. 00:39:44.750 --> 00:39:48.110 But we looked at the electricity consumption graph, 00:39:48.110 --> 00:39:49.345 it was not even listed. 00:39:49.345 --> 00:39:51.770 Is there a reason for that? 00:39:51.770 --> 00:39:54.020 RICHARD SCHMALENSEE: I don't know electricity prices 00:39:54.020 --> 00:39:54.930 in Brazil. 00:39:54.930 --> 00:39:58.030 I did look at this thing for Brazil. 00:39:58.030 --> 00:40:01.013 Brazil is running about 30% hydro 00:40:01.013 --> 00:40:02.180 maybe-- something like that. 00:40:02.180 --> 00:40:04.160 It's pretty high. 00:40:04.160 --> 00:40:07.790 But they may also tax it. 00:40:07.790 --> 00:40:11.600 In a country like Brazil, where a lot of poor people 00:40:11.600 --> 00:40:14.390 don't have electricity, electricity becomes-- 00:40:14.390 --> 00:40:17.480 as it was in the United States, say, through the '20s, 00:40:17.480 --> 00:40:21.860 it becomes predominantly consumed by wealthier people. 00:40:21.860 --> 00:40:23.660 So it becomes something you might want 00:40:23.660 --> 00:40:25.070 to tax for political reasons. 00:40:25.070 --> 00:40:25.820 I'm just guessing. 00:40:25.820 --> 00:40:31.640 I don't know that, and I don't know the cost 00:40:31.640 --> 00:40:34.430 of Brazil's fossil fuel plants. 00:40:34.430 --> 00:40:36.770 They don't have coal, so I assume 00:40:36.770 --> 00:40:38.300 the fossil is mostly oil. 00:40:38.300 --> 00:40:40.055 AUDIENCE: [INAUDIBLE]. 00:40:40.055 --> 00:40:43.640 RICHARD SCHMALENSEE: And oil is not that cheap. 00:40:43.640 --> 00:40:47.120 Oil is not that cheap to generate electricity with. 00:40:47.120 --> 00:40:48.210 Yeah. 00:40:48.210 --> 00:40:50.060 AUDIENCE: For the right-hand side, 00:40:50.060 --> 00:40:55.797 for the uses of the energy, what does the non-energy box mean? 00:40:55.797 --> 00:40:57.380 RICHARD SCHMALENSEE: Chemicals mostly. 00:40:57.380 --> 00:40:58.302 AUDIENCE: OK. 00:40:58.302 --> 00:40:59.510 RICHARD SCHMALENSEE: Use oil. 00:40:59.510 --> 00:41:02.957 I mean, in the later US graph that I showed last time, 00:41:02.957 --> 00:41:03.665 it didn't appear. 00:41:06.830 --> 00:41:09.410 Lawrence Livermore kept it until quite recently. 00:41:09.410 --> 00:41:12.650 And I read that-- since the only thing that 00:41:12.650 --> 00:41:15.500 ever goes in there is oil and natural gas, 00:41:15.500 --> 00:41:17.302 I view that as the chemical industry. 00:41:17.302 --> 00:41:18.260 They're not burning it. 00:41:18.260 --> 00:41:20.120 They're using it for petrochemicals. 00:41:20.120 --> 00:41:20.620 Yeah. 00:41:20.620 --> 00:41:22.470 AUDIENCE: Why does it [INAUDIBLE]?? 00:41:26.700 --> 00:41:29.010 RICHARD SCHMALENSEE: Different parts of the country. 00:41:29.010 --> 00:41:32.220 Maybe it's that they've got-- 00:41:32.220 --> 00:41:36.220 I would guess this is refined product. 00:41:36.220 --> 00:41:40.350 So maybe there is a refinery in Sweden, say, 00:41:40.350 --> 00:41:43.560 that happens to be close to a major source, 00:41:43.560 --> 00:41:47.220 so it's just easier to import some from Sweden. 00:41:47.220 --> 00:41:52.360 Normally, this happens, and you see it a lot of places-- 00:41:52.360 --> 00:41:54.073 well, you see it here in electricity. 00:41:54.073 --> 00:41:55.615 For instance, they import electricity 00:41:55.615 --> 00:41:57.810 and they export electricity. 00:41:57.810 --> 00:41:59.010 That's geography. 00:41:59.010 --> 00:42:02.340 You've got a line going here where demand exceeds supply. 00:42:02.340 --> 00:42:05.130 You got a line over here where supply exceeds demand, 00:42:05.130 --> 00:42:06.240 and we do too. 00:42:06.240 --> 00:42:08.670 You import one energy export at the other. 00:42:08.670 --> 00:42:13.710 I would assume that this is refined product 00:42:13.710 --> 00:42:14.820 that they're getting. 00:42:14.820 --> 00:42:17.190 There happens to be a convenient refinery that's 00:42:17.190 --> 00:42:22.560 willing to sell, and they're exporting mostly crude. 00:42:22.560 --> 00:42:25.470 But normally, that's what this will be. 00:42:25.470 --> 00:42:26.140 Yeah. 00:42:26.140 --> 00:42:29.580 AUDIENCE: Do most countries have the same breakdown of energy 00:42:29.580 --> 00:42:31.380 services in rejected energy? 00:42:31.380 --> 00:42:33.045 Are there some type of [INAUDIBLE]?? 00:42:33.045 --> 00:42:34.878 RICHARD SCHMALENSEE: I haven't looked at it. 00:42:34.878 --> 00:42:38.470 I assume they're similar, because it has to do with-- 00:42:38.470 --> 00:42:40.620 I mean, it's inefficiency. 00:42:40.620 --> 00:42:42.690 So you're going to lose a bunch up here, 00:42:42.690 --> 00:42:45.840 depending on how efficient your generation plant is. 00:42:45.840 --> 00:42:48.480 And how you do the efficiency for hydro and nuclear 00:42:48.480 --> 00:42:51.630 is just a tricky definitional issue. 00:42:54.180 --> 00:42:55.980 Everybody's going to have more reject. 00:42:55.980 --> 00:42:58.860 I thought you'd have more rejected than used. 00:42:58.860 --> 00:43:00.720 I think that's what we have, isn't it? 00:43:00.720 --> 00:43:03.300 Let's take a look. 00:43:03.300 --> 00:43:07.490 There's France with more rejected than used. 00:43:07.490 --> 00:43:10.170 There's the US is more rejected than used. 00:43:10.170 --> 00:43:11.640 And there are the Norwegians. 