In previous OSQAR editions, we’ve focused on the three pillars of sustainability: energy, economy and environment – each important in their own right. This week, we turn our attention to the connection between energy and the economy.
It is no accident the United States, with only 5% of world population and one of its highest living standards, consumes 25% of total global energy. It has long been observed (PDF) that the higher a country’s per capita energy consumption, the more prosperous that country is.
This pattern certainly holds true, when you consider China and other non-member Organization For Economic Co-operation and Development (OECD) countries as examples. The International Energy Agency, in their World Energy Outlook 2010 (PDF), notes China has probably already overtaken the U.S. as the world’s largest energy user and will soon have its largest economy. It also predicts that non-member OECD countries could account for 93% of energy growth over the next 25 years.
As Dennis Anderson argues in the UN Development Programme’s Energy and Economic Prosperity, modern, abundant energy can improve living standards of billions of people, especially in the developing world, who lack access to services or whose consumption levels are far below those in industrialized countries.
"No country has been able to raise per capita incomes from low levels without increasing its commercial energy use."
Anderson notes that no country has been able to raise per capita incomes from low levels without increasing its commercial energy use. Industrialized countries’ demand for fossil fuels has expanded more than 50-fold (in energy units) since 1860, while horsepower per worker in industry and agriculture has grown commensurately and contributed to enormous labour productivity increases. As the chart below illustrates, energy use and social development go hand in hand.
It is clear that developing countries are advancing along a similar but much faster track than developed economies once did, as modern fuels have replaced less efficient ones like wood and are much more abundant and affordable. According to the World Bank, electricity, when first available, was 20 times today’s cost in inflation-adjusted prices. The consequence of efficient electricity generation was not only cheaper power, but an entire new phase of industrialization and urbanization driven by high-quality lighting and smaller, cleaner machines in homes and workplaces.
From a country-by-country energy consumption perspective, there may be some lessons to be learned from countries that have advanced their economies, but have been more efficient in their energy use. Take for example, energy consumption patterns between Canada, the United States and western Europe.
Anderson reminds us that energy is an economic “good”, but pollution from energy production and use is an economic “bad”. Effectively dealing with this “bad” requires substitution (coal replacing wood, gas replacing coal) in the long term and technology (SOX and NOX scrubbers on power stations, catalytic converters on automobiles) in the short term. Managing pollution “bads” with technology marginally increases overall energy costs, but it also drives higher economic output and well-being.
Sustainable development ensues from a strong economy, a healthy environment and social well-being, and all three are inextricably dependent on affordable energy. The challenge is to find the right balance right, not just for us, but for the billions of people around the world that are rightly striving to improve their quality of life.
