Skip to main content Accessibility help
×
Home
  • Print publication year: 2012
  • Online publication date: September 2012

Chapter 6 - Energy and Economy

Summary

Executive Summary

The three most basic drivers of energy demand are economic activity, population, and technology. Longer-term trends in economic growth for a particular economy depend on underlying demographic and productivity trends, which in turn reflect population growth, labor force participation rate, productivity growth, national savings rate, and capital accumulation (USEIA, 2011).

Several historic shifts are likely to fundamentally alter global demographics over the coming decades. First, as developing nations move from poverty to relative affluence, there is a fundamental shift from agriculture to more energy-intensive but much more productive commercial enterprises. Second, labor forces in the developed countries are aging considerably, which has implications on many fronts, including energy use and employment structures. Third, for the first time the majority of the world's population has become urbanized, with the largest urban centers emerging in developing regions where energy access is a serious constraint. All of these will have immense impacts on the level and quality of energy demand and on concerns about energy security.

Global energy security and sustainability in the twenty-first century will depend less on the total global population than on incomes and their distribution. This in turn will depend to a large extent on how effectively the lack of energy services, which now limit economic opportunities in the less developed regions, is addressed. In addition, energy security will depend on the ability of countries to maintain reliable sources of energy to meet their needs.

References
Abosedra, S. and H., Baghestani, 1989: New Evidence on the Causal Relationship between U.S. Energy Consumption and Gross National Product. Journal of Energy Development, 14 (2): 285–292.
,AGECC, 2010: Energy for a Sustainable Future. The United Nations Secretary-General's Advisory Group on Energy and Climate Change (AGECC), New York, NY, USA.
Arrow, K. J., W. R., Cline, K.-G., Maler, M., Munasinghe, R., Squitieri and J. E., Stiglitz, 1996: Intertemporal Equity, Discounting, and Economic Efficiency. In Climate Change 1995: Economic and Social Dimensions of Climate Change. J. P., Bruce, L. H., and E. F., Haites (eds.), Second Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), Cambridge University Press, Cambridge, UK and New York, NY, USA., pp. 125–144.
Arthur, W. B., 2009: The Nature of Technology: What It Is and How It Evolves. The Free Press, New York, NY, USA.
Ayers, R. U. and B., Warr, 2009: The Economic Growth Engine: How Energy and Work Drive Material Prosperity. Edward Elgar Publishing Ltd., Cheltenham, UK.
Barnes, J., D., Brumberg, M. E., Chen, D. B., Cook, J., Elass, M., El-Gamal, M., Gillis, J., González-Gómez, P. R., Hartley, D., Hertzmark, A. M., Jaffe, Y. J., Kim, N., Lane, D., Li, D. R., Mares, K., Matthews, K. B., Medlock, R., Soligo, L., Smulcer, R., Stoll and X., Xu, 2008: The Global Energy Market: Comprehensive Strategigies to Meet Geopolitical and Financial Risks—the G8, Energy Security, and Global Climate Issues. Baker Institute Policy Report #37, James A. Baker III Institute for Public Policy of Rice University, Houston, TX, USA.
Barnett, H. and C., Morse, 1963: Scarcity and Growth: The Economics of Natural Resource Availability. Johns Hopkins University Press for Resources for the Future, Baltimore, MD, USA.
Berck, P. and M., Roberts, 1996: Natural Resource Prices: Will They Ever Turn Up?Journal of Environmental Economics and Management, 31 (1): 65–78.
,BNEF, 2010: Weathering the Storm – Public Funding for Low-Carbon Energy in the Post Financial Crisis Era. United Nations Environment Programme Sustainable Energy Finance Alliance (UNEP SEF Alliance) and Bloomberg New Energy Finance (BNEF), London, UK.
Campbell, M., J., Cleland, A., Ezeh and N., Prata, 2007: Return of the Population Growth Factor. Science, 315 (5818): 1501–1502.
