IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v11y2019i13p3644-d245104.html
   My bibliography  Save this article

Energy Transition Scenarios and Their Economic Impacts in the Extended Neoclassical Model of Economic Growth

Author

Listed:
  • Lukáš Režný

    (Faculty of Informatics and Management, University of Hradec Králové, Rokitanského 62, 50003 Hradec Králové, Czech Republic)

  • Vladimír Bureš

    (Faculty of Informatics and Management, University of Hradec Králové, Rokitanského 62, 50003 Hradec Králové, Czech Republic)

Abstract

Introduction: Energy return on energy invested (EROEI) of fossil fuels has been declining sharply, while modern renewable energy sources generally have even lower EROEI than fossil fuels. It has been repeatedly proven that economic growth expressed in the form of growth of real Gross Domestic Product (GDP) is closely related to intensified energy consumption and escalated usage of natural resources in general. This problem remains scarcely explored in pure economic modelling. Objectives: This study presents a novel model titled Energy Extended Neoclassical Growth Model (EENGM), which focuses on the consequences of declining quantity and quality of extractable fossil fuels and lower quality of the succeeding renewable energy technology for economic growth. Method: The Neoclassical growth model is translated into a system dynamics format and is extended by important feedback mechanisms, which are identified as important from the literature and mostly missing from the analyzed system dynamics models with a similar scope. Two scenarios assess the EENGM performance: business as usual (BAU) and the sustainability strategy (SUS). Results: Sensitivity analysis is performed for the Energy Return on Energy Invested (EROEI) parameter and results in the investment share in GDP varying between 27 and 40%, while the energy sector investment largely displaces investment in other economic sectors. The EENGM is associated with new behavior whereby the underperforming energy sector limits GDP growth and seizes most of the available investment. The adoption of the SUS strategy causes 28% lower cumulative fossil fuel aggregate consumption which still corresponds to higher than 1.5 °C global warming compared to the preindustrial levels. Conclusion: The share of consumption in the GDP of an economy undergoing energy transition can approach levels previously seen only in totally war-oriented economies. Even omitting other negative environmental feedback, the feasibility of the successful energy transition of the system in its contemporary form, with the currently available renewable energy technology, seems to be highly uncertain.