00:43:11.640 --> 00:43:13.440 Aside from the size of the blocs, 00:43:13.440 --> 00:43:16.740 the numbers say more used than rejected. 00:43:16.740 --> 00:43:18.670 Got me. 00:43:18.670 --> 00:43:19.230 You got me. 00:43:19.230 --> 00:43:19.590 Yeah. 00:43:19.590 --> 00:43:21.090 AUDIENCE: Maybe it's due to the fact 00:43:21.090 --> 00:43:23.880 that, like, hydroelectricity is a lot more efficient, as 00:43:23.880 --> 00:43:27.960 opposed to, like, nuclear coal burns off a lot, 00:43:27.960 --> 00:43:29.835 and a lot of heat is lost or not transferred. 00:43:29.835 --> 00:43:32.610 RICHARD SCHMALENSEE: That may just be how you define it. 00:43:35.280 --> 00:43:38.490 How do you define the efficiency of a hydro plant? 00:43:38.490 --> 00:43:42.570 I don't know what they do in terms of the efficiency. 00:43:42.570 --> 00:43:44.190 I'd have to look. 00:43:44.190 --> 00:43:48.660 In transportation, you've got more waste than used. 00:43:48.660 --> 00:43:52.560 In industrial, the reverse. 00:43:52.560 --> 00:44:01.440 In household, in commercial, yeah, if I read-- 00:44:01.440 --> 00:44:03.510 I can't tell how much is going down here. 00:44:03.510 --> 00:44:06.930 I can't sort it out by sector. 00:44:06.930 --> 00:44:08.340 That's a departure. 00:44:08.340 --> 00:44:10.930 Most countries have more rejected than used. 00:44:10.930 --> 00:44:12.792 It might be the hydro. 00:44:12.792 --> 00:44:14.130 Yeah, Matthew. 00:44:14.130 --> 00:44:15.860 AUDIENCE: What would cause a country that 00:44:15.860 --> 00:44:20.373 has such large domestic amounts of natural gas and petroleum 00:44:20.373 --> 00:44:22.235 to develop hydro like they do? 00:44:22.235 --> 00:44:25.220 RICHARD SCHMALENSEE: They developed the hydro earlier. 00:44:25.220 --> 00:44:29.920 So the hydro is earlier, and then they found the natural gas 00:44:29.920 --> 00:44:33.940 and petroleum offshore later. 00:44:33.940 --> 00:44:37.000 And they worked very hard at learning 00:44:37.000 --> 00:44:39.250 how to manage hydro systems. 00:44:39.250 --> 00:44:43.120 It's actually a little tricky because it doesn't always rain 00:44:43.120 --> 00:44:46.360 and the snow doesn't always melt when you want it to. 00:44:46.360 --> 00:44:50.620 And they also worked very hard to develop hydro 00:44:50.620 --> 00:44:54.460 without wrecking the environment. 00:44:54.460 --> 00:44:56.350 So once you've got that capability 00:44:56.350 --> 00:44:59.860 and you're good at it, and you've got the geography 00:44:59.860 --> 00:45:02.470 and you discover you've got a lot of natural gas and oil 00:45:02.470 --> 00:45:05.290 offshore, it may make more sense to export 00:45:05.290 --> 00:45:07.670 that than to burn it locally. 00:45:07.670 --> 00:45:08.170 Yeah. 00:45:08.170 --> 00:45:10.900 AUDIENCE: Could you please give examples of energy services 00:45:10.900 --> 00:45:13.992 which is [INAUDIBLE]? 00:45:13.992 --> 00:45:15.700 RICHARD SCHMALENSEE: Oh, energy services? 00:45:18.310 --> 00:45:24.740 Driving, running factories. 00:45:24.740 --> 00:45:30.020 And this is mostly heating, ventilating, 00:45:30.020 --> 00:45:33.790 and air conditioning, but electric ranges, refrigerators, 00:45:33.790 --> 00:45:36.790 running your computer, et cetera, et cetera, 00:45:36.790 --> 00:45:40.600 all the things you use it for. 00:45:40.600 --> 00:45:41.410 This is puzzling. 00:45:41.410 --> 00:45:44.260 AUDIENCE: But doesn't it come from the electricity and heat? 00:45:44.260 --> 00:45:47.716 I would [INAUDIBLE] it on the left side of that box. 00:45:47.716 --> 00:45:49.510 RICHARD SCHMALENSEE: Well, your computer 00:45:49.510 --> 00:45:53.110 doesn't use 100% of the energy and the electricity 00:45:53.110 --> 00:45:54.310 for useful work. 00:45:54.310 --> 00:45:56.290 There's waste heat. 00:45:56.290 --> 00:45:59.290 Your refrigerator wastes-- there's waste heat that 00:45:59.290 --> 00:46:00.415 comes off the refrigerator. 00:46:00.415 --> 00:46:01.832 AUDIENCE: There's more [INAUDIBLE] 00:46:01.832 --> 00:46:03.360 services than electricity and heat. 00:46:03.360 --> 00:46:04.955 There's 640 versus-- 00:46:04.955 --> 00:46:08.930 RICHARD SCHMALENSEE: Well, here you're running machinery. 00:46:08.930 --> 00:46:10.760 I mean-- oh, I see what you're saying. 00:46:10.760 --> 00:46:13.670 I mean, here you're running a car from gasoline. 00:46:13.670 --> 00:46:18.570 Here, you are running machinery of various kinds. 00:46:18.570 --> 00:46:19.200 I don't know. 00:46:19.200 --> 00:46:21.680 I'd have to list it. 00:46:21.680 --> 00:46:29.307 And you're also burning oil directly to heat. 00:46:29.307 --> 00:46:31.640 You're burning oil directly to heat in all these places. 00:46:37.300 --> 00:46:39.070 We'll go through some other examples, 00:46:39.070 --> 00:46:41.650 but I'm not sure what you're missing. 00:46:41.650 --> 00:46:46.240 I guess the thing to think of is what do you use energy for. 00:46:46.240 --> 00:46:49.300 I used it for my electric toothbrush this morning. 