Energy Use And Economic Growth

While the scientific understanding of climate change was developing, the expansion of energy use proceeded apace. The series of inventions from the steam engine onwards - the railways, mechanised industrial and agricultural production, the internal combustion engine, fossil fuel electricity production, through to the jet engine - continued to require and enable a constant expansion in the use of coal, oil and gas. Overall consumption of fossil fuels grew tenfold, from to 200 x 1018 joules6 between 1900 and 1970, by which time carbon emissions from such fuels were four billion tonnes a year. The growth of such consumption was strongly concentrated in the industrialised countries in the North, who still accounted for 70% of global emissions in 1990 (despite only having around 25% of world population). But the model of growth based on fossil energy was also progressively globalised,

5 S. R. Weart, The Discovery of Global Warming (Cambridge MA: Harvard University Press, 2004), pp. 43-4.

6 See M. Jaccard, Sustainable Fossil Fuels (Cambridge: Cambrdge University Press, 2006), p. 17. An exajoule or EJ is 1018 joules. For comparison, a 100 watt light bulb uses 100 joules per second, or around 3 x109 joules if it was running continuously for a year. So it would take 333 million such bulbs running constantly to use an EJ.

through imitation by newly independent countries and by the lending practices of international institutions like the World Bank.7

There was a broad consensus through to the mid 1970s that energy use and economic growth were intimately related. The growth of energy use and the growth of industrial economies seemed in lock step. Growth stimulates increases in energy use as expanded economic activity requires more throughput of energy for production and consumption. But growth is also dependent on those increases; without increases in energy use, the transport of goods, the heating of houses, the powering of industries, and so on, would all be put into question.

Then in 1973-1974, the conflict in the Middle East between Israel and its neighbours triggered a four-fold increase in oil prices in six months. Many countries, in particular in Europe and newly industrialised Japan, depended heavily on the Middle East for their oil, and consequently put into place a series of policies designed to reduce such dependence. For some, such as the UK and Norway, this stimulated the search for an exploitation of oil resources within their own territories. But most didn't have this option available to them, and thus they pursued aggressive policies designed to promote energy efficiency and conservation. They increased taxes on petroleum consumption, introduced subsidies for home insulation, and changed building codes to increase the efficiency of new homes. Some also worked hard to develop alternative sources of energy; notable was Denmark's early promotion of wind energy, and Brazil's methanol programme.

One consequence of this was that the energy intensity of these economies - the amount of energy used for each unit of output -declined significantly. Some suggested that energy use and economic growth were being decoupled. However, two awkward facts muddy this picture.

First, energy efficiency has a more complicated relationship to overall energy use than it first seems. Translating efficiency gains in particular uses - in car engines, in light bulbs or appliances, for example -into reductions in consumption overall, is a complicated business. And while the energy intensity of European and Japanese economies has declined considerably since the early 1970s, the overall energy use of those economies has nevertheless continued to increase. This is largely because of the overall growth of their economies. At the level of individual energy use, the question is, if I save some money by buying a highly

7 I. Tellam, (ed), Fuel for Change: World Bank Energy Policy - Rhetoric and Reality (London: Zed Books, 2000).

Towards consensus on climate change 15

efficient fridge, heating system and car, what do I do with the extra money? If I spend it on an outdoor patio heater and cheap flights, then energy use may well still go up, even if the intensity of the economic activity I generate declines. So the lesson of the 'decoupling' of energy use from growth in the 1970s is not a simple one.

Second, and perhaps more telling, is that if one looks at the overall energy intensity of the global economy, it is possible the decoupling doesn't even exist. That is, energy use per unit of gross world product is largely similar to that existing before the oil crisis.8 This is largely because one of the significant effects of the energy price increases was that it stimulated a de-industrialisation of Europe and Japan, and the shifting of many industrial processes to other countries. European and Japanese economies became increasingly centred on services, which are relatively less energy intensive, while newly industrialising economies such as Korea, Taiwan, Mexico, Brazil, and more recently China and India, expanded industrial production. Many of the end products from this production are still destined for European, Japanese or American markets - but the energy involved in producing a fridge that is consumed in Germany but produced in Taiwan appears in statistics as part of Taiwanese energy consumption not German. One recent study found that in 2005 China emitted 1.7 billion tonnes of greenhouse gases (GHGs) from its export-related sectors, 33% of the national total.9

Facts such as these suggest a serious shortcoming of approaches that set emissions targets on a nation-by-nation basis and at the point of production rather than consumption. The overall story, however, is of a close correlation between global energy use and global economic growth. The challenge for climate policy is how to decouple the two.

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