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Energy intensity, growth and technical change

Author

Listed:
  • Akshay Shanker
  • David Stern

Abstract

World and U.S. energy intensities have declined over the past century, falling at an average rate of approximately 1.2–1.5 percent a year. The decline has persisted through periods of stagnating or even falling energy prices, suggesting the decline is driven in large part by autonomous factors, independent of price changes. In this paper, we use directed technical change theory to understand the autonomous decline in energy intensity and investigate whether the decline will continue. We show in an economy with no state-dependence, where existing knowledge does not make R&D more profitable, energy intensity continues to decline, albeit at a slower rate than output growth, due to energy-augmenting innovation. However, in an economy with extreme state-dependence, energy intensity eventually stops declining because labor-augmenting innovation crowds out energy-augmenting innovation. Our empirical analysis of energy intensity in 100 countries between 1970 and 2010 suggests a scenario without extreme state dependence where energy intensity continues to decline; in either case, energy intensity never declines faster than output grows, and so energy use always increases, as long as the extraction cost of energy stays constant.

Suggested Citation

  • Akshay Shanker & David Stern, 2018. "Energy intensity, growth and technical change," CAMA Working Papers 2018-46, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2018-46
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2018-09/46_2018_shanker_stern_v1.pdf
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Energy Intensity, Growth, and Technical Change
      by noreply@blogger.com (David Stern) in Stochastic Trend on 2018-10-03 00:11:00
    2. Annual Review 2018
      by noreply@blogger.com (David Stern) in Stochastic Trend on 2018-12-23 02:35:00
    3. Second Francqui Lecture
      by noreply@blogger.com (David Stern) in Stochastic Trend on 2021-03-24 02:38:00

    Citations

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    Cited by:

    1. Bruns, Stephan B. & Moneta, Alessio & Stern, David I., 2021. "Estimating the economy-wide rebound effect using empirically identified structural vector autoregressions," Energy Economics, Elsevier, vol. 97(C).
    2. Yang, Mian & Wang, En-Ze & Hou, Yaru, 2021. "The relationship between manufacturing growth and CO2 emissions: Does renewable energy consumption matter?," Energy, Elsevier, vol. 232(C).

    More about this item

    Keywords

    Energy; Directed Technological Change; Economic Growth;
    All these keywords.

    JEL classification:

    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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