NS4960
Spring Term 2017
Burnell and Simon Chapter 3
U.S. Energy Security Policy
Private Property Rights
and the Public Good
Outline
• Core issues of energy security
• Public policy considerations
• Free market incentives
• Idea of comprehensive energy security
• Domestic goals
• International repercussions
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Overview I
• Core issues energy security somewhere near borderline
between
• Pure public policy considerations and
• Marketplace of free enterprise entrepreneurial activity
• Comprehensive energy security policy means
• Significant attention be paid to current and future international
relations and
• Existing and developing global market forces alike
• A domestically focused position one nation’s “energy
security” can lead to insecurity in other nations
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Overview II
• Examples
• Japan’s decision to develop nuclear power an example
eventually led to many country’s rejecting nuclear power
• U.S. has driven up global food prices as adoption of ethanol
additive policies led to increased demand for corn feedstocks
• Philosophy of governance plays a significant role in
determining whether energy security is primarily driven
by
• Public policy
• Market driven choice or
• Some combination of both
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Main Points I
• Government and markets tend to view energy security
issues quite differently
• Government’s generally view energy security from
perspective of property rights
• Regulating those rights in ways that reduced marginal social
costs and
• Ways that advance existing policy priorities
• Marginal social costs are the basis of regulating property
and its use.
• The effort to manage marginal social costs through
constraints on property rights has a long term impact on
energy security
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Main Points II
• From a market perspective,
• Energy type
• The uses made of the energy and
• The development decision regarding resource recovery
• Are based on a combination of
• Market demand
• The ability of firms to minimize costs and
• Profitability
• Costs are managed either through government policy or
through the market mechanism.
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Main Points III
• In some cases such as electricity generation and
transmission government regulation of electricity
markets serves as a basis of promoting energy security
• Big lesson for energy security is that it is a function of
the allocation of property rights within our legal
institutional framework
• Property rights and the exercise of such rights key
components in long term market developments in
• Energy supply
• Affordability and
• Long term security
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Main Points IV
• In case of nations with large national energy agencies
managing key energy resources the capacity to create a
more uniform articulation of property rights and rules
governing property use may lead to greater capacity to
produce energy security
• Conversely large scale government control as the
potential to reduce entry points of energy innovation –
PEMEX in Mexico
• Contrast energy revolution in the U.S.
• Market driven innovation often works in this highly
dramatic way
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