Chen, S. and M., Ravallion, 2008: The Developing World Is Poorer Than We Thought, but No Less Successful in the Fight Against Poverty, Policy Research Working Paper No. 4703, The Work Bank, Washington, D.C., USA.
Cheng, B. S., 1995: An Investigation of Cointegration and Causality between Energy Consumption and Economic Growth. Journal of Energy Development, 21 (1): 73–84.
Chontanawat, J., L. C., Hunt and R., Pierse, 2008: Does Energy Consumption Cause Economic Growth?: Evidence from a Systematic Study of over 100 Countries. Journal of Policy Modeling, 30 (2): 209–220.
Cleland, J., S., Bernstein, A., Ezeh, A., Faundes, A., Glasier and J., Innis, 2006: Family Planning: The Unfinished Agenda. The Lancet, 368 (9549): 1810–1827.
Dasgupta, A. K. and D. W., Pearce, 1972: Cost-Benefit Analysis: Theory and Practice. Palgrave Macmillan, Basingstoke, UK.
Dasgupta, P. and G. M., Heal, 1979: Economic Theory and Exhaustible Resources. Cambridge University Press, New York, NY, USA and Cambridge, UK.
Davies, J. B., S., Sandström, A., Shorrocks and E. N., Worlff, 2008: The World Distribution of Household Wealth. Discussion Paper No. 2008/3, United Natoins University World Institute for Development Economics Research (UNU-WIDER), Helsinki, Finland.
Ekholm, T., V., Krey, S., Pachauri and K., Riahi, 2010: Determinants of Household Energy Consumption in India. Energy Policy, 38 (10): 5696–5707.
,EPRI, 2003: Electricity Technology Roadmap: Meeting the Critical Challenges of the 21st Century. Project Number: 1010929, Electric Power Research Institute (EPRI), Palo Alto, CA, USA.
Erol, U. and E. S. H., Yu, 1987: On the Casual Relationship between Energy and Income for Industrialized Countries. Journal of Energy Development, 13 (2): 113–122.
Espey, J. A. and M., Espey, 2004: Turning on the Lights: A Meta-Analysis of Residential Electricity Demand Elasticities. Journal of Agricultural and Applied Economics, 36 (1): 65–81.
Espey, M., 1998: Gasoline Demand Revisited: An International Meta-Analysis of Elasticities. Energy Economics, 20 (3): 273–295.
,EU, 2003: World Energy Technology and Climate Policy Outlook 2030 (WETO). Directorate-General for Research, Energy, European Commission, Brussels, Belgium.
Fouquet, R. and P. J. G., Pearson, 2006: Seven Centuries of Energy Services: The Price and Use of Light in the United Kingdom (1300–2000). Energy Journal, 27 (1): 139–177.
Fouquet, R., 2008: Heat, Power and Light: Revolutions in Energy Services. Edward Elgar Publishing Ltd., Cheltenham, UK and Northampton, MA, USA.
Fouquet, R., 2011: Long Run Trends in Energy-Related External Costs. Ecological Economics, 70 (12): 2380–2389.
Galvin, R. and K., Yeager, 2009: Perfect Power – How the Microgrid Revolution Will Unleash Cleaner, Greener, and More Abundant Energy. McGraw-Hill, New York, NY, USA.
Goldemberg, J., T. B., Johansson, A. K. N., Reddy and R. H., Williams, 1985: Basic Needs and Much More with One Kilowatt Per Capita. Ambio, 14 (4/5): 190–200.
Griffin, J. M., 1993: Methodological Advances in Energy Modelling: 1970–1990. The Energy Journal, 14 (1): 111–124.
Grubler, A., 1998: Technology and Global Change. Cambrdige University Press, Cambridge, UK.
Haas, R., N., Nakicenovic, A., Ajanovic, T., Faber, L., Kranzl, A., Müller and G., Resch, 2008: Towards Sustainability of Energy Systems: A Primer on How to Apply the Concept of Energy Services to Identify Necessary Trends and Policies. Energy Policy, 36 (11): 4012–4021.
