North versus South. Energy transition and intensity in Europe over ...

Paper for session 49 Helsinki 2006

North versus South

Energy Transition and Energy Intensity in Europe

over 200 Years

Abstract

The paper examines energy consumption in Sweden, Holland, Italy

and Spain over 200 years, including both traditional and modern energy car-

riers. The article is based on totally new series of energy consumption in-

cluding traditional carriers along with modern sources. Our main purposes

are a closer examination of the process of the energy transition in Europe

and a revison of the prevailing idea of there being an inverted U-curve (or

Environmental Kuznets Curve –EKC-) in the very long run. Changes in en-

ergy consumption are decomposed into effects from population growth, eco-

nomic growth and energy intensity. The results on energy intensity challenge

previous suggestions by most scholars. An inverted U curve does not exist

whenever we include traditional sources of energy in our analysis.

Keywords: energy, traditional sources, EKC, service transition

Ben Gales, Astrid Kander, Paolo Malanima and Mar Rubio

Ben Gales Paolo Malanima

Faculty of Economics Institute of Studies

Economic History on Mediterranean Societies

University of Groningen (Italian National Council

The Netherlands of Research) Italy

[email protected] [email protected]

Astrid Kander* Mar Rubio

Department of Economic History Department of Economics

Box 7083 and Business

220 07 LUND University Pompeu Fabra

Sweden Barcelona Spain

[email protected] [email protected]

2

mailto:[email protected]




There is no consensus on precisely how important energy is for eco-

nomic growth and human welfare. If energy is a crucial resource for

the economy, so that growth can not take place without more or less

proportionate increases of energy, its availability could endanger

economic behaviour in a near future. If, on the other hand, energy

consumption shows high variability in relation to the economy, and

especially if it tends to decline in relative terms, the prospects are

more optimistic.

The proposition that energy consumption does not grow propor-

tionately to GDP, but that the ratio between energy and GDP (energy

intensity) shows a pattern that resembles an inverted U-curve, with a

relative increase in the early phases of industrialization and subse-

quently a decline in the post-industrial phase, is maintained by most

scholars.1 Nevertheless, this widely assumed proposition does not

take into account traditional forms of energy exploited prior to the in-

troduction of fossil fuels. It is our opinion that the long-term pattern

would look profoundly different from an inverted U-curve when tradi-

tional energy carriers, such as firewood and muscle energy of men

and working animals, were included in the calculation. In this case, in

fact, the starting level of energy use would not be so low: part of the

increase of energy consumption would appear, as a consequence,

only as a substitution of modern to traditional energy carriers.2 The

hypothesis was confirmed for Sweden, where there was a long-term

1 Goldenberg, Reddy (1990). 2 Jean-Marie Martin (1988) had suggested, in the wake of Schurr & Netschert (1960), that including firewood did change the energy/GDP relationship for the US, which was a wood-rich country. Grubler, A. (2004) reproduces these results for the US.

3

declining trend in energy intensity (energy measured by its heat con-

tent divided by GDP in constant prices), around which there were

some long swings.3 The result thus conveyed a fairly optimistic mes-

sage: economic growth has taken place with relatively less energy

requirements during the past 200 years; that is the economy man-

aged to grow faster than the consumption of energy. Furthermore, at

least in Sweden, a substantial relative decline took place from the en-

ergy crisis of the 1970s, after which even the absolute energy con-

sumption levelled off and came to a halt. Further reductions could be

expected in the future.

The Swedish long-term decline in energy intensity does not seem

apparently country-specific. A similar trend has been recently found

out in Italy, where energy intensity declined since the middle of the

19th century.4 So it seems reasonable to suppose that we could dis-

cover a similar decreasing trend of the energy intensity in other Euro-

pean countries.

The following research is based on new statistical material and

new series of energy consumption in four European countries.5

In section 1 we account for the different energy systems of our

four countries.6 We are dealing with two rather small, but early indus-

trialized and climatically cold countries in the North -The Netherlands

and Sweden-, versus two large but late industrialized Mediterranean 3 Kander (2002), Kander & Lindmark (2004). 4 Malanima (2006). 5 These data, together with the criteria used are available in www. (to be added). See also Kander (2002) and Kander & Lindmark (2004), Rubio (2005) and Malanima (2006). 6 Subsequently also Germany, England and Wales, Portugal and Norway will be in-cluded among the countries that we compare. Work on these countries is ongoing by researchers in our EGP (Energy-Growth-Pollution) network.

