TODAY’S STUDY: THE WORLD’S ENERGY INTENSITY

Energy Intensity Is Rising Slightly
Haibing Ma, September 20, 2011 (Vital Signs Online via Worldwatch Institute)

Global energy intensity, defined as worldwide total energy consumption divided by gross world product, increased 1.35 percent in 2010…Since the global financial crisis in 2008, worldwide energy consumption has grown faster than the global economy for two years in a row, as many countries started implementing massive stimulus packages to push their national economies out of recession…

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This rising energy intensity reverses the broader trend of the last three decades. From 1981 to 2010, global energy intensity decreased by about 20.46 percent—about 0.79 percent each year…During this period, most industrial countries restructured their economies, with energy-intensive heavy industry accounting for a progressively smaller share. New technologies applied to energy production and consumption significantly improved efficiency in almost every sector of the economy. The past few decades have also seen some energy-intensive industries migrate from industrial countries to emerging economies like China and India, but such transfers were largely based on mature technologies and already improved efficiency, which helped maintain the declining trend of energy intensity at the global level.

Yet the pace of global energy intensity improvement has slowed in the last 10 years. Energy intensity dropped at an average annual rate of 0.98 in the 1980s and at 1.40 percent in the 1990s…During 1991–2000, the surge of the so-called knowledge-based economy significantly boosted global economic productivity without consuming too much energy…Then from 2001 to 2010, energy intensity dropped more slowly, at 0.03 percent a year on average…

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During this last decade, energy intensity has actually fluctuated. A slight rise between 2002 and 2004 was followed by a drop of 0.8 percent, much faster than the average for the entire decade.7 (See Figure 2.) This fluctuation looks unusual, given that the previous two decades never showed this kind of trend. But if real gross domestic product (GDP) values based on purchasing power parity (PPP) are used, the fluctuating ―S‖ shape disappears, and global energy intensity in the last 10 years still follows the overall declining trend…

Using GDP values expressed in a PPP-based conversion ratio, global energy intensity exhibits three trends: energy efficiency worldwide was constantly increasing until recently; between 2004 and 2008, with an average annual rate of 1.87 percent, global energy intensity experienced its sharpest decline in 30 years; and starting in 2009, worldwide energy intensity rose for the first time in three decades.9 In addition to technological advances, the rise in energy prices contributed to the sharp decline in global energy intensity between 2004 and 2008. Worldwide crude oil prices more than quadrupled, the fastest rise since the oil crisis in the late 1970s, which played a key role in damping worldwide energy demand…But after international oil prices dropped 75 percent in the second half of 2008, global energy intensity started rising…

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Advanced economies like the United States, Germany, and Japan followed the global trend of declining energy intensity. Compared with the relatively sharp decline in the United States and Germany, Japan made more modest progress…The country even experienced an increase in energy intensity during the 1990s, which may largely be attributed to the economic recession there. Japan has long been regarded as one of the most energy-efficient countries in the world…But when fluctuations in currency exchange rates are eliminated by using PPP value-based GDP data, Germany surpassed Japan in the early 1990s and has since maintained its leadership in energy efficiency…

China may have made the most progress in this field, with a 65 percent decline in energy intensity in the past 30 years…Between 1981 and 2002, China’s energy intensity dropped by 4.52 percent annually…Following a brief rise after 2002, when energy-intensive industries expanded rapidly, China’s energy intensity dropped 15.37 percent during 2005–10, although that fell short of the government’s goal of 20 percent…One reason for the shortfall was that more than half of the 4 trillion RMB ($630 billion) stimulus plan was invested in infrastructural development, which drove up overall energy consumption…

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The most turbulent energy intensity trends were witnessed in newly industrialized and transitional countries. South Korea, for instance, had an increase in energy intensity as its industry-heavy national economy achieved rapid growth in most of the 1980s and 1990s. The country’s industries were hit hard by the 1997 Asian financial crisis, which caused a sharp reversal of the growing trend of energy intensity…Since the early 2000s, however, Korean government and industry started shifting the growth pattern by focusing more on advanced-technology-related research and development and on environment-friendly green energy initiatives. These efforts not only helped the country regain its economic vitality, they also contributed to lower energy intensity. Similarly, the Russia Federation experienced a rise and then a decline of energy intensity as it slowly recovered from economic recession in the 1990s…

Global energy intensity is likely to keep rising in the next couple of years as the world continues to rely on large-scale infrastructure development as a way to create more jobs and bring the global economy out of recession. In the long term, as a new international climate framework is being shaped, more countries will have a stronger incentive to transition toward more climate- and environment-friendly development patterns. Such a green transition could boost new industries such as clean tech and renewable energy as the new economic growth engines. If that happens, not only would global energy intensity continue its declining trend, but the world could achieve more sustainable development when cleaner energy sources account for a larger share of total energy consumption.