00:46:49.300 --> 00:46:50.410 That's an energy service. 00:46:53.560 --> 00:46:56.445 Energy powered that little machine. 00:46:56.445 --> 00:46:57.820 That's something that energy did. 00:46:57.820 --> 00:47:00.760 I mean, you don't want electricity. 00:47:00.760 --> 00:47:04.850 You want things that electricity runs. 00:47:04.850 --> 00:47:07.130 I care about keeping the food cold. 00:47:07.130 --> 00:47:09.890 I get no utility from the electricity that 00:47:09.890 --> 00:47:12.140 runs through the refrigerator. 00:47:12.140 --> 00:47:15.550 The service is keeping the food cold. 00:47:15.550 --> 00:47:18.400 The service is the refrigeration. 00:47:18.400 --> 00:47:20.470 The energy input is the energy input. 00:47:20.470 --> 00:47:22.840 That's produced by energy and capital. 00:47:22.840 --> 00:47:27.470 Capital in the refrigerator energy comes into it. 00:47:27.470 --> 00:47:31.572 Now, we'll come back. 00:47:31.572 --> 00:47:32.780 What else have I got for you? 00:47:32.780 --> 00:47:33.613 Oh, there's Germany. 00:47:36.350 --> 00:47:39.860 Germany also uses a fair amount of nuclear, which it 00:47:39.860 --> 00:47:41.210 says it's going to shut down. 00:47:43.960 --> 00:47:46.430 And it has shut down a fair amount. 00:47:46.430 --> 00:47:49.174 It also uses coal. 00:47:49.174 --> 00:47:51.700 It also buys electricity, and will probably 00:47:51.700 --> 00:47:54.400 buy more electricity from France if it shuts 00:47:54.400 --> 00:47:58.000 those nuclear plants down fast. 00:47:58.000 --> 00:48:01.990 Germany, again, has coal, but doesn't really-- 00:48:01.990 --> 00:48:05.860 it does have coal, but it really doesn't have natural gas 00:48:05.860 --> 00:48:09.520 and it doesn't have any oil to speak of. 00:48:09.520 --> 00:48:12.040 There again, you'll see it's importing a ton of oil 00:48:12.040 --> 00:48:13.450 and exporting some. 00:48:13.450 --> 00:48:17.020 And this has got to be refined product, 00:48:17.020 --> 00:48:19.690 and less stuff just gets shipped through on a tanker somehow. 00:48:22.700 --> 00:48:29.310 But actually, that's interesting. 00:48:29.310 --> 00:48:33.150 This has got to be heat. 00:48:33.150 --> 00:48:35.370 You'll notice it uses this particular color 00:48:35.370 --> 00:48:36.480 for electricity. 00:48:36.480 --> 00:48:40.590 And then coming out of here is this red band. 00:48:40.590 --> 00:48:45.360 In a lot of countries, much more than in the US, 00:48:45.360 --> 00:48:49.860 power plants provide heat to nearby buildings. 00:48:49.860 --> 00:48:52.880 So it's called district heating or combined heat and power. 00:48:52.880 --> 00:48:58.250 And that has to be what this red is, because it's not nuclear. 00:48:58.250 --> 00:49:01.475 This has got to be heat going to nearby industry. 00:49:04.650 --> 00:49:07.670 Anything else weird here? 00:49:07.670 --> 00:49:12.630 Not much, except you'll see solar going into commercial. 00:49:12.630 --> 00:49:17.670 Germany has big solar subsidies, and that may actually 00:49:17.670 --> 00:49:21.570 be solar panels on the roofs of warehouses and stores. 00:49:21.570 --> 00:49:26.920 It may be big enough to register, even in 2007. 00:49:26.920 --> 00:49:28.950 Anything else here? 00:49:28.950 --> 00:49:32.670 Oh, and the natural gas export-- most of Germany's natural gas 00:49:32.670 --> 00:49:35.190 comes from Russia. 00:49:35.190 --> 00:49:38.710 So if you want to worry about energy security, 00:49:38.710 --> 00:49:41.470 worry about energy security. 00:49:41.470 --> 00:49:44.170 And that's just transshipment of some Russian gas. 00:49:46.890 --> 00:49:48.810 This is Japan. 00:49:48.810 --> 00:49:50.880 Now if you want to worry about energy security, 00:49:50.880 --> 00:49:54.360 look over on the left. 00:49:54.360 --> 00:49:56.600 Everything is imported. 00:49:56.600 --> 00:50:00.780 Nuclear power's important. 00:50:00.780 --> 00:50:03.018 Nuclear plants are being shut down, or are shut down. 00:50:03.018 --> 00:50:05.310 I'm not sure whether there's anything currently running 00:50:05.310 --> 00:50:05.893 at the moment. 00:50:08.310 --> 00:50:12.510 You wonder why Japan is energy efficient. 00:50:12.510 --> 00:50:14.880 Suppose you're having a political debate 00:50:14.880 --> 00:50:17.790 about energy policy, and you look at the left-hand side 00:50:17.790 --> 00:50:19.520 of this graph. 00:50:19.520 --> 00:50:22.210 And you worry about energy security, 00:50:22.210 --> 00:50:25.837 and you say, well, we can build nuclear plants 00:50:25.837 --> 00:50:28.420 and develop an efficient nuclear industry, which they've done. 00:50:31.420 --> 00:50:36.210 Not clear what else you can do but be efficient in energy use. 00:50:36.210 --> 00:50:41.700 Small houses, taxes on energy to hold down consumption, 00:50:41.700 --> 00:50:43.480 and so on and so forth. 00:50:43.480 --> 00:50:48.070 So to some extent, the natural endowment and other things 00:50:48.070 --> 00:50:54.280 will drive the local policy, will drive the energy mix. 00:50:54.280 --> 00:50:57.880 So let's leave the developed world. 00:50:57.880 --> 00:51:02.320 There is a middle income neighbor, Mexico. 