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

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

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

Part 1

The Importance of Demand


Roger fouquet grantham research institute on climate change and environment

Lighting

Domestic Heating

Industrial Power

PassengerTransport

Lighting

0.1

Freight Transport

0.01

Source: Fouquet (2014) REEP


Roger fouquet grantham research institute on climate change and environment

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

Part 2

The UK Energy-GDP Linkage


Roger fouquet grantham research institute on climate change and environment

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

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)


Roger fouquet grantham research institute on climate change and environment

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


Roger fouquet grantham research institute on climate change and environment

Energy Intensity in the United Kingdom, 1700-2010

Primary Energy Intensity

Final User Energy Intensity

Source: updated from Fouquet (2008)


Roger fouquet grantham research institute on climate change and environment

Sectoral GDP in the United Kingdom, 1700-1870

Source: Broadberry et al (2013)


Roger fouquet grantham research institute on climate change and environment

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

Part 3

The Impact of Energy Technologies

on Economic Growth


Integrating energy services into energy intensive industries production function

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


Roger fouquet grantham research institute on climate change and environment

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)


Roger fouquet grantham research institute on climate change and environment

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

EnergyServices

Energy

Source: Fouquet (2011)


Exogeneity of the price of energy services

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

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.)


Roger fouquet grantham research institute on climate change and environment

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


Roger fouquet grantham research institute on climate change and environment

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

Part 4

Concluding Remarks


Insights

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


  • Roger fouquet grantham research institute on climate change and environment

    Energy and Information Intensity in US, 1800-2010

    Energy

    Information: Newspapers and Internet

    Communication

    Energy

    Source: Fouquet and Hippe (2014)


    Roger fouquet grantham research institute on climate change and environment

    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

    Appendix

    Pre-1750


    Roger fouquet grantham research institute on climate change and environment

    Energy Intensity in the United Kingdom, 1500-2010

    Primary Energy Intensity

    Final User Energy Intensity

    Source: updated from Fouquet (2008)


    Roger fouquet grantham research institute on climate change and environment

    Sectoral GDP in the United Kingdom, 1500-1750

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


    Roger fouquet grantham research institute on climate change and environment

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

    Source: Fouquet (2008)


    Roger fouquet grantham research institute on climate change and environment

    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)


    Roger fouquet grantham research institute on climate change and environment

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

    Power

    Iron Production

    Freight Transport

    Source: Fouquet (2008)


    Roger fouquet grantham research institute on climate change and environment

    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)


    Roger fouquet grantham research institute on climate change and environment

    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)


    Roger fouquet grantham research institute on climate change and environment

    Energy Intensity in European Countries, 1800-2000

    Early Adopter: Exports and Inefficiencies

    United Kingdom

    Germany

    France

    Netherlands

    Italy

    Source: Kander et al. (2013)


    Roger fouquet grantham research institute on climate change and environment

    Energy and Information Intensity in US, 1800-2010

    Energy

    Information: Newspapers and Internet

    Communication

    Energy

    Source: Fouquet and Hippe (2014)


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