Suggested Citation

  • Lukáš Režný & Vladimír Bureš, 2019. "Energy Transition Scenarios and Their Economic Impacts in the Extended Neoclassical Model of Economic Growth," Sustainability, MDPI, vol. 11(13), pages 1-25, July.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:13:p:3644-:d:245104
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/11/13/3644/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2071-1050/11/13/3644/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ferroni, Ferruccio & Hopkirk, Robert J., 2016. "Energy Return on Energy Invested (ERoEI) for photovoltaic solar systems in regions of moderate insolation," Energy Policy, Elsevier, vol. 94(C), pages 336-344.
    2. Reynolds, Douglas B., 1999. "The mineral economy: how prices and costs can falsely signal decreasing scarcity," Ecological Economics, Elsevier, vol. 31(1), pages 155-166, October.
    3. Victor Court & Pierre-André Jouvet & Frédéric Lantz, 2018. "Long-term endogenous economic growth and energy transitions," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    4. Ayres, Robert U. & Warr, Benjamin, 2005. "Accounting for growth: the role of physical work," Structural Change and Economic Dynamics, Elsevier, vol. 16(2), pages 181-209, June.
    5. Patzek, Tadeusz W. & Croft, Gregory D., 2010. "A global coal production forecast with multi-Hubbert cycle analysis," Energy, Elsevier, vol. 35(8), pages 3109-3122.
    6. James D. Hamilton, 2009. "Causes and Consequences of the Oil Shock of 2007-08," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 40(1 (Spring), pages 215-283.
    7. Warr, Benjamin & Ayres, Robert, 2006. "REXS: A forecasting model for assessing the impact of natural resource consumption and technological change on economic growth," Structural Change and Economic Dynamics, Elsevier, vol. 17(3), pages 329-378, September.
    8. Ansell, Thomas & Cayzer, Steve, 2018. "Limits to growth redux: A system dynamics model for assessing energy and climate change constraints to global growth," Energy Policy, Elsevier, vol. 120(C), pages 514-525.
    9. Capellán-Pérez, Iñigo & Mediavilla, Margarita & de Castro, Carlos & Carpintero, Óscar & Miguel, Luis Javier, 2014. "Fossil fuel depletion and socio-economic scenarios: An integrated approach," Energy, Elsevier, vol. 77(C), pages 641-666.
    10. Weißbach, D. & Ruprecht, G. & Huke, A. & Czerski, K. & Gottlieb, S. & Hussein, A., 2013. "Energy intensities, EROIs (energy returned on invested), and energy payback times of electricity generating power plants," Energy, Elsevier, vol. 52(C), pages 210-221.
    11. Sgouris Sgouridis & Denes Csala, 2014. "A Framework for Defining Sustainable Energy Transitions: Principles, Dynamics, and Implications," Sustainability, MDPI, vol. 6(5), pages 1-22, May.
    12. Hall, Charles A.S. & Lambert, Jessica G. & Balogh, Stephen B., 2014. "EROI of different fuels and the implications for society," Energy Policy, Elsevier, vol. 64(C), pages 141-152.
    13. Graham M Turner, 2008. "A Comparison of the Limits to Growth with Thirty Years of Reality," Socio-Economics and the Environment in Discussion (SEED) Working Paper Series 2008-09, CSIRO Sustainable Ecosystems.
    14. Grubler, Arnulf, 2012. "Energy transitions research: Insights and cautionary tales," Energy Policy, Elsevier, vol. 50(C), pages 8-16.
    15. Mediavilla, Margarita & de Castro, Carlos & Capellán, Iñigo & Javier Miguel, Luis & Arto, Iñaki & Frechoso, Fernando, 2013. "The transition towards renewable energies: Physical limits and temporal conditions," Energy Policy, Elsevier, vol. 52(C), pages 297-311.
    16. Victor Court & Pierre-André Jouvet & Frédéric Lantz, 2018. "Long-term endogenous economic growth and energy transitions," Post-Print hal-01549796, HAL.
    17. David I. Stern and Astrid Kander, 2012. "The Role of Energy in the Industrial Revolution and Modern Economic Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    18. Ugo Bardi, 2013. "Mind Sized World Models," Sustainability, MDPI, vol. 5(3), pages 1-16, March.
    19. Takuro Uehara & Yoko Nagase & Wayne Wakeland, 2016. "Integrating Economics and System Dynamics Approaches for Modelling an Ecological–Economic System," Systems Research and Behavioral Science, Wiley Blackwell, vol. 33(4), pages 515-531, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jacques, Pierre & Delannoy, Louis & Andrieu, Baptiste & Yilmaz, Devrim & Jeanmart, Hervé & Godin, Antoine, 2023. "Assessing the economic consequences of an energy transition through a biophysical stock-flow consistent model," Ecological Economics, Elsevier, vol. 209(C).
    2. Jean-François Fagnart & Marc Germain & Benjamin Peeters, 2020. "Can the Energy Transition Be Smooth? A General Equilibrium Approach to the EROEI," Sustainability, MDPI, vol. 12(3), pages 1-29, February.
    3. Stringer, Thomas & Joanis, Marcelin, 2022. "Assessing energy transition costs: Sub-national challenges in Canada," Energy Policy, Elsevier, vol. 164(C).
