The relationship between energy
consumption and economic growth is long-established. There exists a strong direct link between a
country’s power sector and its GDP. This means that as the power sector of a
country becomes more developed, its GDP increases and vice versa. Since 2000, the
world energy use has grown approximately as fast as world real GDP, indicating
the growing inability of the two to decouple.
Thus it is evident that the economic
development of any country irrespective of its size mainly depends upon the
development of the power sector. Power is central not only to all household
activities, but to economic development as well. In fact it is the fuel of
economic progress in all sectors, not only agricultural and industrial but all
allied areas. Economic progress depends very much upon how successfully and
profitably a country manages its power sector.
If GDP growth and energy use are so
closely tied, it will be even more difficult to meet CO2 emission goals than
most have expected. Critics argue - that measures to make countries more
sustainable would raise the prices of products and make it more difficult for
the nations to do business, forcing the Gross Domestic
Product downward. A reduction in
emissions is likely to require a similar percentage reduction in world GDP.
On the other
hand, some analysts argue that the correlation between energy consumption and growth is not so tight. The linkage between energy use and economic
growth can be mitigated by a number of factors, including shifting to higher
quality fuels and technological change aimed at increasing the economic
productivity and, specifically, at reducing pollution.
In 2012, U.S. energy-related carbon dioxide
emissions were at their lowest level since 1994, more than 12 percent below the
2007 peak. The carbon emissions dropped by 3.8% despite a 2.8% growth in
gross domestic product. Prior to the last few years, economic growth had been
closely tied to increased carbon emissions. In 2009, the sharp drop (7.1%) in
CO2 released into the atmosphere was directly attributed to the
recession. The US Energy Information Administration identified a
variety of causes for the drop in carbon emissions. These included:
Substitution
of Natural Gas for Coal in Power Generation:
Despite the overall decline in renewables, the carbon intensity of power
generation still fell by 3.5 percent, largely due to the increase in the share
of natural gas generation relative to coal generation.
A
mild heating season: Half of the overall energy
decline was from the residential sector, where a very warm first quarter of the
year lowered energy demand and emissions. By the end of March 2012, cumulative
heating degree days were about 19 percent below the 10-year normal and 22
percent below 2011.
Residential
sector electricity consumption was lower in 2012 as
compared to 2011. The residential electricity consumption declining by
3.4 percent, electricity system losses declined even further, (4.8 percent)
implying an efficiency increase in electricity generation, transmission, and
distribution of over 1 percent.
The transportation sector
also contributed to lower energy-related CO2 emissions. Vehicle miles traveled
in 2012 were flat compared to 2011 (8,072 million miles per day in both years),
while more energy-efficient vehicles continued to enter the market.
Conclusion- Given the constraints imposed by resource depletion and climate
change on the long-term sustainability of economic growth, the fundamental
challenge remains- Can we sustain
economic growth while radically reducing energy consumption and carbon emissions,
at the same time? If not, is the continued economic growth sustainable?
{Source: U.S. Energy Information
Administration (EIA); USDA Economic
Research Institute data}
Infraline Energy Power & Coal Knowledgebase Team
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