Hartwick, J. M. and A. P., Hageman, 1993: Economic Depreciation of Mineral Stocks and the Contribution of El Serafy. In Toward Improved Accounting for the Environment. E., Lutz (ed.), World Bank, Washington, D.C., USA.
Hausman, J. A., 1979: Individual Discount Rates and the Purchase and Utilization of Energy-Using Durables. Bell Journal of Economics, 10 (1): 33–54.
Hotelling, H., 1931: The Economics of Exhaustible Resources. Journal of Political Economy, 39 (2): 137–175.
Howarth, R. B. and A. H., Sanstad, 1995: Discount Rates and Energy Efficiency. Contemporary Economic Policy, 13 (3): 101–109.
Hunt, L. C. and Y., Ninomiya, 2003: Modelling Underlying Energy Demand Trends and Stochastic Seasonality: An Econometric Analysis of Transport Oil Demand in the Uk and Japan. School of Economics Discussion Papers 107, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey, Surrey, UK.
Hwang, D. and B., Gum, 1991: The Causal Relationship between Energy and Gnp: The Case of Taiwan. Journal of Energy Development, 16 (2): 219–226.
,ICHRP, 2011: Beyond Technology Transfer – Protecting Human Rights in a Climate-Constrained World. International Council on Human Rights Policy (ICHRP), Geneva, Switzerland.
,IEA, 2003: World Energy Investment Outlook 2003. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2005: The Experience with Energy Efficiency Policies and Programmes in Iea Countries – Learning from the Critics. IEA Information Paper, H. Geller and S. Attali, International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2006a: World Energy Outlook 2006. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2006b: Energy Technology Perspectives 2006 – Scenarios & Strategies to 2050. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2007: World Energy Outlook 2007. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2008a: Energy Technology Perspectives 2008 – Scenarios & Strategies to 2050. International Energy Agency (IEA) of the Organistion for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2008b: World Energy Outlook 2008. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2008b: Energy Technology Perspectives: Energy Technology Perspectives to 2050. International Energy Agency – OECD, Paris.
,IEA, 2009a: World Energy Outlook 2009. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2009b: World Energy Outlook. International Energy Agency, Organization for Economic Cooperation & Development, Paris.
,IEA, 2010a: World Energy Outlook 2010. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA, 2010b: Energy Statistics and Balances: Online Database. International Energy Agency (IEA) of the Organization for Economic Co-operation and Development (OECD), Paris, Francehttp://www.iea.org/stats/index.asp (accessed 25 August, 2011).
,IEA, 2011: World Energy Outlook 2011. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development (OECD), Paris, France.
,IEA/NEA, 2010: Projected Costs of Generating Electricity, 2010 Edition. International Energy Agency (IEA) of the Organisation for Economic Cooperation and Development and the Nuclear Energy Agency (NEA), Paris, France.
,IPCC, 2000: Ipcc Special Report – Methodological and Technological Issues in Technology Transfer. Special Report of IPCC Working Group III, World Meteorological Organisation (WMO), United Nations Environment Programme (UNEP), and the Intergovernmental Panel on Climate Change (IPCC), Geneva, Switzerland.
,IPCC, 2007: Mitigation of Climate Change. Contribution of Working Group III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change, 2007 B. Metz, O. R. Davidson, P. R. Bosch, R. Dave and L. A. Meyer, Cambridge University Press, Cambridge, UK and the Intergovernmental Panel on Climate Change (IPCC), Switzerland, Geneva.
Jaffe, A. B. and R. N., Stavins, 1994a: The Energy Paradox and the Diffusion of Conservation Technology. Resource and Energy Economics, 16 (2): 91–122.
Jaffe, A. B. and R. N., Stavins, 1994b: The Energy-Efficiency Gap What Does It Mean?Energy Policy, 22 (10): 804–810.
