Thursday, November 12, 2009

Do rich people have to use more energy?

Greetings from the Fenner School of Environment and Society at ANU. The issue under discussion in today's seminar by David I. Stern on "Modelling Global Trends in Energy Efficiency" is the relationship between standards of living and energy use. This is important for the current proposals for curbing greenhouse gas emissions. It has been assumed that as countries develop and standards of living increase, then energy use increases making it more difficult to curb CO2 emissions.

Crude measures of energy intensity can be misleading, as they do not take into account the technology being used. As an example on crude measures Mexico looks more efficient in energy use, but on a more detailed analysis the USA is more efficient. One outcome of this analysis is that countries which use coal have an handicap, due to its high level of pollution.

An interesting aspect to such models is that they assume that the energy is used to produce the same products. I suggest that with disruptive technologies such as ICT, this does not apply. That is rather than trying to get developing nations to produce the same goods developed countries do, but with less energy and less CO2 pollution, instead they can skip the dark satanic mills of the industrial revolution and move straight to an information economy. Rather than replacing bullock carts with trucks for delivering paper documents, the Internet can be used to replace both the vehicle and the paper documents.

Dr. Stern's main conclusion seems to be that when distortions due to developing countries undervaluing their currency are removed, there is no clear relationship between energy intensity and GDP per capital. That is getting rich does not result in your using more energy.

One of the problems I had with Dr. Stern's analysis was that it is based on nation states. This assumes that technology, economy and culture are uniform within a county. This does not apply, particularly to India and China, where the developed regions look more like that of each other and like western nations, than like the rural hinterland of the same country. As an example in business terms Bangalore has more in common with California, than it does with the rest of India. In some cases these differences are formalised, where for example China's special zones have different rules and financial regulations.

Perhaps it would be useful to use the measures of the number of mobile telephones and broadband connections in these calculations. This would provide a measure of the IT use of the country. It would be interesting to see if this correlates with energy use. It would seem on the face of it that rich people would have more mobile phones and broadband. But mobile phones are spreading rapidly through developing nations and broadband is not far behind.

Next week's seminar is Promoting Development, Saving the Planet.

Fenner School Seminar Series

Thursday 12th November 2009

1-2pm, in Fenner School FORESTRY LECTURE THEATRE, Forestry building 48

Modelling Global Trends in Energy Efficiency

David I. Stern
Arndt-Corden Division of Economics, College of Asia and the Pacific, Australian National University


This seminar reports on ongoing research in the CERF Environmental Economics Research Hub funded project: “Modelling the Global Diffusion of Energy Efficiency and Low-Carbon Technology”. The environmental Kuznets curve has been a popular simple model of the relationship between economic growth and environmental quality. It is plagued, however, by significant econometric issues and explains relatively little about the differences in emissions between countries. The between estimator is a simple consistent estimator of long-run coefficients in panel data that avoids these issues and performs well in real world situations. I apply the between estimator to both environmental Kuznets curves for carbon and sulfur emissions and a more sophisticated production frontier model of energy efficiency. The latter model explains differences in energy efficiency across countries in terms of differences in input and output mix, climate, and differences in the level of energy efficiency technology. The residuals from this model are the underlying trends in energy efficiency technology in each country. In the final part of the presentation I will show how a social choice model can be used to explain differences in environmental technology across countries.


Photo of David SternDavid Stern is an energy and environmental economist with an interdisciplinary background in geography and economics. His research has focused on understanding the relationship between resource use and economic growth and development. He has investigated both the role of energy and resources in economic growth and the determinants of environmental impacts, especially air pollution and climate change. He is currently working on a project funded by the Environmental Economics Research Hub titled: “Modelling the Global Diffusion of Energy Efficiency and Low-Carbon Technology”.

The Fenner School Seminar Series is held in the Forestry Lecture Theatre, Forestry Building 48, Linnaeus Way (comes off Daley Road), ANU (Acton) campus, ACT

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