00:51:02.320 --> 00:51:04.740 Mexico has oil. 00:51:04.740 --> 00:51:08.490 Mexico is a significant oil exporter. 00:51:08.490 --> 00:51:11.710 Mexico's oil production is declining. 00:51:11.710 --> 00:51:18.150 So Mexico has a long-term problem, 00:51:18.150 --> 00:51:21.780 but it heavily uses its oil and its natural gas 00:51:21.780 --> 00:51:23.475 to generate electricity. 00:51:26.730 --> 00:51:29.020 What else do I want to say? 00:51:29.020 --> 00:51:32.760 Oh, all of these have electricity 00:51:32.760 --> 00:51:36.000 going into transportation. 00:51:36.000 --> 00:51:41.340 And that's not electric cars in Mexico in 2007. 00:51:41.340 --> 00:51:43.005 That's railroads and mass transit. 00:51:45.760 --> 00:51:52.380 So what else do we see in Mexico? 00:51:52.380 --> 00:51:56.280 Not too much. 00:51:56.280 --> 00:51:57.670 Anything grab you? 00:51:57.670 --> 00:51:58.912 Yeah. 00:51:58.912 --> 00:52:00.870 AUDIENCE: I noticed that all their solar energy 00:52:00.870 --> 00:52:03.110 is going directly to commercial, and that [INAUDIBLE] 00:52:03.110 --> 00:52:04.080 use electricity. 00:52:04.080 --> 00:52:06.480 What do you think that they might be using it for, 00:52:06.480 --> 00:52:08.160 on the commercial level? 00:52:08.160 --> 00:52:11.760 RICHARD SCHMALENSEE: Hot water would be my guess. 00:52:11.760 --> 00:52:16.680 Solar hot water is a pretty mature, pretty widespread 00:52:16.680 --> 00:52:17.190 technology. 00:52:17.190 --> 00:52:18.930 I'm surprised we don't see more of it 00:52:18.930 --> 00:52:22.410 residential, because that's a pretty good climate for it. 00:52:22.410 --> 00:52:25.200 And electricity is not that cheap or reliable in Mexico. 00:52:25.200 --> 00:52:25.890 Yeah. 00:52:25.890 --> 00:52:29.078 AUDIENCE: [INAUDIBLE] had my hand raised before that. 00:52:29.078 --> 00:52:31.170 I'm just going to ask something more general. 00:52:31.170 --> 00:52:32.253 RICHARD SCHMALENSEE: Sure. 00:52:32.253 --> 00:52:34.470 AUDIENCE: I noticed that for Germany, [INAUDIBLE] 00:52:34.470 --> 00:52:36.470 in Japan [INAUDIBLE] nuclear. 00:52:36.470 --> 00:52:39.850 I just though, given their endowments, 00:52:39.850 --> 00:52:43.890 that especially for Germany, making such a hard decision 00:52:43.890 --> 00:52:48.830 about closing all their nuclear, I just didn't know-- 00:52:48.830 --> 00:52:50.730 a general comment about countries. 00:52:50.730 --> 00:52:55.980 Why would you just go ahead and purchase a huge blow 00:52:55.980 --> 00:52:56.850 to yourself? 00:52:56.850 --> 00:52:59.916 Because you don't have so many other resources? 00:52:59.916 --> 00:53:04.390 [INAUDIBLE] so maybe they're scared, 00:53:04.390 --> 00:53:07.500 so they want to veer away from the nuclear. 00:53:07.500 --> 00:53:10.200 But given their situation, as you said other, 00:53:10.200 --> 00:53:13.620 than being extra efficient, you may be 00:53:13.620 --> 00:53:16.720 forced to go down some roads. 00:53:16.720 --> 00:53:21.150 And I'm just curious to see why any political process, 00:53:21.150 --> 00:53:23.728 or lobbying, or whatever could have happened to lead you 00:53:23.728 --> 00:53:26.210 down the quite tricky road, especially 00:53:26.210 --> 00:53:30.420 with nuclear generators shutting down on a very small fraction, 00:53:30.420 --> 00:53:31.420 if I remember correctly. 00:53:31.420 --> 00:53:33.380 And they have to replace that with, 00:53:33.380 --> 00:53:35.310 what, the natural gas in Russia. 00:53:35.310 --> 00:53:37.010 [INAUDIBLE] Russia [INAUDIBLE]. 00:53:37.010 --> 00:53:40.080 RICHARD SCHMALENSEE: It's caused a lot of people outside Germany 00:53:40.080 --> 00:53:42.480 to scratch their heads. 00:53:42.480 --> 00:53:47.160 But you got to remember, Germany has a very, very powerful Green 00:53:47.160 --> 00:53:48.390 Party. 00:53:48.390 --> 00:53:49.950 The environmental movement in Germany 00:53:49.950 --> 00:53:54.270 is stronger than here-- stronger than a lot of places. 00:53:54.270 --> 00:53:57.150 It was a political calculation. 00:53:57.150 --> 00:54:02.820 Mrs. Merkel is not crazy and she's not dumb. 00:54:02.820 --> 00:54:05.130 So to answer that question-- 00:54:05.130 --> 00:54:06.307 I mean, I've read answers. 00:54:06.307 --> 00:54:07.890 I can't reproduce them because I don't 00:54:07.890 --> 00:54:10.650 know the German system that well, 00:54:10.650 --> 00:54:12.390 but that's a political calculation. 00:54:16.620 --> 00:54:20.780 It remains to be seen how quickly they do it, in fact. 00:54:20.780 --> 00:54:23.800 It remains to be seen what the public reaction is going 00:54:23.800 --> 00:54:26.740 to be when they realize how much nuclear electricity 00:54:26.740 --> 00:54:30.580 they're importing from France right next door 00:54:30.580 --> 00:54:34.900 and elsewhere to fill the gap. 00:54:34.900 --> 00:54:39.610 They are also heavily committed to renewables, and have been. 00:54:39.610 --> 00:54:42.610 They're going to spend a lot of money building 00:54:42.610 --> 00:54:46.870 offshore windmills, which won't replace nuclear power plants, 00:54:46.870 --> 00:54:50.290 because the wind doesn't always blow, 00:54:50.290 --> 00:54:55.210 but that's part of the political calculus. 