Judson, R. A., R., Schmalensee and T. M., Stoker, 1999: Economic Development and the Structure of the Demand for Commercial Energy. The Energy Journal, 20 (2): 29–58.
,KfW, 2011: Action by Kfw Entwicklungsbank. KfW Banking Group, Frankfurt, Germanyhttp://www.kfw-entwicklungsbank.de/ebank/EN_Home/Sectors/Energy/Action_by_KfW_Entwicklungsbank/index.jsp (accessed 1 August, 2011).
Kilian, L., 2008: The Economic Effects of Energy Price Shocks. Journal of Economic Literature, 46 (4): 871–909.
Kraft, J. and A., Kraft, 1978: On the Relationship between Energy and Gnp. Journal of Energy Development, 3(2): 401–403.
Krautkraemer, J. A., 1998: Nonrenewable Resource Scarcity. Journal of Economic Literature, 36 (4): 2065–2107.
Landes, D., 1969: The Unbound Prometheus. Cambridge University Press, Cambridge, UK.
Lee, C.-C., 2005: Energy Consumption and Gdp in Developing Countries: A Cointegrated Panel Analysis. Energy Economics, 27 (3): 415–427.
Liu, N. and B. W., Ang, 2007: Factors Shaping Aggregate Energy Intensity Trend for Industry: Energy Intensity Versus Product Mix. Energy Economics, 29 (4): 609–635.
Lutz, W., J. C., Cuaresma and W., Sanderson, 2008: The Demography of Educational Attainment and Economic Growth. Science, 319 (5866): 1047–1048.
Lutz, W. and K. C., Samir, 2010: Dimensions of Global Population Projections: What Do We Know About Future Population Trends and Structures?Philosophical Transactions of the Royal Society B: Biological Sciences, 365 (1554): 2779–2791.
Lutzenhiser, L., 1993: Social and Behavioral Aspects of Energy Use. Annual Review of Energy and the Environment, 18: 247–289.
Manne, A. S. and L., Schrattenholzer, 1986: International Energy Workshop: A Progress Report. OPEC Review, 10 (3): 287–320.
Markandya, A. and R., Boyd, 2002: Airpacts Economic Valuation. University of Bath, UK, for the International Atomic Energy Agency (IAEA), Vienna, Austria.
Markandya, A., S., Pedroso-Galinato and D., Streimikiene, 2006: Energy Intensity in Transition Economies: Is There Convergence Towards the Eu Average?Energy Economics, 28 (1): 121–145.
Markandya, A., A., Bigano and R., Porchia, Eds. 2010: The Social Costs of Electricity: Scenarios and Policy Implications. Edward Elgar Publishing Limited, Cheltenham, UK.
Martin, P., 2005: Migrants in the Global Labor Market. Prepared for the Policy Analysis and Research Programme, Global Commission on International Migration (GCIM), New York, NY, USA.
Masih, A. M. M. and R., Masih, 1996: Energy Consumption, Real Income and Temporal Causality: Results from a Multi-Country Study Based on Cointegration and Error-Correction Modelling Techniques. Energy Economics, 18 (3): 165–183.
Modi, V., S., McDade, D., Lallement and J., Saghir, 2005: Energy Services for the Millenium Development Goals. Energy Sector Management Assistance Programme (ESMAP), United Nations Development Programme (UNDP), UN Millenium Project, and the World Bank, New York, NY, USA.
Nakicenovic, N. and H.-H., Rogner, 1996: Financing Global Energy Perspectives to 2050. OPEC Review, 20 (1): 1–23.
Nakicenovic, N., A., Grubler and A., McDonald, Eds. 1998: Global Energy Perspectives. Cambridge Universitiy PressCambridge, UK.
Nakićenović, N., 1996: Freeing Energy from Carbon. Daedalus, 125 (3): 95–112.
