Energy is required for any economy to function. From the industrial revolution, the total energy used by the world has only increased in magnitude. However, the good news is that while a hundred years ago we were getting our energy from sources like coal, today’s energy sources are not only less polluting but also more efficient. As a consequence, the energy intensity or energy per unit of GDP has declined and continues to decline for most major economies.
However, even today there are many differences among countries and some use more energy than others to produce the same GDP growth. This can be attributed to a number of factors, such as the overall energy and efficiency of transmission and the way the economy functions.
This interesting graph shows the energy intensity of various economies. It is interesting to note the peaks of US and China. While the energy intensity of the US began to decline from around 1915, the same effect was seen much later in China, around 1960 and again around 1975. The difference can be attributed to the delay in technology reaching the less developed countries. In India, the peak was reached much later, around 1990. The peaks for China and India indicate that the opening up of the economy does a lot of good in terms of efficiency and lowering the energy intensity.
However, even today in this highly globalized world where information and technology travel with ease across borders, there are significant differences in the energy intensity. For example, Russia’s energy intensity is almost twice as large as India’s. This could be attributed to the way in which these economies are evolving. While both India and Russia are growing economies and thus need energy for their growth, the type of growth is different in India, where it is more oriented towards the service sector and lighter manufacturing than Russia, which would need to spend considerable amounts of energy in extraction of natural resources like oil and gas.
The United States remains around the world average, even though the total energy consumption and the per-capita energy consumption remain high. An overall reduction in energy intensity can also be attributed to the general awareness that energy use is responsible for pollution and global warming and people are becoming more conscious of their energy needs.
The good news is that the energy intensity has been declining for almost all the major economies. The forecast of the future is also significant. Russia is projected to decrease its energy intensity by about 50% in the coming couple of decades, which can be a significant achievement even after considering the fact that it still remains higher than the world average.
Energy intensity changes significantly as the economies around the world change. With larger parts of the economy going online, it an only reduce the energy intensity because you do not need as much energy to generate a unit of GDP as in a world that runs on manufacturing. Energy intensity therefore predicts a change in the way the current economy is changing. It is no longer the case that huge amounts of energy are required for GDP growth, which is good for the planet.