00:54:55.210 --> 00:55:01.210 If you were a green eyeshade economist, and you said, 00:55:01.210 --> 00:55:05.530 well, the public overstates the risk-- 00:55:05.530 --> 00:55:09.430 Germany doesn't have that many tidal waves, 00:55:09.430 --> 00:55:13.060 these reactors are inland, we're not earthquake prone, 00:55:13.060 --> 00:55:19.810 these facilities are much safer, what we really should do 00:55:19.810 --> 00:55:26.510 is take a deep breath, review our safety considerations, 00:55:26.510 --> 00:55:28.970 and go on, and reconsider how much we 00:55:28.970 --> 00:55:32.390 want to do with nuclear versus renewables going forward. 00:55:32.390 --> 00:55:37.790 But that's a green eyeshade cost-benefit calculation. 00:55:37.790 --> 00:55:42.290 The political world, as we will discuss next week, 00:55:42.290 --> 00:55:45.600 is not always the green eyeshade world. 00:55:45.600 --> 00:55:52.510 It's a world in which you may do things because of their impact 00:55:52.510 --> 00:55:55.990 on your political situation, on your ability 00:55:55.990 --> 00:55:59.530 to get something else done, or your ability to maintain office 00:55:59.530 --> 00:56:03.700 or a variety of other things that have economic costs. 00:56:03.700 --> 00:56:08.370 Not irrational, but a different kind of calculation, 00:56:08.370 --> 00:56:11.390 which I hope at the end of this semester we all 00:56:11.390 --> 00:56:14.060 come a little closer to understanding. 00:56:14.060 --> 00:56:15.550 But that's a hard one. 00:56:15.550 --> 00:56:18.140 That one in particular is hard. 00:56:18.140 --> 00:56:19.460 People gasped. 00:56:19.460 --> 00:56:22.040 Even knowledgeable people gasped. 00:56:22.040 --> 00:56:26.960 The current, or is he former, German foreign minister, 00:56:26.960 --> 00:56:29.930 who came from the Green Party, spoke at MIT 00:56:29.930 --> 00:56:34.130 toward the end of last semester about that. 00:56:34.130 --> 00:56:36.470 And I went to the talk, and I actually went to dinner 00:56:36.470 --> 00:56:39.440 with him afterward. 00:56:39.440 --> 00:56:44.990 And it still isn't clear to say what they were thinking 00:56:44.990 --> 00:56:49.340 and why, because I don't know German politics well enough. 00:56:49.340 --> 00:56:51.650 OK, good question. 00:56:51.650 --> 00:56:54.240 There's China. 00:56:54.240 --> 00:56:59.530 China, you'll notice, has a lot of coal, 00:56:59.530 --> 00:57:01.480 and their electricity is driven-- 00:57:01.480 --> 00:57:06.323 2007 is true, still true, driven by coal. 00:57:06.323 --> 00:57:07.240 We have a lot of coal. 00:57:07.240 --> 00:57:09.220 China has a lot of coal. 00:57:09.220 --> 00:57:10.810 They burn the coal. 00:57:10.810 --> 00:57:16.050 Building power plants at a rapid rate. 00:57:16.050 --> 00:57:20.310 That's the main story here I think 00:57:20.310 --> 00:57:21.825 that's of any interesting. 00:57:24.800 --> 00:57:27.000 This is India. 00:57:27.000 --> 00:57:28.460 India is not as wealthy as China. 00:57:28.460 --> 00:57:30.960 India has some coal. 00:57:30.960 --> 00:57:32.060 Oil is imported. 00:57:32.060 --> 00:57:37.940 Now you see biomass in the residential area, 00:57:37.940 --> 00:57:39.800 oddly enough, much more important in India 00:57:39.800 --> 00:57:45.550 than in China, structure of villages and so forth. 00:57:45.550 --> 00:57:47.470 But this is an estimate now, basically, 00:57:47.470 --> 00:57:50.980 of wood being burned to cook, rather than 00:57:50.980 --> 00:57:54.370 other fuels being used. 00:57:54.370 --> 00:57:59.068 And electricity is again dominated by coal. 00:57:59.068 --> 00:58:00.235 Most of the oil is imported. 00:58:04.090 --> 00:58:08.540 with again, some exports, which have to be refined product. 00:58:08.540 --> 00:58:09.040 Yeah. 00:58:09.040 --> 00:58:10.880 AUDIENCE: So a lot of the breakdowns 00:58:10.880 --> 00:58:12.805 we've been looking at are all by the country. 00:58:12.805 --> 00:58:13.420 RICHARD SCHMALENSEE: Yes. 00:58:13.420 --> 00:58:15.700 AUDIENCE: But some of these countries are really big. 00:58:15.700 --> 00:58:19.700 Would it make sense, especially for internal policy, 00:58:19.700 --> 00:58:22.010 to look at different regions, especially 00:58:22.010 --> 00:58:23.160 like in India and China? 00:58:23.160 --> 00:58:26.375 I feel like this big picture blurs things together. 00:58:26.375 --> 00:58:28.460 RICHARD SCHMALENSEE: Well, you're right. 00:58:28.460 --> 00:58:30.150 These are the data we have. 00:58:30.150 --> 00:58:32.840 There's some work ongoing at MIT, 00:58:32.840 --> 00:58:35.660 in the joint program on the Science and Policy 00:58:35.660 --> 00:58:39.410 of Global Change to model China regionally. 00:58:39.410 --> 00:58:41.420 And of course, you can model the US regionally. 00:58:41.420 --> 00:58:44.660 That model exists. 00:58:44.660 --> 00:58:46.820 And when you do Europe, you're modeling, 00:58:46.820 --> 00:58:48.380 to some extent, bite-sized countries. 00:58:48.380 --> 00:58:49.100 But you're right. 00:58:49.100 --> 00:58:51.050 India and China are anomalous. 