4

countries -Italy and Spain-. These four countries represent regions of

Europe with differences in climate, domestic sources of energy and

economic development paths.

In section 2 we compare the aggregate and per capita energy

consumption of the various countries. We find pair-wise similar results

in per capita consumption for the North and the South countries.

In section 3 we analyze the changes over time in aggregate en-

ergy consumption. For this purpose we use the Commoner-Ehrlich

equation and decompose the changes into population effects, con-

sumption effects and a residual.7 The residual is energy intensity (en-

ergy/GDP). We then will shortly address the discussion on the role of

the transition to the service economy, which we argue is largely an

illusion in terms of real production.

Section 4 contains a concluding discussion, which sums up the

main results of the study and makes some overall comments on what

has to be learnt from the previous analysis on the energy-economy

relationship.

1. The energy transition. Comparisons of the national energy

systems

The common feature of all these four countries is that traditional

energy carriers made up a large part of energy consumption until

7 Commoner (1971a), (1971b), Ehrlich et al. (1977), Ehrlich and Ehrlich (1990).

5

rather late (Figures 1-4). If we classify muscle power of men and

working animals, firewood, wind and water and peat as traditional en-

ergy carriers, we find that their contribution to the total energy input

became less than 50 percent only from 1864 on in The Netherlands,

from the late 1920s in Sweden, and immediately before World War II

in Italy and Spain.

Figure 1: The Swedish energy transition 1800-2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%non-thermalelectricityspent pulpingliquordistrict heating

gas

peat

o il

coal

firewood

muscle

Note: District heating is hot wastewater from industrial processes that are

used for heating houses. This is rather common in Sweden. Spent pulping

liquor is an energy-rich waste product from the pulp manufacturing that is

used as fuel in the pulp industry.

Figure 2: The Spanish energy transition 1850-2000

6

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%non-thermalelectricityNatural Gas

Oil

Coal

Direct water

Fuelwood

M uscle

Figure 3: The Italian energy transition 1861-2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% non-thermoelectricitygas

o il

coal

water

wind

firewood

muscle

Figure 4: The Dutch energy transition 1800-2000

7

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%non-thermalelectricitygas

o il

coal

peat

wind

firewood

muscle

The relative importance of specific traditional energy carriers dif-

fered among our countries.8 In Sweden the dominant traditional en-

ergy carrier was firewood, with roughly 75 percent of energy in 1850,

and food and fodder making up the rest. Direct working water was

less than 1 percent. In 1850 Spain the situation was pretty much the

reverse: food and fodder made up 50 percent, firewood 46, coal 1.7

and direct water and wind 2. This means that Spain had relatively

more motive power and less thermal energy at its disposal than Swe-

den. In 1861 Italy the situation reminded of the Spanish, but food for

men and fodder for draught animals played a minor role (about 20

percent each), firewood made up 50 percent and coal 7, while wind

8 The figures presented in these pages have been worked out using the same meth-odology. These methods are fully explained in Kander (2002) and Malanima (2006). While muscle energy corresponds to the input of food by men and working animals –only working animals -; firewood to the actual consumption in the four countries; wind and water have been estimated from the power of water and wind engines –sailships included- and the time, per year, these engines were in use. On modern carriers we exploited the statistical national accounts; or OECD and IEA series (in The Nether-lands from 1950 on).

8

and water only 1 percent.9 In Holland the situation was remarkable in

terms of the relative roles played by wind10 and peat. Around 1850

peat represented 25 percent and wind 10! The large pumping and

drainage projects needed in a country with half of its surface close to

or below the sea level were the main reason for the spectacular high

wind consumption. Firewood was, on the contrary, not very important

there: it only made up 10 percent, coal 15 and food and fodder 3511

(Table 1).

Table 1. Composition of energy consumption in 1850 Sweden, The Nether-

lands, Italy* and Spain (%).

