models, and the various mechanisms that can weaken the links between energy and growth. Finally we review the empirical literature that finds that energy used per unit of economic output has declined, but that this is to a large extent due to a shift from poorer quality fuels such as coal to the use of higher quality fuels, and especially electricity. Furthermore, time series analysis shows that energy and GDP cointegrate and energy use Granger causes GDP when additional variables such as energy prices or other production inputs are included. As a result, prospects for further large reductions in energy intensity seem limited.
Energy Consumption and GDP4, Second Law of Life: This time I would like to dwell a little bit on energy ‖consumption‖ and its relation to Gross Domestic Product (GDP) creation. (In fact, the term ―energy consumption‖ is misleading, as energy cannot be destroyed nor created, according to the First Law of Thermodynamics. For this discussion, I‘m using data from the 2006 Report of the International Energy Agency 5 (2010 Key World Energy Statistics6). There are several ways to look at the raw data, three of which are described below. First, one feels intuitively that the amount of energy that a nation uses is related to its productivity, as expressed in its GDP and its population, which of course drives GDP. Therefore, in order to compare nations with different outputs and populations, it seems wise to divide both consumed energy and GDP by population. This is expressed in Figure 1 below.
What we notice is the huge range in power levels (in KW/capita) between the lowest consumer (India) and the highest (USA). In the USA, each citizen needs an average power level of more than 10KW every second to keep the society going (this includes everything: transportation, work, food, housing, leisure, etc.). But when we look to productivity levels (expressed as GDP/capita), we see that the productivity of the USA (ca. $36,000/capita) is more than 70 times than that of India (ca $500 /capita).
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BP Report shows economic growth still depends on oil7, Mail & Globe: ―The relationship between energy and global economic growth has never been clearer than in BP‘s World Energy Statistical Review for 2010..[..] The good news about the pending global economic
http://secondlawoflife.wordpress.com/2007/05/17/energy-consumption-and-gdp/ http://www.iea.org/Textbase/publications/free_new_Desc.asp?PUBS_ID=1199 6 http://www.iea.org/textbase/nppdf/free/2010/key_stats_2010.pdf 7 http://www.theglobeandmail.com/report-on-business/commentary/jeff-rubins-smaller-world/bp-report-shows-economic-growth-still-dependson-oil/article2069075/ 5