00:58:51.050 --> 00:58:56.630 I think that the basic story, coal 00:58:56.630 --> 00:58:59.990 is the big driver, that's true. 00:58:59.990 --> 00:59:02.720 They're putting photovoltaics in Western China, 00:59:02.720 --> 00:59:08.120 but the big story is coal and some offshore oil. 00:59:08.120 --> 00:59:11.180 Similarly in India, but of course, 00:59:11.180 --> 00:59:14.810 you don't have cooking fires in downtown Mumbai. 00:59:14.810 --> 00:59:17.060 So this notion that there's a lot 00:59:17.060 --> 00:59:21.410 of mass going into residential use, that's true in aggregate. 00:59:21.410 --> 00:59:22.580 It's not true everywhere. 00:59:22.580 --> 00:59:23.930 Can't be true everywhere. 00:59:23.930 --> 00:59:25.640 There are places in the deserts where 00:59:25.640 --> 00:59:27.830 there isn't that much wind, and there 00:59:27.830 --> 00:59:29.480 are metropolitan areas where it's 00:59:29.480 --> 00:59:32.330 tough to gather wood to cook. 00:59:32.330 --> 00:59:36.080 So you're right, these are big countries. 00:59:36.080 --> 00:59:37.205 Doing this was heroic. 00:59:42.720 --> 00:59:48.150 As I say, there are projects on now to disaggregate China. 00:59:48.150 --> 00:59:50.790 But they aren't that good-- 00:59:50.790 --> 00:59:51.780 they aren't that good. 00:59:51.780 --> 00:59:53.040 Yeah. 00:59:53.040 --> 00:59:56.430 AUDIENCE: I noticed that almost all the electricity and heat 00:59:56.430 --> 00:59:59.010 that India generates goes to this rejected energy. 00:59:59.010 --> 01:00:00.840 Is that just because they're using 01:00:00.840 --> 01:00:04.725 inefficient, outdated generators? 01:00:04.725 --> 01:00:06.943 RICHARD SCHMALENSEE: That would be my guess, yeah. 01:00:06.943 --> 01:00:08.110 Yeah, I hadn't noticed that. 01:00:08.110 --> 01:00:12.390 But you're right, as compared to-- let's see. 01:00:12.390 --> 01:00:15.390 Yeah, just by i the relative size 01:00:15.390 --> 01:00:21.150 of the useful and the wasted are different in China, 01:00:21.150 --> 01:00:24.210 where the plants are newer than in India. 01:00:24.210 --> 01:00:26.766 Yeah, I think that's right. 01:00:26.766 --> 01:00:29.460 AUDIENCE: [INAUDIBLE] stay there, the electricity grid. 01:00:29.460 --> 01:00:31.293 RICHARD SCHMALENSEE: Yeah, that's true, too. 01:00:31.293 --> 01:00:33.060 The Chinese grid is much more modern. 01:00:33.060 --> 01:00:36.330 China has a lot of very high voltage lines 01:00:36.330 --> 01:00:37.320 that are quite new. 01:00:37.320 --> 01:00:39.150 Their losses are less. 01:00:39.150 --> 01:00:42.690 So also, often, you measure rejected 01:00:42.690 --> 01:00:46.140 as the difference between stuff that's generated 01:00:46.140 --> 01:00:48.060 and stuff that gets paid for. 01:00:48.060 --> 01:00:52.560 So a lot of these countries have huge numbers for losses, 01:00:52.560 --> 01:00:53.820 and a lot of that's theft. 01:00:53.820 --> 01:00:55.890 I don't know if that's true here, 01:00:55.890 --> 01:00:58.140 but I know it's true in some places. 01:00:58.140 --> 01:01:00.270 OK, there's India. 01:01:00.270 --> 01:01:01.860 Just for humor, here's Saudi Arabia. 01:01:04.842 --> 01:01:06.410 [CHUCKLES] 01:01:06.410 --> 01:01:07.957 They use oil and gas for everything. 01:01:07.957 --> 01:01:09.290 Don't bother with anything else. 01:01:09.290 --> 01:01:11.870 And they appear to import wood for fires. 01:01:11.870 --> 01:01:13.490 I don't know what that's about. 01:01:13.490 --> 01:01:16.310 But you notice all the biomass is, imported 01:01:16.310 --> 01:01:17.690 and it's all residential. 01:01:17.690 --> 01:01:20.090 And I assume that fires for show. 01:01:20.090 --> 01:01:23.330 I don't know what that is. 01:01:23.330 --> 01:01:26.810 And there is a poor country, and poor countries 01:01:26.810 --> 01:01:29.410 tend to look like that. 01:01:29.410 --> 01:01:33.020 A lot of biomass, all the oil is imported, 01:01:33.020 --> 01:01:38.470 all the coal's imported, little snippets of other things. 01:01:38.470 --> 01:01:44.050 And then just to really get there, there's Cambodia. 01:01:44.050 --> 01:01:46.120 Some hydro, I don't know where it is. 01:01:46.120 --> 01:01:49.870 Well, I do know where it is-- not much of it. 01:01:49.870 --> 01:01:54.790 Domestic biomass used in residences. 01:01:54.790 --> 01:01:59.420 All the oil is imported, used to power motorbikes. 01:01:59.420 --> 01:01:59.920 Yeah. 01:01:59.920 --> 01:02:03.190 AUDIENCE: Do you know what biomass is? 01:02:03.190 --> 01:02:06.325 I know it shows it on the left side of the box [INAUDIBLE] 01:02:06.325 --> 01:02:08.950 domestic, but it doesn't do that for wood, [INAUDIBLE],, hydro, 01:02:08.950 --> 01:02:10.658 and solar energy. 01:02:10.658 --> 01:02:12.700 RICHARD SCHMALENSEE: Well, here, there isn't any. 01:02:12.700 --> 01:02:15.160 Hydro is domestic. 01:02:15.160 --> 01:02:17.832 If you import electricity as they do, it shows up here. 01:02:17.832 --> 01:02:18.790 AUDIENCE: Right, right. 01:02:18.790 --> 01:02:21.082 So biomass always comes up on the left side of the box, 01:02:21.082 --> 01:02:24.116 even though it's still domestic, whereas like solar and hydro 01:02:24.116 --> 01:02:25.810 [INAUDIBLE]. 