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Growth and energy use - a surprising relationship

One assumption that is often made in public discourse is that the size of the economy and the consumption of energy are firmly and linearly linked; the growth of one inevitably requires the growth of the other. But are things really that simple? I’m not so sure.

A great place to start when considering a question like this is the excellent dataset maintained by the World Bank.  Let’s start in the UK: how does GDP relate to the usage and production of energy? These are plotted in Figure 1. The economy has grown steadily since 1960, but the same can’t be said of energy use or production; indeed, production can be seen to be in steep decline since 2000.

Figure 1

To get a clearer picture, let’s consider the relationship between UK energy use and GDP in Figure 2. Clearly, the trajectory is far from linear. In fact, since 2000 the UK economy has both expanded and contracted, whilst energy use has been in rapid decline in the same period. It’s likely that advances in energy efficiency and the decline of heavy industry in the UK may be responsible for this effect, but the fact remains that there is little evidence that a growing UK economy will always need more energy to sustain it. It may even be possible that a larger, ‘greener’ economy may need even less energy in years to come.

Figure 2

So, does that mean that humanity has finally broken free of its addiction to energy? Can the world economy grow without draining the Earth’s energy resources? I’d say no.

Before the industrial revolutions of the 19th century, the basis of a country’s economy was predominantly agrarian, and the engine of agricultural production was muscle power. This was replaced by mechanical fuel-driven devices as countries industrialised, and led to the strong correlation between growth and energy use. This effect is still very visible in the fast growing economies of recently industrialised nations. An excellent example is that of China, visible in Figure 3 and Figure 4.

Figure 3

Figure 4
While the UK does appear to have reversed the trend of energy usage, this is due to a large extent to globalisation. Today, we in the UK import a much larger selection of goods from overseas than we did before the industrial revolution. Industrial economies are often still shackled by the old linear relationship between energy use and economic output, and by purchasing goods from these countries we are simply ‘outsourcing’ our energy needs elsewhere. Perhaps nations that are in the process of industrialisation will eventually adopt more energy-efficient means than they currently use. But until then, my conclusion is that it is possible to grow the UK economy without increasing our energy use. However, we do so at a cost to world energy use, and perhaps that should be the statistic that we pay more attention to.

This blog is written by Neeraj Oak, Cabot Institute.

Neeraj Oak

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