Fossil Energy in Economic Growth: A Study of the Energy Direction of Technical Change, 1950-2012

40 Pages Posted: 15 Jun 2016

Date Written: June 13, 2016

Abstract

Climate change mitigation challenges national economies to increase productivity while reducing fossil energy consumption. Fossil energy-saving technical change has been assumed to accomplish this, yet empirical evidence is scarce. This paper investigates the long-run relationship between the rate and direction of technical change with respect to fossil energy and labor in the world economy. Growth rates of labor productivity and the fossil energy-labor ratio are examined for more than 95% of world output be- tween 1950 and 2012. The average elasticity of the energy-labor ratio with respect to labor productivity is close to one, implying highly energy-using technical change, but no trade-off between factor productivity growth rates. This stylized fact suggests the importance of a cheap, abundant energy supply for robust global growth, and a more important role for renewable energy. Integrated assessment models do not incorporate this restriction which may result in poorly specified baseline scenarios.

Keywords: labor productivity, fossil energy productivity, energy-using technical change, decoupling, long-run trends, stylized fact

JEL Classification: N10, O44, O47, Q43

Suggested Citation

Semieniuk, Gregor, Fossil Energy in Economic Growth: A Study of the Energy Direction of Technical Change, 1950-2012 (June 13, 2016). SWPS 2016-11, Available at SSRN: https://ssrn.com/abstract=2795424 or http://dx.doi.org/10.2139/ssrn.2795424

Gregor Semieniuk (Contact Author)

SOAS University of London

Thornhaugh St
Russell Square
London, Camden WC1H 0XG
United Kingdom

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