Sweden Netherlands Italy Spain

Muscle 25 38 41 50

Firewood 73 11 51 46

Wind, Water <1 10 1 2

Fossil fuels 2 41 7 2

* 1861.

The coal-age arrived late in these countries, even though the age

of fossil fuels was already in progress in Holland, because of the wide

usage of peat (Table 2). Coal was very much a phenomenon of the

20th century.

9 Malanima (2006) and Bardini (1998). 10 Albers (2002), pp. 103-14 and 200-02. 11 Van Zanden (1997), p. 491. See also the remarks on firewood consumption in The Netherlands by Van der Woude (2003).

9


lands, Spain and Italy (%).


Muscle 17 20 39 31

Firewood 45 1 34 26



Primary electricity 0.1 0 0.1 0

Note: primary electricity is only a commonly used abridged expression for

hydro- and nuclear electricity. Actually primary electricity does not exist,

electricity being in any case a secondary form of energy. Electricity is here

calculated by its heat content, and not by the energy content of the water or

uranium used for its production.

The dominance of the major energy carrier varied considerably.

The share of coal at its peak was 79 percent in The Netherlands

(1913), but only 45 percent in Sweden (1909). In Italy the maximum

was around 40 percent in 1935-40 and in Spain it peaked in the years

1927-30 with levels of 46-49 percent. Then the Civil War disrupted

the economy to such a degree that its effects could be noticed for the

fifteen years after its end. Similar levels of coal consumption were not

achieved again until the mid 1950s (Table 3).


lands, Spain and Italy (%).

10


Muscle 6 10 27 27

Firewood 21 0 17 12



Primary electricity 9 0 10 2

The fact that The Netherlands became more of a coal econ-

omy than the others is not due to its own stocks.12 The take-off of in-

digenous mining was rather late, from 1900, and essentially from the

First World War onwards. In normal conditions this industry exported

most of the coal mined. Dutch demand, however, could be easily and

cheaply met by foreign trade.

The dependence upon oil was more similar across the coun-

tries. The break-through of oil came on grand scale after World War II

in Italy, Spain and Sweden, but less so in The Netherlands, which

remained coal based for a longer period (Table 4).


lands, Italy and Spain (%).


Muscle 2 2 4 4

Firewood 23 0 2 0


12 Gales (2000).

11

Primary electricity 33 10 6 7

Note: In 2000 Sweden had 2% of its energy supplied by district heating,

therefore the figures for Sweden do not sum up to 100%! Primary electricity

in The Netherlands is the sum of biomass electricity (7%), international trade

in electricity (more than 2%) and some nuclear electricity.

Primary electricity is of different importance in our four coun-

tries. It long was negligible in The Netherlands because of lack of wa-

ter falls, but nowadays make up 10 percent, where two thirds come

from bio-fuels and 1/3 from nuclear power. In Spain its importance in-

creased over time and is now 7 percent. In Italy the relative share de-

clined since its maximum in the 1950s (9-10 percent) and is nowa-

days 5 percent. Nearly all of this primary electricity is produced by

hydropower. Nuclear energy has been negligible in Italy and nowa-

days no nuclear power plant exists.13 Sweden is the country that has

put most effort into the primary electricity production. It presently con-

stitutes around 30 percent of the energy, half of which comes from

nuclear energy and half from hydropower. Sweden presently has 10

nuclear reactors running, out of originally 12. On the other hand, and

as a consequence of the large non-thermal electricity share, it has a

negligible share of thermo-electricity; only around 5 percent is pro-

duced by coal nowadays.

In 200 years, at the end of the 20th century, a long energy

transition had been accomplished with the almost total disappearance

13 Silvestri (1989), p. 175.

12

of traditional carriers such as wind, water and draft animals. Another

traditional source, human muscle energy, was relatively unimportant

from the start. Firewood, however, remained substantial in many

countries till deep in the 20th century. The more recent decades, after

the oil crises of the 1970s, show a proliferation of relevant energy car-

riers. The portfolio is less determined by one prime energy carrier

than in the past. There is, however, quite some variation between the

portfolios. The Netherlands became a gas-country. In Italy as well gas

consumption progressed fast since the oil crisis. Sweden opted for

nuclear electricity and, again, wood. Spain in turn, went back to coal

burning for electricity production. In the year 2000, about 90 per cent

of the coal consumed in Spain was for thermal electricity production.