01:02:25.810 --> 01:02:28.440 RICHARD SCHMALENSEE: I'm not sure. 01:02:28.440 --> 01:02:31.950 There is some-- I'm not sure what you mean. 01:02:31.950 --> 01:02:34.560 AUDIENCE: The source is biomass as domestic, as well as solar, 01:02:34.560 --> 01:02:35.712 or geothermal, or-- 01:02:35.712 --> 01:02:37.920 RICHARD SCHMALENSEE: I think solar and geothermal are 01:02:37.920 --> 01:02:39.660 by definition domestic, since these 01:02:39.660 --> 01:02:43.720 are used except for solar, for hot water, and so forth. 01:02:43.720 --> 01:02:46.260 These are used for electricity and they're domestic. 01:02:46.260 --> 01:02:49.340 You don't import sun. 01:02:49.340 --> 01:02:52.110 You import electricity. 01:02:52.110 --> 01:02:54.000 So I don't know how this is powered, 01:02:54.000 --> 01:02:55.570 but you import electricity. 01:02:55.570 --> 01:02:57.030 You don't import. 01:02:57.030 --> 01:02:59.467 I mean, if you had a line to a nuclear plant 01:02:59.467 --> 01:03:01.050 across the border, you might count it. 01:03:01.050 --> 01:03:04.440 But electricity is electricity. 01:03:04.440 --> 01:03:08.430 OK, so I want to close with a little bit of data 01:03:08.430 --> 01:03:10.813 on rich countries and poor countries. 01:03:10.813 --> 01:03:11.730 And this is something. 01:03:11.730 --> 01:03:15.600 You should see you will see data lots of places, 01:03:15.600 --> 01:03:18.840 in some of the assignments, that relate to the OECD. 01:03:18.840 --> 01:03:20.310 This is just for your background. 01:03:20.310 --> 01:03:21.690 This is who the OECD is. 01:03:21.690 --> 01:03:24.900 It's basically a rich countries club, 01:03:24.900 --> 01:03:28.050 Organization for Economic Cooperation and Development, 01:03:28.050 --> 01:03:31.530 with a few not quite so rich countries 01:03:31.530 --> 01:03:35.820 that have entered recently under US and other sponsorship. 01:03:35.820 --> 01:03:39.630 So we pulled in Mexico and Chile. 01:03:42.360 --> 01:03:44.347 We probably pulled in Korea as well. 01:03:44.347 --> 01:03:45.930 Korea is getting to be a rich country. 01:03:45.930 --> 01:03:50.640 It began, it was Japan, Western Europe, and North America. 01:03:50.640 --> 01:03:55.855 But you see, it's just under 18% of the world population, 01:03:55.855 --> 01:03:58.640 almost half of the world's energy use. 01:03:58.640 --> 01:04:00.950 You don't go too far wrong thinking of this 01:04:00.950 --> 01:04:03.200 is the rich countries club. 01:04:03.200 --> 01:04:07.190 So I want to do a little rich and poor here going forward 01:04:07.190 --> 01:04:10.310 in aggregate, not country by country. 01:04:10.310 --> 01:04:13.880 This is energy use. 01:04:13.880 --> 01:04:16.160 This is from the EIA assignment. 01:04:16.160 --> 01:04:19.850 This is energy use actual, the first three bars, 01:04:19.850 --> 01:04:20.750 and projected. 01:04:20.750 --> 01:04:23.090 But this is a pretty standard projection. 01:04:23.090 --> 01:04:27.890 The growth is expected to come outside the OECD. 01:04:27.890 --> 01:04:30.320 17 and 1/2% rich country population 01:04:30.320 --> 01:04:32.630 of the world, half the energy use. 01:04:32.630 --> 01:04:35.720 You see by the time you get to 2030, 2035, 01:04:35.720 --> 01:04:38.180 it's well under half the energy use. 01:04:38.180 --> 01:04:44.150 Some growth in rich countries, most of the growth outside. 01:04:44.150 --> 01:04:48.380 If you do the numbers, this is one of those-- 01:04:48.380 --> 01:04:53.690 suppose the world had actual OECD energy per capita. 01:04:53.690 --> 01:04:56.720 All else equal, that would increase world 01:04:56.720 --> 01:04:58.820 use-- this is just doing percentages. 01:04:58.820 --> 01:05:00.560 This would increase world consumption 01:05:00.560 --> 01:05:02.840 by a factor of almost 3. 01:05:02.840 --> 01:05:05.900 If the whole world had us energy per capita, 01:05:05.900 --> 01:05:08.645 it would increase world consumption by a factor of 4. 01:05:11.270 --> 01:05:15.320 No growth-- just take a snapshot of 2009. 01:05:15.320 --> 01:05:18.450 Those are scary numbers. 01:05:18.450 --> 01:05:21.810 And of course, there will be growth. 01:05:21.810 --> 01:05:25.950 This is where is it going to happen. 01:05:25.950 --> 01:05:28.320 And you'll see the projection-- and again, 01:05:28.320 --> 01:05:33.030 up to 2008, the actual, and we're getting close to 2015, 01:05:33.030 --> 01:05:36.030 is non-OECD Asia. 01:05:36.030 --> 01:05:37.890 What is non-OECD Asia? 01:05:37.890 --> 01:05:41.970 Non-OECD Asia is mainly India and China, 01:05:41.970 --> 01:05:44.340 and Indonesia for that matter, but it's mainly 01:05:44.340 --> 01:05:46.720 India and China. 01:05:46.720 --> 01:05:48.840 So here's coal consumption. 01:05:48.840 --> 01:05:52.830 Recall, I said the coal market share has been growing. 01:05:52.830 --> 01:05:54.210 Where is that coming from? 01:05:54.210 --> 01:05:59.480 Non-OECD Asia-- India and China. 01:05:59.480 --> 01:06:03.060 You will recall India and China have a lot of coal. 01:06:03.060 --> 01:06:11.390 India and China, as they move out of poverty, are burning it. 01:06:11.390 --> 01:06:14.990 Not unreasonable at one level, but that's 01:06:14.990 --> 01:06:18.770 how you get CO2 emissions growth. 