Steve Sorrell SPRU, University of Sussex International Exergy Economics Workshop Introduction: Context and Objectives Steve Sorrell SPRU, University of Sussex

Context: Energy consumption remains strongly correlated with GDP Source: Csereklyei et al (2016) 1% growth in per capita income associated with ~0.7% growth in per capita primary energy demand http://tinyurl.com/jxpn3ev

Relative decoupling of energy consumption from GDP Source: Csereklyei et al (2016) Global energy intensity has fallen because countries have got richer, not because they use less energy to produce a given level of income

Absolute decoupling in the UK The UK is a rare exception to the global trend (others include Denmark, Romania and Cameroon)

Growing population and incomes associated with growing energy use Global primary energy use has grown by ~2.4%/year since 1850 (Jarvis, 2012)

But the rate of growth must slow if we are to meet global climate targets…. Source: IPCC, 2014

Stock resources are finite and flow resources are rate-limited …and must ultimately decline to zero if we are to achieve sustainability Stock resources are finite and flow resources are rate-limited

Multiple factors influence the energy-GDP relationship… Physical: Demand for different energy services Efficiency of conversion devices and passive systems Economic: Composition of economic output Composition of energy inputs Mix of energy, capital and labour inputs Level of technology

..and multiple techniques are used to study this relationship... Index and structural decomposition of historical trends EKC-type econometric analysis Tests for Granger causality between energy and output  Growth accounting and estimation of aggregate production functions Energy-economic modelling

…but there is little agreement “..IF it is very easy to substitute other factors of production for natural resources…..the world can, in effect, get along without natural resources… what little evidence there is suggests that there is quite a lot of substitutability….” Robert Solow “…economic growth is not driven primarily by ‘technological progress’ in some general sense but specifically by the availability of cheaper energy, and the useful work from that energy……energy is the ultimate resource. It is essential, it is needed that every economic sector and activity and there is no substitute…” Most economic growth attributed to increased inputs of useful work Most economic growth attributed to technical change Complexity of energy-GDP relationship Limitations of data and methodologies Differences in core assumptions

Could exergy economics offer new insights? Account for energy quality Focus upon how energy is used productively in the economy Apply established methods to new data Develop new methods Bridge physical and economic perspectives Extend to all natural resources

Some questions for the workshop What is exergy economics? What is the state-of-the-art in exergy economics? What are the strengths and weaknesses of current exergy economics research? What synergies and conflicts exist between exergy economics and orthodox energy economics? What can exergy economics contribute to climate change and sustainability analysis? What future research directions and funding sources appear most promising? What are the potential policy implications of this work?

Can we bring exergy economics into the mainstream…? Energy economics Exergy economics