2. Aggregate energy consumption

While structures of the energy systems are different, there are

clear similarities in the long-run patterns of total energy consumption

in the four countries (Figure 5). There were modest rates of increase

until the World War II, a period of faster growth rates in 1950-1970

and declining growth rates between 1970 and 2000. This fits well with

overall economic growth patterns and lend some credibility to the idea

of more growth requiring more energy and more energy making more

growth possible. Some differences are also obvious. First: the re-

sponse to crises such as the World Wars differed. The First World

13

War resulted in pair-wise similar effects: The Netherlands and Swe-

den decreased their energy consumption relatively much during that

War, while Spain and Italy show more modest declines. Spain had its

own civil war to cope with in the 1930s and for those years statistics

are lacking. Second: the interwar period was marked by strong

growth in energy consumption in The Netherlands and Sweden, while

energy requirements in Spain (who did not participate in the Secon

World War) and in Italy hardly grew at all. Third: Spain shows a

stronger growth in energy during the 1990s than the other countries,

which continue to have modest growth rates.

Figure 5: Primary energy consumption in Italy, the Netherlands,

Spain and Sweden, in petajoules (PJ).

Primary energy consumption, el (heat)

10

100

1000

10000

1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

PJ

NetherlandsSwedenItalySpain

To some degree the different levels of energy consumption are

naturally connected to the size of the country, or basically to the

number of inhabitants of each country. The levels of energy con-

14

sumption, and the ordinal ranking of the countries in this respect,

show that Italy is the clear leader. Spain is second, but challenged in

that position by The Netherlands that catches up with Spain in the

1930s and then stays very close. Sweden starts at a level higher than

The Netherlands, but converges and reaches the same level in the

1880s, only to fall behind The Netherlands again from the 1920s on-

ward.

When examining the energy consumption per capita (Figure 6),

we see more distinct pair-wise developments in the North and South

European countries, together with a completely different hierarchy:

Sweden and Holland clearly overtake Italy and Spain. The Nether-

lands and Sweden also show remarkable resemblance in their long-

term development, apart from the period before 1870, where Sweden

actually declines its per capita energy consumption thanks to impres-

sive thermal efficiency developments both in household heating and

the iron industry, and in cultivation of new land without proportionate

increases in draught animals. Their development is thus one of con-

vergence. Spain and Italy share almost the same level of energy per

capita over the first 100 years (1860-1960), but then Italy takes off

and surpasses Spain. We see, however, that, while in the long term

climatic conditions, still important, count relatively less and the eco-

nomic performance is more meaningful, a relative convergence takes

place. The difference between Sweden-Holland on one hand and It-

aly-Spain on the other is much lower today than immediately after the

Second World War and during the previous century.

15

Figure 6: Energy consumption per capita

Energy/cap

10

100

1000

1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

GJ/

cap


3. Decomposing energy

A frequently used formula for decomposing the environmental

impact into its main components is the Commoner-Ehrlich equation:14

I P C T= ⋅ ⋅

Where:

I environmental impact;

P population;

C per capita GDP;

T the environmental impact from producing one unit of GDP (the ratio

energy/GDP), which depends on the level of technology.

14For an overview, see Ekins (2000), pp. 154-81.

16

A growth in P and C needs to be outbalanced by declines in T

in order for I to stay constant. Technical change can imply shifts in

production possibilities so that the environmental stress per produced

unit is reduced. In other words: there is an ongoing race between

productivity increases and growth and the winner determines the rela-

tionship between economy and environment.15

Translated into an energy context, the Commoner-Ehrlich

equation gets the following expression, where E stands for total en-

ergy consumption, GDP for C, while the T-factor has been replaced

by energy intensity (E/GDP):

GDP EE PP GDP

= ⋅ ⋅

A look at their rate of growth during the half century 1950-

2000 and from the 1973 oil crisis until 2000 clearly reveals that the

forces of growth –population and GDP per capita- have been stronger

than the forces of the efficiency –energy intensity-. In the following ta-

ble e, p, y and ei are the annual compound rates of increase of total

energy consumption, population, per capita GDP and energy inten-

sity. Whenever p+y exceeds ei, the consequence is an increase of to-

tal energy consumption (Table 5).