    4. Pablo E. Carvajal & Asami Miketa & Nadeem Goussous & Pauline Fulcheri, 2022. "Best Practice in Government Use and Development of Long-Term Energy Transition Scenarios," Energies, MDPI, vol. 15(6), pages 1-21, March.
    5. Elise Dupont & Marc Germain & Hervé Jeanmart, 2021. "Feasibility and Economic Impacts of the Energy Transition," Sustainability, MDPI, vol. 13(10), pages 1-34, May.
    6. Manuel Ayala & Diego Huaraca & José Varela-Aldás & Andrea Ordóñez & Genís Riba, 2020. "Anthropization and Growth of the Electricity Grid as Variables for the Analysis of Urban Infrastructure," Sustainability, MDPI, vol. 12(4), pages 1-17, February.
    7. Henrique Oliveira & Víctor Moutinho, 2021. "Renewable Energy, Economic Growth and Economic Development Nexus: A Bibliometric Analysis," Energies, MDPI, vol. 14(15), pages 1-28, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Rye, Craig D. & Jackson, Tim, 2018. "A review of EROEI-dynamics energy-transition models," Energy Policy, Elsevier, vol. 122(C), pages 260-272.
    2. Carlos de Castro & Iñigo Capellán-Pérez, 2020. "Standard, Point of Use, and Extended Energy Return on Energy Invested (EROI) from Comprehensive Material Requirements of Present Global Wind, Solar, and Hydro Power Technologies," Energies, MDPI, vol. 13(12), pages 1-43, June.
    3. Heun, Matthew Kuperus & Owen, Anne & Brockway, Paul E., 2018. "A physical supply-use table framework for energy analysis on the energy conversion chain," Applied Energy, Elsevier, vol. 226(C), pages 1134-1162.
    4. Jean-François Fagnart & Marc Germain & Benjamin Peeters, 2020. "Can the Energy Transition Be Smooth? A General Equilibrium Approach to the EROEI," Sustainability, MDPI, vol. 12(3), pages 1-29, February.
    5. Capellán-Pérez, Iñigo & Mediavilla, Margarita & de Castro, Carlos & Carpintero, Óscar & Miguel, Luis Javier, 2014. "Fossil fuel depletion and socio-economic scenarios: An integrated approach," Energy, Elsevier, vol. 77(C), pages 641-666.
    6. Buus, Tomáš, 2017. "Energy efficiency and energy prices: A general mathematical framework," Energy, Elsevier, vol. 139(C), pages 743-754.
    7. Aramendia, Emmanuel & Brockway, Paul E. & Pizzol, Massimo & Heun, Matthew K., 2021. "Moving from final to useful stage in energy-economy analysis: A critical assessment," Applied Energy, Elsevier, vol. 283(C).
    8. Leiva, Benjamin & Ramirez, Octavio A. & Schramski, John R., 2019. "A framework to consider energy transfers within growth theory," Energy, Elsevier, vol. 178(C), pages 624-630.
    9. Dupont, Elise & Koppelaar, Rembrandt & Jeanmart, Hervé, 2018. "Global available wind energy with physical and energy return on investment constraints," Applied Energy, Elsevier, vol. 209(C), pages 322-338.
    10. Richard Heinberg & Timothy Crownshaw, 2018. "Energy Decline and Authoritarianism," Biophysical Economics and Resource Quality, Springer, vol. 3(3), pages 1-11, September.
    11. Marc Germain, 2020. "Limits to growth and structural change," Post-Print hal-03129992, HAL.
    12. Marco Vittorio Ecclesia & João Santos & Paul E. Brockway & Tiago Domingos, 2022. "A Comprehensive Societal Energy Return on Investment Study of Portugal Reveals a Low but Stable Value," Energies, MDPI, vol. 15(10), pages 1-22, May.
    13. David I. Stern, 2010. "The Role of Energy in Economic Growth," CCEP Working Papers 0310, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    14. Carlos Castro & Iñigo Capellán-Pérez, 2018. "Concentrated Solar Power: Actual Performance and Foreseeable Future in High Penetration Scenarios of Renewable Energies," Biophysical Economics and Resource Quality, Springer, vol. 3(3), pages 1-20, September.
    15. Charles A. S. Hall, 2022. "The 50th Anniversary of The Limits to Growth : Does It Have Relevance for Today’s Energy Issues?," Energies, MDPI, vol. 15(14), pages 1-13, July.
    16. Alfredsson, Eva C. & Malmaeus, J. Mikael, 2019. "Real capital investments and sustainability - The case of Sweden," Ecological Economics, Elsevier, vol. 161(C), pages 216-224.
    17. Fizaine, Florian & Court, Victor, 2015. "Renewable electricity producing technologies and metal depletion: A sensitivity analysis using the EROI," Ecological Economics, Elsevier, vol. 110(C), pages 106-118.
    18. Patrick Moriarty & Damon Honnery, 2020. "Feasibility of a 100% Global Renewable Energy System," Energies, MDPI, vol. 13(21), pages 1-16, October.
    19. King, Carey W., 2020. "An integrated biophysical and economic modeling framework for long-term sustainability analysis: the HARMONEY model," Ecological Economics, Elsevier, vol. 169(C).
    20. Walmsley, Timothy G. & Walmsley, Michael R.W. & Varbanov, Petar S. & Klemeš, Jiří J., 2018. "Energy Ratio analysis and accounting for renewable and non-renewable electricity generation: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 98(C), pages 328-345.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jsusta:v:11:y:2019:i:13:p:3644-:d:245104. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.