Summary International Exergy Economics Workshop University of Sussex 13-15 July 2016

Strengths of Exergy Economics Research Exergy Analysis reveals the location of exergy losses and improvement potential

Strengths of Exergy Economics Research Exergy Analysis reveals the location of exergy losses and improvement potential It consistently adds different types of energy and materials

Strengths of Exergy Economics Research Exergy Analysis reveals the location of exergy losses and improvement potential It consistently adds different types of energy and materials Useful exergy has a strong link with economic processes

Weaknesses of Exergy Economics Research 18 Wh 18 Wh Exergy is a difficult concept A hot cup of tea Use a labtop for an hour

Weaknesses of Exergy Economics Research Exergy is a difficult concept Lack or methodological issues in data: Between final and useful stage of exergy use (efficiencies and allocations) On embodied exergy in materials (available data is average data) Methodological issues in data in LCA (allocation in the case of subproducts) Extraction of rare elements from coal waste

Weaknesses of Exergy Economics Research Exergy is a difficult concept Lack or methodological issues in data: Between final and useful stage of exergy use (efficiencies and allocations) On embodied exergy in materials (available data is average data) Methodological issues in data in LCA (allocation in the case of subproducts) Exergy does not measure everything Other properties are important in materials Other properties are important in energy carriers (e.g. technology – substitutability) Uses where oil is difficult to replace currently (internal combustion engine) Abundant wood would have caused growth stagnation in Sweden

Issue 1: Why to include materials at macro and micro scales? Trade-offs between embodied exergy and exergy dissipation Recycling (trade-offs between inputs) Insulation (trade-offs between inputs and better boundaries)

Issue 1: Why to include materials at macro and micro scales? Trade-offs between embodied exergy and exergy dissipation Recycling (trade-offs between inputs) Insulation (trade-offs between inputs and better boundaries) Material services are distinct from other Energy Services: In material production exergy is not all dissipated - part is embedded in the materials (intrinsic exergy) A fraction of materials is used to make more capital which will provide services for a long timespan Rare materials Higher amounts of exergy will be needed in the future to extract them

Issue 2: Relationship between useful exergy and GDP There is no decoupling between useful exergy and GDP in the past Focus should be on the efficiency avoiding rebound and efficiency dilutions effects

Issue 2: Relationship between useful exergy and GDP There is no decoupling between useful exergy and GDP in the past Focus should be on the efficiency avoiding rebound and efficiency dilutions effects Additional tests for the robustness of this relationship Correct for embodied exergy in trade with input-output analysis Correct for material services (mostly HTH) World relationship for a longer timescale

Issue 2: Relationship between useful exergy and GDP Is it possible to decouple useful exergy from GDP? If not, why not? – there seems to be a huge potential for efficiency improvements between useful exergy and energy services If possible, how and why did we not observe that for the past?

Issue 3: Environmental Impacts & Sustainable Growth Can we replace high with low environmental impact useful exergy? Exergy required to extract rare minerals/materials required to produce the technologies that are more sustainable and will lead to green growth (e.g. copper needed to run the windmills

Issue 4: Modelling relationship exergy vs. economy Strictly conventional Cobb-Douglas Production Functions =f(K*,L*) with observed cost shares are able to account for almost all of economic growth if capital services are estimated with exergy and labour

Issue 4: Modelling relationship exergy vs. economy Strictly conventional Cobb-Douglas Production Functions =f(K*,L*) with observed cost shares are able to account for almost all of economic growth if capital services are estimated with exergy and labour Insights: Capital has to be there for the economy to use it in the first place – but it is how many hours and how productively it is used that counts for growth (capital is inert) – exergy and labour are the best indicators for this Test this insight with other production function (CES and LINEX)

Issue 4: Modelling relationship exergy vs. economy LINEX production function is able to explain growth using capital, labour, energy and technology or capital, labour and useful exergy Insights: Cost shares are not obeyed because of technological contraints (capital cannot use more useful exergy to produce output than the maximum value it was designed for) Technology as an explanatory factor is related only with exergy efficiency

Issue 4: Modelling relationship exergy vs. economy Should we correct GDP when we add exergy as an extra production factor? What is the role of “directed technological change” motivated by energy prices and quantities in these conditions (mix is irrelevant and technological change is efficiency)? How do we take rebound effect into account? Price of final energy carriers (scarcity & technology & taxes) Efficiency (technology & matching)

Issue 4: Modelling relationship exergy vs. economy Links between useful exergy and energy services Energy services contribute heterogeneously to: economic growth because they have different roles (the impact of each is dependent on the time period) human well-being environmental impact

Issue 5: Forecast Scenarios Useful exergy (aggregate and per type of use) is easier to predict than final or primary energy Material and Energy services have saturation limits Scenarios of evolution of exergy efficiencies (with practical limits to exergy efficiencies) Scenarios of energy mix

Issue 6: How to focus attention on exergy? Direct Approach: for engineering students increase exergy literacy by teaching it in undergraduate or graduate courses Indirect Approach: For mainstream energy-economic modelers focus on supplying energy services efficiently In general: use mainstream language (modeling, economic) and make use of exergy as a tool along with the established mainstream methodologies. Emphasize the relevance of this new tool.

Potential Policy Implications of this analysis Legislation for industrial (and other sectors) energy use based on exergy or resource based efficiency Legislation that taxes the use of rare materials ????? Policies related with climate change: Based on better exergy based scenarios Focus on increasing global exergy efficiency: developed countries should export sustainable technologies to developing countries