Energy Efficiency Delivers 25% of UK’s Economic Growth from 1971 to 2013
Energy efficiency delivered one-quarter of the economic growth in the United Kingdom between 1971 and 2013, far more than conventional wisdom usually assumes, according to a new study in the journal Energies.
Summarizing their work for Carbon Brief, a team of four researchers from the University of Leeds and the University of York trace their use of an economic model that factored in more than 50 socio-economic variables, including GDP, investment, labour, prices, wages, and disposable income, along with the flow of energy through the economy. Unlike most models, they say the UK MAcroeconometric Resource COnsumption (MARCO-UK) model approximates the “useful energy” actually available to consumers—not just primary energy sources like coal, oil, or renewables.
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“Research suggests that it is this useful energy stage that has the closest links to the economy, rather than the earlier primary and final energy stages. In other words, the economy needs energy services, such as cold fridges, not primary energy, such as coal,” they write. MARCO-UK “places energy flows and energy efficiency at the core of the modelling framework. This means that changes to energy use or efficiency in our model have broad impacts on the rest of the economic system, whereas conventional models often assume the only effects come via energy prices.”
That shift in focus helps establish energy efficiency as “a key driver of rising GDP,” they write. Of the £1 trillion in economic growth in the UK over the study period, they say, as little as 75% would have occurred if energy efficiency had not improved.
“This finding suggests that the tight coupling between global energy use and GDP can be explained because of—not in spite of—decades of energy efficiency investment,” the authors state. “In other words, investments in energy efficiency are a key driver of economic growth.” Which means that “improving energy efficiency has benefits far beyond climate policy, given that the delivery of increased energy services can improve aspects of society, such as livelihoods and well-being.”
The results also point to several options for a climate strategy of “decoupling” energy use from GDP growth. The authors suggest countering the “rebound effect” from lower overall energy costs by “combining efficiency policies with approaches that increase the price of energy,” like energy or carbon taxes.
“A second response is to consider how we can deliver energy services—such as warmth, travel, or lighting—in ways that reduce primary energy demand. Alternatively, we could focus on reducing demand for energy services, via a ‘sufficiency’ strategy that encourages a more equitable distribution of resources.”
They add that “alternative policy levers” like increased renewable energy deployment are “sensible” if it turns out that “improved energy efficiency might not deliver energy and carbon savings as well as we hoped.”