John A. “Skip” Laitner, an energy and resource economist, well known to many EiD readers, has recently published an article entitled Linking energy efficiency to economic productivity: recommendations for improving the robustness of the U.S. economy. It discusses new evidence that traces, at least in part, both the growing climate problem and a weakening economy all the way back to the hugely inefficient use of energy. The journal article builds on a new set of data and insights. While his primary target is the US, the analysis and insights are important for all regions. The article is in WIREs Energy and Environment journal.
Skip provides an important context:
“. . . our economic activity wastes 86% of the energy used in the production and distribution of goods and services. This level of energy inefficiency imposes an array of costs that constrain the robustness of the American economy. This assessment explores new terms and concepts—many of which are familiar to physicists and engineers, but have not generally become part of normal policy discussion. As a result, the current system of economic accounts (which tracks employment, investment, and income) limits insights and understanding about: (1) the current dynamics of productivity improvements and routine economic activity; and (2) the mix of price signals, policies, and incentives designed to redirect purposeful effort and productive investment. Applying these insights has the potential to transform the economy into one that provides both social and environmental well-being, and that is also sustainable over the long run.”
The article continues and an important point is made in italics:
“While most policy makers see energy efficiency as an easy way to save some money for households and businesses, or to achieve a few cost-effective reductions in greenhouse gas emissions, the data suggest that it is also a critically-needed resource if we are to maintain a robust and sustainable economy [editor’s italics]. In short, the efficient use of energy plays a much more prominent role in the economic process than is generally understood. But the role of high-quality energy, as it enables economic activity, is also badly defined and poorly tracked within the standard national economic accounts.”
Skip concludes the article with the following important points:
“The data indicate a U.S. economy that significantly underperforms as a result of an anemic 14% exergy (rather than energy) efficiency—that is, the conversion of high-quality energy in actual goods and services.
“Energy efficiency may be an invisible resource but it is also the most promising means of meeting the nation’s growing energy service demands, securing its economic future, and reducing emissions of greenhouse gas emissions [editor’s italics]. Indeed, recent assessments indicate that there is a surprisingly large array of behavioral changes and technological, systems, and infrastructural investments that can be put to work to catalyze those improvements. If policy makers and businesses choose to develop those opportunities, exergy efficiency could provide as much as 60% of the needed reductions in greenhouse gas emissions by 2050, even as it enhances the robustness of the American economy. By combining both smart pricing and policy signals with mechanisms to focus on accelerated exergy efficiency, rather than focusing merely on energy supply, and emphasizing immediate policies that can ease the market transition over the next decades, the United States can dramatically increase the energy productivity of its economy in ways that enable a revitalized prosperity to be sustained.”
For those familiar with Skip Laitner’s work, you will notice that he builds on many of the themes he has been working on for many years. Seeing energy efficiency as a “critically-needed resource” is fundamentally important if it is to gain the policy priority it deserves. He makes some valuable points that need to be further discussed in Europe.
EiD welcomes your comments. Information on obtaining the article is available on the Wiley website.
Energy in Demand - Sustainable Energy - Rod Janssen 