*The author thanks Bart Davis, Lee Schipper, and the referees for thorough reviews of an earlier draft. Financial support was provided by the Office of Policy, Planning and Evaluation of the U.S. Environmental Protection Agency.
ENERGY EFFICIENCY AND ECONOMIC GROWTH
Article first published online: 29 JUN 2007
Contemporary Economic Policy
Volume 15, Issue 4, pages 1–9, October 1997
How to Cite
HOWARTH, R. B. (1997), ENERGY EFFICIENCY AND ECONOMIC GROWTH. Contemporary Economic Policy, 15: 1–9. doi: 10.1111/j.1465-7287.1997.tb00484.x
- Issue published online: 29 JUN 2007
- Article first published online: 29 JUN 2007
Recent contributions by Brookes (1990), Saunders (1992), and Inhaber and Saunders (1994) argue that cost-effective improvements in energy efficiency may, in the long run, lead energy use to grow more rapidly than it would in a world of fixed technologies. Since efficiency improvements may be viewed as a form of technological change that both reduces the effective cost of energy services and stimulates economic activity, energy demand may, under some circumstances, rise even as energy productivity improves. This paper examines this hypothesis using a simple model that distinguishes the roles of energy and energy services in production activities. In this model, improved energy efficiency can-not give rise to increased energy use unless: (i) energy costs dominate the total cost of energy services and (ii) expenditures on energy services constitute a large share of economic activity. Since neither of these assumptions is empirically plausible, the paper concludes that energy efficiency improvements will yield long-run reductions in energy use under the assumptions of the model.