Nilsson, L. J., 1993: Energy Intensity Trends in 31 Industrial and Developing Countries 1950–1988. Energy, 18 (4): 309–322.
Nordhaus, W. D., 1997: Beyond the Cpi: An Augmented Cost of Living Index (Acoli). Cowles Foundation Discussion Papers 1152, Cowles Foundation for Research in Economics, Yale University, New Haven, CT, USA.
Norgaard, R. B., 1988: Sustainable Development: A Co-Evolutionary View. Futures, 20 (6): 606–620.
O'Neill, B. C., M., Dalton, R., Fuchs, L., Jiang, S., Pachauri and K., Zigova, 2010: Global Demographic Trends and Future Carbon Emissions. Proceedings of the National Academy of Sciences.
Pacala, S. and R., Socolow, 2004: Stabilization Wedges: Solving the Climate Problem for the Next 50 Years with Current Technologies. Science, 305 (5686): 968–972.
Prata, N., 2009: Making Family Planning Accessible in Resource-Poor Settings. Philosophical Transactions of the Royal Society B: Biological Sciences, 364 (1532): 3093–3099.
Rabl, A. and J. V., Spadaro, 1999: Damages and Costs of Air Pollution: An Analysis of Uncertainties. Environment International, 25 (1): 29–46.
Reddy, A. K. N. and B. S., Reddy, 1994: Substitution of Energy Carriers for Cooking in Bangalore. Energy, 19 (5): 561–571.
REN21, 2011: Renewables 2011 – Global Status Report. Renewable Energy Policy Network for the 21st Century (REN21), Paris, France.
Riahi, K., A., Grübler and N., Nakicenovic, 2007: Scenarios of Long-Term Socio-Economic and Environmental Development under Climate Stabilization. Technological Forecasting and Social Change, 74 (7): 887–935.
Ricci, A., 2010: Policy Use of the Needs Results. New Energy Externatlities Development for Sustainability.
Rogner, H.-H., 2010: Innovating for Development: Nuclear Power and Sustainable Development. Journal of International Affairs, 64 (1): 137–163.
Samuelson, P. A., W. D., Nordhaus and J., McCallum, 1988: Macroeconomics – Sixth Canadian Edition. McGraw-Hill Ryerson Ltd, Toronto, Canada.
,SAUNER, 2000: Sustainability and the Use of Non-Renewable Resources (SAUNER) – Summary Final Report. Contract ENV4-CT97–0692, University of Bath, UK; University of Suttgart, Germany and Montanuversität Leoben, Austria.
Schipper, L. and S., Meyers, 1992: Energy Efficiency and Human Activity – Past Trends, Future Prospects. Stockholm Environment Institute, Stockholm, Sweden and Cambridge University Press, Cambridge, UK.
Schurr, S. H., B. C., Netschert, V. F., Eliasberg, J., Lerner and H. H., Landsberg, 1960: Energy in the American Economy, 1850–1975. Johns Hopkins Press, Baltimore, MD, USA.
Smith, K. R. and K., Balakrishnan, 2009: Mitigating Climate, Meeting Mdgs, and Moderating Chronic Disease: The Health Co-Benifts Landscape. In Commonwealth Health Ministers' Update 2009, Commonwealth Secretariat, London, UK.
Soytas, U. and R., Sari, 2003: Energy Consumption and Gdp: Causality Relationship in G-7 Countries and Emerging Markets. Energy Economics, 25 (1): 33–37.
Soytas, U. and R., Sari, 2006: Energy Consumption and Income in G-7 Countries. Journal of Policy Modeling, 28 (7): 739–750.
Taylor, R. P., C., Govindarajalu, J., Levin, A. S., Meyers and W. A., Ward, 2008: Financing Energy Efficiency – Lessons from Brazil, China, India, and Beyond. Report No. 42529, Energy Sector Management Assistance Program (ESMAP) and the World Bank, Washington, D.C., USA.