01:06:18.770 --> 01:06:26.120 This is world energy-related CO2 emissions, OECD, non-OECD. 01:06:26.120 --> 01:06:27.060 What's the growth? 01:06:27.060 --> 01:06:31.511 The growth is non-OECD Asia burning coal largely-- 01:06:31.511 --> 01:06:32.780 largely. 01:06:32.780 --> 01:06:36.980 So again, if you run these kinds of numbers, 01:06:36.980 --> 01:06:41.000 suppose the world got to where the OECD is, or suppose 01:06:41.000 --> 01:06:44.930 the world got to where the US is, forget growth. 01:06:44.930 --> 01:06:49.655 After that, you'd have CO2 emissions up by a multiple. 01:06:54.650 --> 01:06:57.450 As we will discuss when we talk about climate-- 01:06:57.450 --> 01:06:59.600 we'll talk about climate a little bit next time 01:06:59.600 --> 01:07:03.062 and more later, that's scary. 01:07:03.062 --> 01:07:08.300 If you go to double CO2 emissions, that's scary. 01:07:08.300 --> 01:07:13.940 But if I'm a poor country, I say, wait a minute. 01:07:13.940 --> 01:07:16.770 You guys burned your coal. 01:07:16.770 --> 01:07:19.830 You're using much more energy than we are per capita. 01:07:22.480 --> 01:07:24.450 You got rich. 01:07:24.450 --> 01:07:27.340 Don't we get a chance to get rich? 01:07:27.340 --> 01:07:30.030 You guys sit in fancy classrooms at MIT 01:07:30.030 --> 01:07:33.930 and try hard to stay awake and all of that. 01:07:33.930 --> 01:07:36.340 Don't we get to do that? 01:07:36.340 --> 01:07:41.100 So we'll come back to this, because I 01:07:41.100 --> 01:07:45.120 think this is one of the great issues of the day. 01:07:45.120 --> 01:07:47.400 I'm going to close with some final thoughts. 01:07:47.400 --> 01:07:50.790 I hope you got that there's a lot of diversity. 01:07:50.790 --> 01:07:52.950 Some of it comes from resources. 01:07:52.950 --> 01:07:54.960 But some of it comes from culture and some of it 01:07:54.960 --> 01:07:56.640 comes from politics, and some of it 01:07:56.640 --> 01:07:59.160 comes from a variety of technology, efficiency, 01:07:59.160 --> 01:08:03.280 history-- a variety of reasons. 01:08:03.280 --> 01:08:06.550 The last point, which will be a very important point going 01:08:06.550 --> 01:08:09.970 forward, which is we expect the growth to come 01:08:09.970 --> 01:08:13.000 in the future, absent anything else, 01:08:13.000 --> 01:08:15.690 from the developing world-- 01:08:15.690 --> 01:08:19.680 if the rest of the world gets rich the way we got rich, 01:08:19.680 --> 01:08:23.970 there will be enormous increases in energy use, which may not 01:08:23.970 --> 01:08:28.859 be feasible, and in CO2 emissions, which 01:08:28.859 --> 01:08:31.229 at least your children and grandchildren will not 01:08:31.229 --> 01:08:33.140 like much. 01:08:33.140 --> 01:08:34.700 I know that's an impossible thought, 01:08:34.700 --> 01:08:40.529 but you will have children and grandchildren. 01:08:40.529 --> 01:08:45.439 And this is something we'll be talking about. 01:08:45.439 --> 01:08:46.310 That's hard. 01:08:46.310 --> 01:08:48.529 We know how we got rich. 01:08:48.529 --> 01:08:51.590 We burned fossil fuels, and we used 01:08:51.590 --> 01:08:54.170 that to acquire capital stock and knowledge, 01:08:54.170 --> 01:08:58.410 and build universities and do all those great things. 01:08:58.410 --> 01:09:00.979 But that won't work-- 01:09:00.979 --> 01:09:03.960 that won't work. 01:09:03.960 --> 01:09:07.412 What will work, you got me. 01:09:07.412 --> 01:09:08.620 That's what you guys are for. 01:09:08.620 --> 01:09:14.830 OK, any questions or comments, reactions, thoughts? 01:09:14.830 --> 01:09:15.525 Yeah. 01:09:15.525 --> 01:09:17.483 AUDIENCE: You said something in the last class. 01:09:17.483 --> 01:09:20.527 Most of the US energy [INAUDIBLE].. 01:09:20.527 --> 01:09:21.610 RICHARD SCHMALENSEE: Yeah. 01:09:21.610 --> 01:09:22.970 AUDIENCE: So that's true, right? 01:09:22.970 --> 01:09:23.680 RICHARD SCHMALENSEE: That's true, right. 01:09:23.680 --> 01:09:26.880 AUDIENCE: Are you going to explain that more as you go on? 01:09:30.065 --> 01:09:33.020 RICHARD SCHMALENSEE: Yeah. 01:09:33.020 --> 01:09:34.520 Which part would you like explained? 01:09:34.520 --> 01:09:38.402 AUDIENCE: [INAUDIBLE] 01:09:38.402 --> 01:09:40.319 RICHARD SCHMALENSEE: OK, we'll talk about that 01:09:40.319 --> 01:09:41.640 when we go sector by sector. 01:09:41.640 --> 01:09:44.609 But an awful lot of the infrastructure 01:09:44.609 --> 01:09:47.609 is in regulated areas. 01:09:47.609 --> 01:09:50.910 So part of the reason you could raise private capital 01:09:50.910 --> 01:09:54.790 was the capital wasn't hugely at risk. 01:09:54.790 --> 01:09:58.090 So for electric power, for instance, 01:09:58.090 --> 01:10:01.570 if you build a power plant, the regulator says yeah go ahead, 01:10:01.570 --> 01:10:03.780 you would get a return on your investment. 01:10:03.780 --> 01:10:05.430 That makes it easier. 01:10:05.430 --> 01:10:07.200 We'll come back to that. 01:10:07.200 --> 01:10:09.410 OK, thank you.