The role of energy technologies in long run economic growth a historical perspective
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The Role of Energy Technologies in Long Run Economic Growth: A Historical Perspective. Roger Fouquet Grantham Research Institute on Climate Change and Environment London School of Economics (LSE ) IAEE New York, 16 June 2014.

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The Role of Energy Technologies in Long Run Economic Growth: A Historical Perspective

Roger Fouquet

Grantham Research Institute on Climate Change and Environment

London School of Economics (LSE)

IAEE New York,

16 June 2014


Energy Services and Economic Development

  • Stern (2011) ANYAS

    • Changes in Energy Use-Economic Activity Linkage:

      - Subs Energy and Other Inputs for Existing Tech.

      - Technological Change; - Shifts in Composition of the Energy Input;

      - Shifts in Composition of Economic Output.

  • Toman and Jemelkova (2003) EnJ

    • Different Channels of Effect of Energy Services

    • Effects Change with Economic Development


Part 1

The Importance of Demand


Lighting

Domestic Heating

Industrial Power

PassengerTransport

Lighting

0.1

Freight Transport

0.01

Source: Fouquet (2014) REEP


Income and Price Elasticity of Demand for Energy Services, 1800-2008

Lighting

Values Greater than One: 10% Increase in GDP pc leads to a more than 10% increase in Energy Service

Passenger Transport

Domestic Heating

Domestic Heating

Price Elasticities

Passenger Transport

Lighting

$(2010)28,500

$(2010)11,800

$(2010)6,400

$(2010)3,300

Source: Fouquet (2014) REEP


Part 2

The UK Energy-GDP Linkage


England and Great Britain GDP per capita, 1300-1900

Second Industrial Revolution

First Industrial Revolution

Take-Off of English Economic Development

Source: Broadberry et al (2013)


The Importance of Energy

  • Cipolla, Wrigley, Allen: Role of Energy in Ind. Rev.

  • Major Technological Innovations in 1750-1913

    • New Energy Sources

    • Incorporate Role of Technologies

    • Major Improvements in Energy Efficiency

  • Producers Want Energy Services

    • Power for Mineral Extraction and Repetitive Tasks

    • Heating to Manufacture Metals

    • Freight Transport (Land and Sea)


Lighting

Consumption of Energy by Energy Services

in the United Kingdom (mtoe), 1700-2010

Freight Transport

Passenger Transport

Domestic Heating

Industrial Heating

Industrial Power

Source: Fouquet (2014) REEP


Energy Intensity in the United Kingdom, 1700-2010

Primary Energy Intensity

Final User Energy Intensity

Source: updated from Fouquet (2008)


Sectoral GDP in the United Kingdom, 1700-1870

Source: Broadberry et al (2013)


Energy Service Intensity per GDP in the United Kingdom, 1700-2000

Sea Freight Transport

Power

Land Freight Transport

Iron Production

Source: Updated from Fouquet (2008)


Part 3

The Impact of Energy Technologies

on Economic Growth


Integrating Energy Services into Energy-Intensive Industries’ Production Function

  • Y = f1 (y1(K,L,E), y2(K,L,E), … )

  • For Energy Intensive Industries, e.g. UK 1750-1950

    Energy Service (ES) combines K, L and E.

  • Y = f1 (y1(ES), y2(ES), … )

  • The Role of Costs of Production

  • Y = f1 (y1(C(ES)), y2(C(ES)), … )

  • Thus, when the cost of producing ES falls,

    the costs of energy-intensive industrial production fall


Price of Energy Services in the United Kingdom, 1700-2010

Sea Freight Transport

Power

Iron Heating

Land Freight Transport

Source: Fouquet (2011) REEP, Broadberry et al (2013)


Price of Energy and Energy Services in the United Kingdom, 1700-2010

EnergyServices

Energy

Source: Fouquet (2011)


Exogeneity of the ‘Price’ of Energy Services

  • Price of Energy Service:

    Price of Energy

    Efficiency of Energy Technology

  • Price of Energy may be affected by Economic Growth

    if price elasticity of supply is low

  • Adoption of Energy Efficient Tech. is less affected

  • Combined (i.e. Price of ES) assumed to be exogenous

  • Thus, can identify the effect of Price of ES on GDP


Granger Causality Tests

  • Effect of GDP per capita: Price of Land Freight pre-1850?

  • 1750-1800: Price of Power, Ind. Heat. & Land Transport on GDP per capita

  • 1800-1820: Little Effect

  • 1830-1850: Price of Sea Freight, and then Price of Land F.

  • 1860-1950: Price of Power, of Land Freight

    (Modest Effect: Price of Sea Freight/Ind.Heat.)


Impact of 1% Decline in Energy Service Prices on GDP per capita, 1750-1950

Land Freight Transport

Power

Sea Freight Transport

Iron Heating

Source: Author’s Own Estimates


External Costs of Energy Use in the United Kingdom, 1800-2000

Lighting

Domestic Heating

Passenger Transport

Freight

Industrial Heating

Power

Source: Fouquet (2011) Ecological Economics


Part 4

Concluding Remarks


Insights

  • Demand: Income Elasticities and Rebound Effects

  • Technological Impact on GDP per capita:

    • Kick-Starters and Drivers of Periods of Ec. Growth

    • Co-Evolution and Synergies between Technologies

    • Transformative Effect of Energy Technologies

  • Need to Understand How Cheap Energy Services

    Intensifies Energy Service Use in the Economy

  • Energy-Intensive Industries Impacts on the Environment


  • Energy and Information Intensity in US, 1800-2010

    Energy

    Information: Newspapers and Internet

    Communication

    Energy

    Source: Fouquet and Hippe (2014)


    Pushing the Energy Frontier

    or ‘Malthusian’ Energy Growth Trap?

    Energy Service Consumption

    Energy Limits

    Supply-Side Shift

    Energy Consumption

    Energy Limits

    Supply-Side Shift

    Energy Limits

    Technological Revolution

    Technological Revolution


    Appendix

    Pre-1750


    Energy Intensity in the United Kingdom, 1500-2010

    Primary Energy Intensity

    Final User Energy Intensity

    Source: updated from Fouquet (2008)


    Sectoral GDP in the United Kingdom, 1500-1750

    Source: Broadberry et al (2013); Five-year average


    Expenditure on Energy per GDP in the United Kingdom, 1500-2000

    Source: Fouquet (2008)


    Expenditure on Energy per GDP in the United Kingdom, 1500-2000

    Power

    The Decline in % Power Exp. in GDP is not due to a Decline in Power Expenditure, it is due to an Increase in GDP

    Source: Fouquet (2008)


    Energy Service Intensity per GDP in the United Kingdom, 1500-2000

    Power

    Iron Production

    Freight Transport

    Source: Fouquet (2008)


    Price of Energy Services in the United Kingdom, 1700-2010

    Sea Freight Transport

    Power

    Land Freight Transport

    Iron Heating

    Source: Fouquet (2011) REEP, Broadberry et al (2013)


    Price of Energy Services in the United Kingdom, 1700-2010

    GDP per capita

    Sea Freight Transport

    Power

    Iron Heating

    Land Freight Transport

    Source: Fouquet (2011) REEP, Broadberry et al (2013)


    Energy Intensity in European Countries, 1800-2000

    Early Adopter: Exports and Inefficiencies

    United Kingdom

    Germany

    France

    Netherlands

    Italy

    Source: Kander et al. (2013)


    Energy and Information Intensity in US, 1800-2010

    Energy

    Information: Newspapers and Internet

    Communication

    Energy

    Source: Fouquet and Hippe (2014)


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