Robert U. Ayres
Emeritus Professor of Economics and Political Science and Technology Management
Energy; Exergy; Energy Efficiency; Economic Growth; Causality; Cointegration
The aim of this paper is to re-examine the energy-GDP relationship for the US for the period 1946-2000 by redefining energy in terms of exergy (the amount of energy available for useful work) and the amount of useful work provided from energy inputs.This enables helps to examine whether output growth depends on either the quantity of energy supplied and / or the efficiency of energy use. Two multivariate models were estimated involving GDP, capital, labour and the two measures of energy. We find that unidirectional causality runs from either energy measure to GDP.The authors attribute the causation to both short- and long-run effects in the case of exergy, but only long-run effects in the case of useful work. We find no evidence of causality running from GDP to either energy measure.The authors infer that output growth does not drive increased energy consumption and to sustain long-term growth it is necessary to either increase energy supplies or increase the efficiency of energy usage. Faced with energy security concerns and the negative externalities of fossil fuel use the latter option is preferred.