35 years of global energy efficiency gains reflected in the world's GDP

[GliderGuider]

Now and again I hear some talk about how GDP is coming uncoupled from the underlying energy supply that enables and drives all human activity, or even that GDP isn't fundamentally connected to energy at all.

To look at what's been happening in that arena over the last 35 years, I did a bit of arithmetic on world GDP and energy consumption numbers from the World Bank. Since 1975, world GDP has grown by an average of 3% per year. The world's primary energy consumption has grown by an average of 2% per year. The economy's energy efficiency (the amount of GDP that can be produced by a given unit of energy) has grown by an average of 1% per year.

The graph below shows those three growth rates, calculated as four-year moving averages to get rid of some of the short-period noise.



The fourth line in the graph, the black horizontal line right on 0.0% labeled "Residual", shows that all of the world's GDP growth is explained by increases in energy use and efficiency (GDP growth - the growth of energy consumption - the growth in energy efficiency) = 0.

We are becoming more efficient at using energy to make money - the energy efficiency of the world economy has improved by 40% since 1975. But there is no evidence that a recognizable economy can exist in the absence of energy inputs. And any decline in energy consumption will automatically generate a drop in global GDP.

[LouisvilleDem]

1. I think your formula is wrong

Why are you subtracting growth in energy efficiency? When economists say that GDP growth has become decoupled from the underlying energy supply, improvements in energy efficiency are precisely what they are referring to as the cause.

[GliderGuider]

2. If the economy was truly decoupled from energy

...we could get positive economic output with zero energy expenditure (like a perpetual motion machine).

Right now two thirds of the growth of GDP comes from increasing energy consumption, and one third from increased efficiency. But the ability to increase efficiency depends on the energy expenditure being there in the first place.

Economies run on energy. While we can increase the efficiency of any economic activity that requires the transformation or movement of materials (up to some point analogous to the Carnot limit of classical thermodynamics), we can never uncouple the economy from its motive power. If we were to stop increasing the energy supply right now, and maintain constant consumption, the most economic growth we could expect is 1% per year - a rate that would gradually decline over time as we approached the economy's efficiency limit. When that limit was reached, growth would stop.

This is why, despite a 40% improvement in efficiency, our energy consumption has never declined during times of economic growth.

[LouisvilleDem]

12. I see where I got confused now

I was under the assumption that the phrase "the economy has become decoupled from energy" was shorthand for "economic growth has been decoupled from energy supply growth. The former is obviously false and cannot possibly ever be true. However, I believe the later can be true. For example, if I leave energy supply fixed but improve efficiency, I will have obtained economic growth without changing energy supply. I believe that is what the people you are arguing against really mean, but I don't know for sure.

[hunter]

3. Our current measure of "productivity" needs to have a wooden stake driven through the heart.

We are living in a blood-sucking vampire economy.

What we currently call "economic productivity" is a pretty good measure of the damage we are doing to the natural environment that supports us.

The GDP collapsing might be a good thing, but sadly, the way the game is rigged, people already living in poverty would feel the most pain and the very wealthy and politically powerful no pain at all.

[oldhippie]

4. What do you think the measure of .....

... what we call economic activity is? It seems you don't like it, but can you define it?

[hunter]

5. I'd measure economic "success" by the quality of life the least fortunate in a society experience.

Quality of food, quality of shelter, quality of medical care, quality of education, amount of leisure time, and the general happiness of people.

A "successful" local economy might be very "unproductive" by modern standards; they might well look like a traditional society to outsiders -- no cars, simple housing, clothing (or not) etc., but they would be fully literate and well connected to modern communication systems, have an excellent medical clinic, birth control, excellent schools, even as they lived a very low energy, almost prehistoric "permaculture in the forest" lifestyle.

And there would be intense urban lifestyles available to anyone who wanted that. A high tech, high fashion, high arts life.

And there would be plenty of lifestyles in-between. Organic farmer's, meat and vegetables. Officers and staff of non-fossil fueled cruise ships and railroads. Outer space explorers. People recycling coastal cities and creating new wetlands as oceans rise... unlimited possibilities.

What there would NOT be is endless streets of ugly high energy strip malls, cookie-cutter suburbs, big box stores, auto dealers, "factory farming" and fast food places. What there would not be is coal mines or natural gas fracking.

Your smart phone would be made by happy people who enjoyed their jobs and there would be no human on earth who was "better" than the most ordinary person, not even a person who could not "productive" by our current twisted and sociopathic measures.

Welcome to earth little baby! Have a wonderful time for the short time you will be here!

[oldhippie]

8. But I wasn't talking about "success", but "productivity" ......

... , like the original question. What is your definition of "productivity?"

[hunter]

9. Good food, safe shelter, education, and excellent medicine for every human being.

It's not complicated.

[oldhippie]

11. OK, I get that, but .....

..... I was thinking more on the lines of GDP / unit of labor.

http://www.investopedia.com/terms/l/labor-productivity.asp

It seems you are talking more about standard of living rather than productivity. But that's OK.

[FBaggins]

6. Confuses cause and effect.

Insufficient energy availability can restrain growth... but it's growth that drives energy demand - not energy supply driving growth.

Efficiency is its own reward and is driven more by policy and prices rather then growth.

[hunter]

7. "Growth" isn't always a good thing.

Ask any cancer survivor.

"Growth for the sake of growth is the ideology of the cancer cell." -- Edward Abbey

[GliderGuider]

10. You can't separate cause and effect in this process.

Last edited Sat Nov 9, 2013, 01:23 AM - Edit history (1)

It's an autocatalytic positive feedback loop: each side of the process loop amplifies the other.