The role of energy and efficiency in economic development: policy implications

Panel: 1. Foundations of future energy policy

This is a peer-reviewed paper.

Authors:
Timothy Foxon, SPRU, University of Sussex, UK, United Kingdom
Julia Steinberger, University of Leeds, United Kingdom

Abstract

Energy policies in industrialised countries are now seeking to promote a transition to providing low carbon, secure and affordable energy services. This requires a fundamental re-assessment of the role that the availability and efficient conversion of energy sources into useful work plays in economic development. Recent work (Ayres and Warr, 2009) has shown that the increasing availability and efficient conversion of cheaper and higher quality forms of energy inputs has played a key role in driving economic growth in industrialised and emerging economies. This perspective has serious implications for economic growth projections, since we may be at a turning point in affordable, easily available energy: fossil fuel sources are becoming increasingly expensive due to depletion of easily accessible reserves and the imposition of higher carbon prices, and the generation from low carbon energy sources is still relatively expensive. Thus the continuation of past trends in economic growth rates cannot be assumed. This paper applies a coevolutionary framework (Foxon, 2011) to raise the issue of the contribution of the efficient conversion of energy sources to long-term economic growth and examine positive feedbacks or virtuous cycles between changes in energy input and conversion costs and changes in economic activity. This analysis highlights the importance of both energy efficiency improvements and changes in end-use consumption patterns to ensuring continuing economic prosperity as countries undergo a transition to low carbon energy systems.

References

Ayres, R. U. and B. Warr (2009). The economic growth engine: How energy and work drive material prosperity. Cheltenham, UK and Northhampton MA, US, Edward Elgar.

Foxon, T J (2011), ‘A co-evolutionary framework for analysing transition pathways to a sustainable low carbon economy’, Ecological Economics 70, 2258-2267.