Toman, M. T. and B., Jemelkova, 2003: Energy and Economic Development: An Assessment of the State of Knowledge. The Energy Journal, 24 (4): 93–112.
Tomlinson, S., P., Zorlu and C., Langley, 2008: Innovation and Technology Transfer. Chatham House and E3G, London, UK.
Train, K., 1985: Discount Rates in Consumers' Energy-Related Decisions: A Review of the Literature. Energy, 10 (12): 1243–1253.
,UNCTAD, 2001: Growing Micro and Small Enterprises in Ldc – the “Missing Middle” in Ldcs: Why Micro and Small Enterprieses Are Not Growing. UNCTAD/ITE/TEB/5, United Nations Conference on Trade and Development (UNCTAD), Geneva, Switzerland.
,UNDESA, 2004: World Population to 2300. ST/ESA/SER.A/236, Population Division, United Nations Department of Economic and Social Affairs (UNDESA), New York, NY, USA.
,UNDESA, 2011: World Economic and Social Survey 2011 – the Great Green Technological Transformation. E/2011/50/Rev.1 ST/ESA/333, United Nations Department of Ecnomic and Social Affairs (UNDESA), New York, NY, USA.
,UNEP/SEFI/NEF, 2009: Global Trends in Sustainable Energy Investment 2009 – Analysis of Trends and Issues in the Financing of Renewable Energy and Energy Efficiency. United Nations Environment Programme (UNEP), Sustainable Energy Finance Initiative (SEFI) and New Energy Finance (NEF), New York, NY, USA.
,UNFCCC, 2010: The Cancun Agreements – an Assessment by the Executive Secretary of the United Nations Framework Convention on Climate Change. United Nations Framwork Convention on Climate Change (UNFCCC), Geneva, Switzerland.
,UNFPA, 2011: State of the World Population 2011 – People and Possibilities in a World of 7 Billion. United Nations Population Fund (UNFPA), New York, NY, USA.
,USAID, 2009: Energy and Small and Medium Enterprise. United States Agency for International Development (USAID), Washington, D.C., USA.
,USEIA, 2011: Interational Energy Outlook 2011. United States Energy Information Administration (USEIA), Washington, D.C., USA.
Wang, Y., J., Guo and Y., Xi, 2008: Study on the Dynamic Relationship between Economic Growth and China Energy Based on Cointegration Analysis and Impulse Response Function. China Population, Resources and Environment, 18 (4): 56–61.
,WEC, 2008: Energy Efficiency Polices around the World: Review and Evaluation. World Energy Council, London, UK.
Weiss, C. and W. B., Bonvillian, 2009: Structuring and Energy Technology Revolution. The MIT Press, Cambridge, MA, USA.
Wolde-Rufael, Y., 2009: Energy Consumption and Economic Growth: The Experience of African Countries Revisited. Energy Economics, 31 (2): 217–224.
,World Bank, 2010: State and Trends of the Carbon Market. A. Kossoy and P. Ambrosi, Carbon Finance Unit of the World Bank, Washington, D.C., USA.
,World Bank, 2011a: Energy Portfolio Data. World Bank, Washington, D.C., USAhttp://go.worldbank.org/ERF9QNT660 (accessed 25 August, 2011).
,World Bank, 2011b: World Development Indicators 2011. World Bank, Washington, D.C., USA.
Yago, G., 2007: Financing the Missing Middle – Transatlantic Innovations in Affordable Captial. Milken Institute, Wasington, D.C., USA.
Yu, E. S. H. and J. Y., Choi, 1985: Causal Relationship between Energy and Gnp: An International Comparison. Journal of Energy Development, 10 (2): 249–272.
Zhuang, J., Z., Liang, T., Lin and F., de Guzman, 2007: Theory and Practice in the Choice of Social Discount Rate for Cost-Benefit Analysis: A Survey. ERD Working Paper Series No. 94, Economic and Research Department, Asian Development Bank, Manila, Phillipines.