Comparing World Economic and Net Energy Metrics, Part 3: Macroeconomic Historical and Future Perspectives

Maxwell²,

Donovan

2015

Energies

Self Cite

Abstract:We translate between energetic and economic metrics that characterize the role of energy in the economy. Specifically, we estimate monetary expenditures for the primary energy and net external power ratio (NEPR direct ; NEPR, net external power ratio), a power return ratio of annual energy production divided by annual direct energy inputs within the energy industry. We estimate these on an annualized basis for forty-four countries from 1978 to 2010. Expressed as a fraction of gross domestic product (GDP), f e,GDP , the forty-four country aggregate (composing >90% world GDP) worldwide expenditures on energy decreased from a maximum of 10.3% in 1979 to a minimum of 3.0% in 1998 before increasing to a second peak of 8.1% in 2008. While the global f e,GDP fluctuates significantly, global NEPR direct declined from a value of 34 in 1980 to 17 in 1986 before staying in a range between 14 and 16 from 1991 to 2010. In comparing both of these metrics as ratios of power output over power input, one economic ( f −1 e,GDP ) and one biophysical (NEPR direct ), we see that when the former divided by the latter is below unity, the world was in a low-growth or recessionary state.

“…Part 2 analyzes how net energy metrics relate to expenditures on energy. Part 3 places the calculations of expenditures on energy in historical, current and future contexts [2].…”

Section: Introductionmentioning

confidence: 99%

Comparing World Economic and Net Energy Metrics, Part 2: Total Economy Expenditure Perspective

Maxwell²,

Donovan

2015

Energies

Self Cite

“…Consequently, energy carriers were relatively expensive, and preindustrial economies spent large shares of total expenditures in producing food and energy. In preindustrial UK energy expenditures were equal to 35-45 % of economic output (King 2015a), and in Sweden in 1800 they were over 90 % (Kander and Stern 2014). The net energy of the energy system had been low for several centuries, and thus, the structure of society had conformed its structure to that situation.…”

Section: Net Energy Perspectivementioning

confidence: 99%

“…Odum, Georgescu-Roegen, Hall, King and many others have applied this concept to describe energy production systems and technologies within the context of the overall economy (Odum 1971;GeorgescuRoegen 1971GeorgescuRoegen , 1979Hall and Klitgaard 2012;Hall et al 1986;King and Hall 2011;King 2010;King et al 2015a, b;King 2015a). In particular, Hall has promoted the idea that ''net energy'' is an important metric that relates to societal structure and economic growth (Hall et al 2009).…”

Section: Net Energy Perspectivementioning

confidence: 99%

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Information Theory to Assess Relations Between Energy and Structure of the U.S. Economy Over Time

Biophys Econ Resour Qual

2016

This paper describes the changing structure of the United States' (U.S.) domestic economy by applying information theory-based metrics to the U.S. input-output (I-O) tables from 1947 to 2012. Here the I-O tables are an economic network where the sectors are the nodes. The value of these metrics is that they describe the balance or trade-off between efficiency and redundancy of network flows as well as equality and hierarchy of flows through nodes in a network. I relate these metrics to the U.S. gross power consumption and annual intermediate spending by the food and energy sectors, the latter being a proxy for the inverse of the net power ratio (or net energy) of the economy, to test hypotheses of energy-economy structural linkages. The results of this paper show that increasing gross power consumption, as well as a decreasing share of intermediate expenditures of the food and energy sectors, correlates with increased distribution of money among economic sectors, and vice versa. The information theory metrics indicate two time periods at which major structural shifts occurred. The first was between 1967 and 1972, and the second was around the turn of the twenty-first century when food and energy expenditures no longer continued to decrease after 2002. In response to the latter, it is clear that the U.S. economy did trade off structural reserves (e.g., decreasing metrics of conditional entropy, redundancy, and equality) for structural efficiency (e.g., increasing metrics of efficiency, mutual constraint, and hierarchy) after food and energy expenditures increased post-2002. I also test the structural trends with increasingly simpler (e.g., fewer sectors) representations of the I-O tables, and the results are more consistent for I-O representations that account for inputs and outputs (e.g., value added and gross domestic product) rather than only the intermediate transactions among sectors. The findings of this paper have important implications for economic modeling in at least two ways. First, the paper helps explain how fundamental shifts in resources costs relate to economic structure and economic growth. Second, the paper shows that the number of sectors used to represent economic transactions influences the systemic metrics themselves.

“…Part 2 analyzes how net energy metrics translate to total expenditures on energy [1]. Part 3 places the calculations of expenditures on energy in historical, current and future contexts [2].…”

Section: Introductionmentioning

confidence: 99%

Comparing World Economic and Net Energy Metrics, Part 1: Single Technology and Commodity Perspective

Maxwell²,

Donovan

2015

Energies

Self Cite

Abstract:We translate between biophysical and economic metrics that characterize the role of energy in the economy. Specifically, using data from the International Energy Agency, we estimate the energy intensity ratio (EIR), a price-based proxy for a power return ratio (PRR ∼ P out /P invested ). The EIR is a useful metric, because for most countries and energy commodities, it can indicate the biophysical trends of net energy when data are too scarce to perform an original net energy analysis. We calculate EIR for natural gas, coal, petroleum and electricity for forty-four countries from 1978 to 2010. Global EIR values generally rise from 1978 to 1998, decline from 1998 to 2008 and then slightly rebound. These trends indicate one interpretation of the net energy of the world economy. To add perspective to our recent, but short, time series, we perform the same calculations for historical England and United Kingdom energy prices to demonstrate that a given energy price translates to different PRRs (EIR in this case) depending on the structure of the economy and technology. We review the formulation of PRRs and energy return ratios (ERR ∼ E out /E invested ) to indicate why PRRs translate to (the inverse of) energy prices and ERRs translate to (the inverse of) energy costs. We show why for any given value of an ERR or PRR, there is not a single corresponding energy cost or price, and vice versa. These principles in turn provide the basis to perform better modeling of future energy scenarios (e.g., low-carbon transition) by considering the relationship between economic metrics (cost and price) and biophysical metrics (energy and power return ratios) based on energy, material and power flows.