1. The Role of Energy Technologies in Long Run Economic Growth: A Historical Perspective Roger Fouquet Grantham Research Institute on Climate Change and Environment London School of Economics (LSE) IAEE New York, 16 June 2014

2. Energy Services and Economic Development Stern (2011) ANYAS –Changes in Energy Use-Economic Activity Linkage: - Subs Energy and Other Inputs for Existing Tech. - Technological Change; - Shifts in Composition of the Energy Input; - Shifts in Composition of Economic Output. Toman and Jemelkova (2003) EnJ –Different Channels of Effect of Energy Services –Effects Change with Economic Development 2

3. Part 1 The Importance of Demand

4. 0.1 Domestic Heating Industrial Power Passenger Transport Freight Transport Lighting 0.01 Source: Fouquet (2014) REEP

5. Price Elasticities Domestic Heating Source: Fouquet (2014) REEP Domestic Heating Passenger Transport Lighting Income and Price Elasticity of Demand for Energy Services, 1800-2008 Values Greater than One: 10% Increase in GDP pc leads to a more than 10% increase in Energy Service $(2010)3,300 $(2010)6,400 $(2010)11,800 $(2010)28,500

6. Part 2 The UK Energy-GDP Linkage

7. Source: Broadberry et al (2013) England and Great Britain GDP per capita, 1300-1900 Take-Off of English Economic Development First Industrial Revolution Second Industrial Revolution

8. The Importance of Energy Cipolla, Wrigley, Allen: Role of Energy in Ind. Rev. Major Technological Innovations in 1750-1913 –New Energy Sources –Incorporate Role of Technologies –Major Improvements in Energy Efficiency Producers Want Energy Services –Power for Mineral Extraction and Repetitive Tasks –Heating to Manufacture Metals –Freight Transport (Land and Sea)

9. Industrial Power Industrial Heating Source: Fouquet (2014) REEP Domestic Heating Passenger Transport Freight Transport Lighting Consumption of Energy by Energy Services in the United Kingdom (mtoe), 1700-2010

10. Primary Energy Intensity Final User Energy Intensity Source: updated from Fouquet (2008) Energy Intensity in the United Kingdom, 1700-2010

11. Sectoral GDP in the United Kingdom, 1700-1870 Source: Broadberry et al (2013)

12. Energy Service Intensity per GDP in the United Kingdom, 1700-2000 Source: Updated from Fouquet (2008) Iron Production Power Land Freight Transport Sea Freight Transport

13. Part 3 The Impact of Energy Technologies on Economic Growth

14. Integrating Energy Services into Energy-Intensive Industries’ Production Function Y = f1 (y 1 (K,L,E), y 2 (K,L,E), … ) For Energy Intensive Industries, e.g. UK 1750-1950 Energy Service (ES) combines K, L and E. Y = f1 (y 1 (ES), y 2 (ES), … ) The Role of Costs of Production Y = f1 (y 1 (C(ES)), y 2 (C(ES)), … ) Thus, when the cost of producing ES falls, the costs of energy-intensive industrial production fall 14

15. Source: Fouquet (2011) REEP, Broadberry et al (2013) Price of Energy Services in the United Kingdom, 1700-2010 Power Iron Heating Sea Freight Transport Land Freight Transport

16. Energy Energy Services Source: Fouquet (2011) Price of Energy and Energy Services in the United Kingdom, 1700-2010

17. Exogeneity of the ‘Price’ of Energy Services Price of Energy Service: Price of Energy Efficiency of Energy Technology Price of Energy may be affected by Economic Growth if price elasticity of supply is low Adoption of Energy Efficient Tech. is less affected Combined (i.e. Price of ES) assumed to be exogenous Thus, can identify the effect of Price of ES on GDP 17

18. Granger Causality Tests Effect of GDP per capita: Price of Land Freight pre-1850? 1750-1800: Price of Power, Ind. Heat. & Land Transport on GDP per capita 1800-1820: Little Effect 1830-1850: Price of Sea Freight, and then Price of Land F. 1860-1950: Price of Power, of Land Freight (Modest Effect: Price of Sea Freight/Ind.Heat.) 18

19. Power Source: Author’s Own Estimates Iron Heating Land Freight Transport Sea Freight Transport Impact of 1% Decline in Energy Service Prices on GDP per capita, 1750-1950

21. Power Industrial Heating Passenger Transport Domestic Heating Lighting Freight External Costs of Energy Use in the United Kingdom, 1800-2000 Source: Fouquet (2011) Ecological Economics

22. Part 4 Concluding Remarks

23. Insights Demand: Income Elasticities and Rebound Effects Technological Impact on GDP per capita: –Kick-Starters and Drivers of Periods of Ec. Growth –Co-Evolution and Synergies between Technologies –Transformative Effect of Energy Technologies Need to Understand How Cheap Energy Services Intensifies Energy Service Use in the Economy Energy-Intensive Industries Impacts on the Environment

25. Energy and Information Intensity in US, 1800-2010 Communication Energy Information: Newspapers and Internet Energy Source: Fouquet and Hippe (2014)

26. Energy Limits Supply-Side Shift Technological Revolution Energy Consumption Energy Service Consumption Pushing the Energy Frontier or ‘Malthusian’ Energy Growth Trap? Technological Revolution

27. 27

28. Appendix Pre-1750

29. Primary Energy Intensity Final User Energy Intensity Source: updated from Fouquet (2008) Energy Intensity in the United Kingdom, 1500-2010

30. Sectoral GDP in the United Kingdom, 1500-1750 Source: Broadberry et al (2013); Five-year average

31. Expenditure on Energy per GDP in the United Kingdom, 1500-2000 Source: Fouquet (2008)

32. Expenditure on Energy per GDP in the United Kingdom, 1500-2000 Source: Fouquet (2008) Power The Decline in % Power Exp. in GDP is not due to a Decline in Power Expenditure, it is due to an Increase in GDP

33. Energy Service Intensity per GDP in the United Kingdom, 1500-2000 Source: Fouquet (2008) Iron Production Power Freight Transport

34. Source: Fouquet (2011) REEP, Broadberry et al (2013) Price of Energy Services in the United Kingdom, 1700-2010 Power Iron Heating Sea Freight Transport Land Freight Transport

35. Source: Fouquet (2011) REEP, Broadberry et al (2013) Price of Energy Services in the United Kingdom, 1700-2010 GDP per capita Power Iron Heating Sea Freight Transport Land Freight Transport

36. France Energy Intensity in European Countries, 1800-2000 Netherlands United Kingdom Germany Italy Source: Kander et al. (2013) Early Adopter: Exports and Inefficiencies

37. Energy and Information Intensity in US, 1800-2010 Communication Energy Information: Newspapers and Internet Energy Source: Fouquet and Hippe (2014)