Table 5. Compound yearly growth rates in Energy (total), Population, per

capita GDP, Energy intensity (1950-2000 and 1973-2000)(%).

15 Grubler (1998).

17


1950-

2000

1973-

2000

1950-

2000

1973-

2000

1950-

2000

1973-

2000

1950-

2000

1973-

2000

e 1.92 0.12 3.08 1.07 3.80 0.85 3.80 2.65

p 0.46 0.32 0.91 0.63 0.43 0.27 0.76 0.60

y 2.20 1,45 2.59 2,50 3.62 2.02 3.91 2.50

ei -0.73 -1.65 -0.42 -1.40 -0.27 -1.43 -0.87 -0.45

We see, however, that when we distinguish the period 1973-

2000 within this half century, the forces of productivity and efficiency

reveal their stronger impact on the overall trend of energy consump-

tion. They have been able to deeply reduce the growth of energy

consumption and finally, at the very end of the century, to neutralize

it. In 1973-2000, energy intensity decline was faster than per capita

GDP and population growth, taken separately. In any case, taking the

27 years between 1973 and 2000 into account, the combined effect of

p+y, has been stronger than the decline in ei .The whole result – the

slower increase of e than before- has been more easily attained

thanks to the slower growth rate of GDP and population.

A disaggregate analysis per country and per factor provides a

clearer picture of the overall trend.

3.1 The P-factor

The P-factor, or the population factor (Table 6), explains why

The Netherlands overtook Sweden in energy consumption in the

18

1920s: after this point in time the growth rate of the Dutch population

was much higher than that of the Swedish. The Netherlands were a

demographic outlier for a considerable time. The number of births

remained high after the demographic transition in combination with a

very low rate of female participation in the labour force. The latter only

converged to the West-European pattern in the 1970’s; the former

had come down somewhat earlier. The factors behind this were and

still are a matter of debate, but cultural and religious forces are hold-

ing up as important.

Table 6. Population in Sweden, The Netherlands, Italy and Spain 1800-

2000 (thousands).


1800 2,336 2,112 18,260 10,392*

1825 2,771 2,514 20,134 12,615

1850 3,482 3,098 24,603 14,894

1875 4,383 3,788 28,258 16,267

1900 5,136 5,133 33,343 18,594

1925 6,053 7,362 38,715 22,433

1950 7,041 10,113 46,768 27,976

1975 8,208 13,666 54,764 35,548

2000 8,882 15,925 57,844 40,933

* 1797

This P-factor shows small variations in growth rates over time

(between 0.40 and 0.80 percent per year in 1950-2000), and is thus

19

incapable of explaining a factor that shows large fluctuations, such as

energy. For this we need to look at the income per capita variable, the

C-factor.

3.2 The C-factor

The C-factor or the income per capita (Figure 7) is a more

volatile variable than the P-factor and as such is more able to “ex-

plain” development of the E-factor over time. Energy consumption,

however, is not merely a function of income, as the differences be-

tween countries show.

Income per capita

100

1000

10000

100000

1800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

inte

rnat

iona

l dol

lars


Figure 7: Income per capita, constant international 1990 PPP dollars

Naturally this is not the place to discuss the long-term economic

development of these four countries, but the differences across them

appear as much in levels as in trends. The start of Modern Growth

coincided in these four countries with the passage to the exploitation

20

of modern energy carriers and with the transition from an energy sys-

tem based on vegetable carriers to a mineral one. For a long time

The Netherlands enjoyed a leading position. When, after the World

War II, GDP growth accelerated, a trend toward convergence charac-

terized the four economies. At the end of the century, the levels of per

capita GDP are the same in Sweden, Holland and Italy, and Spain is

rapidly converging.

