Clear link between economic growth and energy efficiency found

19th July 2019


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Author

Jo Stott

There is a direct correlation between global economic growth and greater energy efficiency, with the world increasingly needing less oil to produce the same level of GDP.

A study by PricewaterhouseCoopers (PwC) found that 181kg of oil was required to produce $1,000 (£897) of GDP in purchasing power parity terms in 1990, but that this had fallen to 123kg by 2015.

And the researchers expect that only 78kg will be needed to generate $1000 of GDP in 2040, suggesting that the amount oil required is falling by around one-third every 25 years.

“This suggests that governments and businesses can continue to pursue climate change policies that limit energy consumption without eliminating economic growth,“ PwC senior economist, Mike Jakeman, said.

“Becoming more energy efficient is crucial in limiting climate change, while also ensuring that the global economy continues to grow and the world's population becomes prosperous.“

The trend is a result of structural economic change combined with technological progress as more countries shift from manufacturing to services, according to PwC.

In the UK, for example, the service sector accounts for around 80% of GDP but only half of its energy consumption, while the industrial sector is responsible for approximately 15% of each.

It now takes 72kg of oil equivalent to generate $1,000 of GDP in the UK, compared with 135kg in 1990.

Technological progress, such as the advent of smart appliances and increased electrification, has also helped to limit the rise in energy demand while boosting economic growth.

The greatest improvement in reducing energy intensity has occurred in Eastern Europe and Central Asia, with an average fall of 20%, despite many of these being the world's fastest growing economies since 1990.

Economic growth in Eastern Europe has come at the same time as services have swelled by 10-15% as a proportion of GDP, and as the economies have adopted more energy efficient technology stronger governance.

“However, while improved energy efficiency is very encouraging, it's only part of the story and needs to be combined with a continual push to reduce emissions,“ Jakeman added.

Image credit: iStock

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