economics 20 mark essay 1

Submitted By grimesy632
Words: 1314
Pages: 6

Assess the likely value of cost benefit analysis to the UK government in deciding whether to expand subsidies in renewable energy.
A subsidy is a sum of money granted by the state or a public body to help an industry or business keep the price of a commodity or service low.
A cost benefit analysis is a process of which decisions are analysed. This includes aspects such as benefits related to a given situations.
A positive of the cost benefit analysis by the government to expand subsidies is that smaller companies could get the chance to challenge larger companies for market share. As these smaller independent companies have grown by 7.4% in the last five years, from 0.2% to 7.6% in market share. This is a massive growth in such a short period of time, this means that there will be more competition within the energy market, this means that the price of the energy will decrease slightly, as the big six will try to compete with the smaller independent companies that are offering cheaper prices. This reduction in price of energy will mean that every household will have slightly more money to spend in other UK markets. This increase in spending will help boost the UK economy as the government will be obtaining more money from all the businesses. However it is unlikely that the prices will drop radically as the larger gas companies already have the side of the government as, since prices have already increase by £300 since they have been in government. A survey conducted that 20% of people owe money on household energy bills. This increase in price collectively equates to 5.2 million household being in debt with their household energy suppliers. Forcing the homeowners to restrict spending in other none necessary products. Therefore the overall spending in the economy will be decreasing as they are struggling to provide the essentials for their families.
Another benefit of the government expanding subsidies within the renewable energy market is that non-renewable resources are running out we will have developed a booming industry therefore the homeowner won’t be massively effective as they will still be getting the same service however the energy would have been made sustainably. Also this would mean that we wouldn’t have to completely exhort the environment for all of its natural no-renewable resources as the development will already be there. this would be a benefit as it would mean that if we start running with completely renewable energy suppliers they can find the faults with the methods meaning they will become more efficient in the future when they will be need end the most. This process will also be good for the planet as there would be a reduction of carbon dioxide released into the atmosphere. Therefore this reduction would make the United Kingdom a greener country, therefore they government would have to spend less to clear pollution from the atmosphere. Also this would reduce the risk of the UK having to ration its resources due to poor supply for the Scandinavia countries where we get our natural gas from. 47% of the UK’s energy sources come from natural gas, and there was a supply scare where bad weather caused the Norwegian gas supplies push the national grid close to breaking point. This shock event caused the gas price to temporally jumped by 50% to a record high of 150p a therm. If the government continue to expand the subsidies to increase the renewable energy market then this wouldn’t be a problem, because we would be able to generate enough energy to supply the whole of Britain.
Additionally, with the development of these renewable energy companies the government would benefit after expanding the subsidy scheme. This increase in the renewable energy market would create thousands of jobs, through needing people to create the method and then maintain the scheme. So this process would mean that the government is one, spending less on importing non-renewable energy from Scandinavia, they would also be making less…