The rise in per capita GDP was the strongest variable in de-

igure 8: Energy per capita versus income per capita

3.3. The T-factor: Energy intensity

termining a unprecedented growth in energy consumption (Figure 8),

even though energy intensity decline contributed to partially neutralize

this upward trend. In log figures a nearly linear relationship exists be-

tween GDP and energy consumption

F

Energy per capita versus income per capita in several European countries (Netherlands, Sweden, Italy and, Spain 1850-2000)

10

100

1000

1.000 10.000 100.000GDP per habitant (log)

international dollars (1990$) per habitant

ener

gy p

er c

apita

(log

) G

J/ha

bita

nt y

ear


20.0005.000

Netherlands 1995Eng: 210 GJ/habGDPpc: 18527 $/hab Sweden 2000

Eng: 168 GJ/habGDPpc:19898 $/hab

Italy 2000Eng: 134 GJ/habGDPpc: 20574

Spain 2000Eng: 119 GJ/habGDPpc: 14927

21

T is a factor that by construction catches up everything that

has not been caught by the P- factor and C-factor. It stands here for

energy intensity, E/GDP, and is portrayed in figure 9.

One main result is that Sweden is an outlier in its energy in-

tensity. The long-term decline is impressive in Sweden. Some anal-

ogy exists with Italy, but in none of the other countries it was the

same as in Sweden. A weak linear decline can be discerned for

Spain, but The Netherlands show no time trend at all. The reason is

that, as an early comer, its energy system was already different and,

he three late comers. Still,

ith the exception of The Netherlands, the levels of energy intensity

s the end of the

0th ce

in a sense, more modern than those of t

w

in the 19th century are larger than in the 20th century. Despite the wide

increases in energy consumption over the last 100 years, producing

has slowly become cheaper in energy terms. Toward

2 ntury, three out of the four countries have come down to less

than 10MJ/$, a level which is quite below the levels during the previ-

ous 100 years.

Figure 9: Energy intensity

22

Energy intensities, MJ/dollar

100,00

NetherlandsSweden10,00ItalySpain

1,001800 1810 1820 1830 1840 1850 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

Efficiency in energy consumption, the ratio, that is, of the out-

put of useful energy to the total input, certainly improved during the

transition. It was estimated that, while a subsistence agriculture ex-

ploits energy with an efficiency of about 10 percent, a more advanced

agrarian economy economy (an economy, that is, based on food, fod-

der and

plants as the main carriers) before industrialization can reach

even 25 percent.16 This is probably an overestimation. We know that

the efficiency of a working animal hardly reaches 10 percent. Most

fodder is used for the metabolism and does not produce mechanical

energy. In the case of a human being, efficiency is higher: about 20

percent. Traditional fireplaces and stoves usually had a very low effi-

ciency, hardly reaching 20 percent and in most cases even 10. A

weighed average provides an estimate of overall efficiency at around

20 percent and perhaps less. Today modern energy systems are

credited with an efficiency of about 35 percent. In the end, the pas-

sage to the use of modern carriers and the exploitation of the ma-

chines as converters resulted in a higher efficiency. Biological, animal

16 Cook (1976), p. 135. For a more in-depth discussion of this issue, see Malanima (1996), pp. 119 ff.

23

converters of traditional, vegetable sources are, on the whole, less

efficient than the inanimate machines.

The transition from traditional energy carriers to modern ones

therefore implied a decrease of energy intensity in any country. At the

same time technological improvements in mechanical converters con-

tributed in that the declining trend continued and even intensified.

How does our approach change the perception of the relation-

gy

ship between energy intensity and economic growth? The most

widely accepted perspective on this relationship is probably the one

by Goldenberg and Reddy (1990), later identified as the so called En-

vironmental Kuznets Curve (Figure 10). According to this idea, ener

intensity will increase at low levels of income per capita, as the coun-

tries industrialize, and then, after attaining a certain level of per capita

income, energy intensity will start to decrease. A straight implication

of the Environmental Kuznets Curve is that developing nations could

achieve comparable levels of economic growth with a lower ratio of

consumed energy to GDP after a transition across a path of increas-

ing energy intensity.

