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Energy and economic growth: Grounding our understanding in physical reality

  • Ockwell, David G.
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    This article attempts to summarise the complex, wide ranging and unresolved debate within the economics literature on the possibility of decoupling economic growth from energy use. It explores the difference between neo-classical and ecological economic worldviews and highlights how the ecological economic approach attempts to ground its analysis within the physical limits implied by the laws of thermodynamics. Once these laws are accounted for, the possibility of decoupling economic growth from energy use seems more limited than neo-classical economics implies. Analysis of empirical evidence also demonstrates that observed improvements in GDP/energy use ratios in the USA are better explained by shifts towards higher quality fuels than by improvements in the energy efficiency of technologies. This implies a need to focus on decarbonising energy supply. Furthermore, where energy-efficiency improvements are attempted, they must be considered within the context of a possible rebound effect, which implies that net economy-wide energy savings from energy-efficiency improvements may not be as large as the energy saved directly from the efficiency improvement itself. Both decarbonising energy supply and improving energy efficiency require the rapid development and deployment of new and existing low-carbon technologies. This review therefore concludes by briefly outlining areas of economic thought that have emerged as a result of engagement between economists and experts from other disciplines. They include ecological, evolutionary and institutional economics, all of which can make policy-relevant contributions to achieving a transition to a low-carbon economy.

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    File URL: http://www.sciencedirect.com/science/article/B6V2W-4TVJ094-3/2/d94e53503ee1069c27b4674ef7d84b41
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    Article provided by Elsevier in its journal Energy Policy.

    Volume (Year): 36 (2008)
    Issue (Month): 12 (December)
    Pages: 4600-4604

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    Handle: RePEc:eee:enepol:v:36:y:2008:i:12:p:4600-4604
    Contact details of provider: Web page: http://www.elsevier.com/locate/enpol

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    1. Kallis, Giorgos, 2007. "When is it coevolution?," Ecological Economics, Elsevier, vol. 62(1), pages 1-6, April.
    2. Paavola, Jouni & Adger, W. Neil, 2005. "Institutional ecological economics," Ecological Economics, Elsevier, vol. 53(3), pages 353-368, May.
    3. Robert K. Kaufmann, 2004. "The Mechanisms for Autonomous Energy Efficiency Increases: A Cointegration Analysis of the US Energy/GDP Ratio," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 63-86.
    4. Rammel, Christian & Stagl, Sigrid & Wilfing, Harald, 2007. "Managing complex adaptive systems -- A co-evolutionary perspective on natural resource management," Ecological Economics, Elsevier, vol. 63(1), pages 9-21, June.
    5. Toman, Michael & Simpson, R. David & Ayres, Robert, 2004. "Scarcity and Growth in the New Millennium: Summary," Discussion Papers dp-04-01, Resources For the Future.
    6. Brookes, Len, 1990. "The greenhouse effect: the fallacies in the energy efficiency solution," Energy Policy, Elsevier, vol. 18(2), pages 199-201, March.
    7. Stern, David I. & Common, Michael S. & Barbier, Edward B., 1996. "Economic growth and environmental degradation: The environmental Kuznets curve and sustainable development," World Development, Elsevier, vol. 24(7), pages 1151-1160, July.
    8. Stern, David I., 1993. "Energy and economic growth in the USA : A multivariate approach," Energy Economics, Elsevier, vol. 15(2), pages 137-150, April.
    9. Kaufmann, Robert K., 1992. "A biophysical analysis of the energy/real GDP ratio: implications for substitution and technical change," Ecological Economics, Elsevier, vol. 6(1), pages 35-56, July.
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