Figure 10: Traditional portrait of the long-term evolution of energy in-

tensities

24

Source: adapted from Reddy, Goldenberg (1990).

rriers changes the im-

lied relation. The immediate consequence is to elevate the levels of

ensity and economic output per capita has not the expected

The inclusion of traditional energy ca

p

energy consumption, and thus energy intensities, of the earlier peri-

ods. In addition, the inclusion changes the shape. The Environmental

Kuznets Curve normally has the levels of income per capita rather

than time on the x-axis in contrast to the Reddy, Goldenberg presen-

tation and we follow that custom. In Figure 11 energy intensity in-

cludes all types of energies put into use for the economic system and

it is represented in the y-axis. Income per capita, measured by the

GDP per inhabitant of each of our four countries is represented in the

x-axis.

Our representation of the very long-run relationship between en-

ergy int

inverted-U shape implied by the Environmental Kuznets Curve. For

the most part, the figure looks more like a sea-wave moving towards

25

higher levels of income (to the right) with a long-term trend of lower

levels of energy intensity. In fact, the only inverted-U shape that can

be identified is the one peaking around the first oil crisis for three of

the four countries (Spain being the exception). From the level $8,000

per capita (obtained around 1960 in Italy, Sweden and The Nether-

lands) the levels of energy intensity increased until the level of

$13,000 per capita (which were achieved in 1973 by all three). From

then on all three countries achieved higher levels of income per cap-

ita with lower levels of energy intensity. The decline in energy inten-

sity caused by the oil crisis is also observable in the Spanish case,

but at a much lower level of income per capita: $7,700.

Figure 11: Energy intensity versus income per capita

Total energy intensity versus income per capita in several European countries (Netherlands, Sweden, Italy and, Spain 1850-2000)

1,0

10,0

1.000 10.000 100.000GDP per habitant (log)

international dollars (1990$) per habitant

ener

gy in

tens

ity(lo

g)

MJ

of e

nerg

y pe

r $ p

rodu

ced

(199

0$)

100,0Sweden Netherlands Italy Spain

Sweden 1860GDPpc:$1,076Eng: 26.3 MJ/$

In the longer run, the trend exhibits a steady decline of the en-

ergy intensity at higher levels of income per inhabitant. Therefore,

what remains untouched of the original representation of the relation-

ship between energy intensity and income per capita proposed by

Goldenberg and Reddy is the fact that latecomers may achieve com-

Spain 1850GDPpc: $1,079Eng: 13.7MJ/$ Spain 2000

GDPpc: $14,927Eng: 8 MJ/$

Netherlands 1973

20.0005.000

Sweden 2000GDPpc: $19,898Eng: 8.2 MJ/$

Italy 2000GDPpc: $20,574Eng: 6.5 MJ/$

26

parable levels of economic output per capita with a lower ratio of con-

sumed energy to GDP.

3.4 Unpacking the T-factor

ensity, is a residual and may be

erceived as technical change in a broad sense. This technical

y services increases as they get relatively cheaper,

The T-factor, or energy int

p

change can both stimulate efficiency increases and structural change.

The efficiency can arise both from process innovations that increase

efficiency within a specific kind of production, from the introduction of

superior energy carriers, or from product innovations that give rise to

new ventures and branches, thus stimulating structural change of the

economy. Within one existing branch or sector the innovations can be

explicitly directed at energy savings (such as improving the thermal

efficiency of a machine) or at innovations that save on the production

factors that need energy to run (the total factor productivity). If we

consider the large improvements in thermal efficiency of machines

that have taken place over time, together with the substantial im-

provements in productivity, we may erroneously be led to expect a

very radical decline in energy intensity in the long run. However two

things complicate the picture and make the gains in energy intensity

less predictable:

1. “rebound” or “take-back” effects, which means that the con-

sumption of energ

27

which is the case when technical energy efficiency improves.17 This

stimulates structural change in a more energy intensive direction;

2. biases in technical change, which may lead to less gains in

energy savings than in total factor productivity. A normal feature of

y improvements of various kinds in the

tion and decline during the transition to the service econ-

omy.19

the economic development is that capital per worker (K/L) increases.

The capital in relation to GDP (the K/Y ratio) varies among countries..

In cases where capital is not saved upon in relation to GDP it may be

that energy is not saved either, although in general energy is saved

upon in relation to capital.18

Thus energy intensity may not decrease at all, even though

we have substantial efficienc

economy.

A widely held belief is that energy intensity will increase during

industrializa

We think there is reason to be sceptical about the idea that

the transition to the service economy will bring about any relative de-

cline in energy intensity.20 This is mainly because there has not been

a uniform pattern of substantial growth of the share for the service

sector in real terms (constant prices). Between 1970 and 2000 the

service sector only increased by 2 percentage units in Sweden, while

transports grew by 4 percentage units. In Spain the service sector ac-

tually declined by one percentage unit (transports included) and in

Holland services grew by 5 percentage units, while transports grew

17 Howarth (1997). 18 Kander and Schön (forthcoming); Ayers and Warr (2003); Ayres and Warr (2005). 19 Panayotou, Peterson and Sachs (2000). 20 Kander (2005).

28

by another 2 percentage units. Only Italy saw a relatively large in-

crease of the service sector of 14 percent units (transports included).

As a consequence the substantial decline in energy intensity after

1970 in these countries cannot be explained by a relative growth of

services. The shift to a service economy is largely an illusion in

terms of real production, since it is generated by the fall in the price of

manufacturing goods relative to services, which is in turn caused by

more rapid productivity growth in manufacturing than in services.21

What we can consume a lot of in the service economy is what we are

efficient in producing, which is still mainly industrial goods. It is of

course true that parts of the service sector have high productivity and

contain inputs from the industrial sector, like computers, which com-

plicates the picture.22 Baumol’s main argument is still relevant: that

for activities where human time makes up part of the product (the ser-

vice) it is not possible to rationalize production by substituting ma-

chines for labour, and such labour intensive activities make up a large

share of the service sector.

Still the more rapid decline in energy intensity after 1970 com-

pared to earlier periods is a fact and we believe this has much to do

with th

e structural changes within the industrial sector, with a relative

growth of energy-light branches like information and communication

technology and bio-technology. The grand transformation of societies

related to the micro-electronic revolution, sometimes called the third

21 Baumol (1967), Kander (2005). 22 Baumol (1987).

29

industrial revolution, may be largely responsible for the relative sav-

ings of energy.23

4. Concluding remarks

aims in the present research have been:

y transition

2. opinion that energy

We have

Swede

Our two

1. the analysis of the process of the energ

in four European countries, representative, so to

speak, of the North and South;

the revision of the widely held

intensity shows the pattern of an inverted U-curve.

investigated energy consumption in the long run in

n, Holland, Spain and Italy and the energy transition taking

place in our four countries. The relative importance of the traditional

energy carriers differed among the countries, with Sweden relying

upon firewood, Spain and Italy upon fodder and food, and wind and

peat being substantial in The Netherlands. The coal age was a 20th

century phenomenon, but also here its maximum share in energy

consumption varied between 42 and 79 percent. In order to analyse

energy consumption we used a Commoner-Ehrlich type of decompo-

sition of the aggregate into major components, population, income

per capita and energy intensity as a proxy for technology.

23 Schön, L. (1990), Kander (2005).

30

Our main result has been the reshaping of the trend of the en-

ergy intensity on the basis of our new data on traditional energy carri-

ers in a very long perspective. The dominating view of a turned U

movement of the energy intensity is not confirmed by our research

and depended on concentration, by most scholars, only upon ‘mod-

ern’ energy carriers. Our figures show, on the contrary, a long-term

decline in energy intensity. As to the causes of this declining trend,

there is reason to be sceptical about the commonly held belief of a

correlation between the energy intensity decline and the rising impor-

tance of services in the economic structure. Even though a closer in-

spection of this topic would require a reexamination of the national

accounts and the way services are computed, our opinion is that

technological changes accounted much more for this decline than the

rise of services. In any case, looking at the movement of the energy

consumption and energy-GDP in a very long perspective, there is

some ground to be less pessimistic than the majority of the observ-

ers. Technical advance in energy use has been until now a limiting

force on the rising path of energy consumption. Its importance has

grown in the last few decades. The increase in the productivity of en-

ergy could realistically be a strong support of the economic activity in

a near future as well.

31

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