SUMMARY Energy and economic growth: Grounding the understading of the physical reality

Ockwell (2008) summarizes the two main standpoints regarding energy and economic growth. It

mentions the need of decoupling in the framework of sustainable development. The paper depicts the

main differences between the neoclassical school and the ecological economics school. On the one hand

the neoclassicists disregard the role of energy in economic growth by simplifying as an intermediate

good, within the economy as a closed system that just receive interaction from the world system in

terms of inputs and output that DO NOT modify the external system dynamics. The neoclassical defend

decoupling based on substitutability of human made capital and energy, by the increase of total factor

productivity generally attributed to increase of technology. However neoclassical economy cannot

explain the whole of evidence of decoupling experience of some of the biggest economies in the world,

which is ultimately obvious due to its basic contradiction of this theory. On the other hand the ecological

economists respect and recognize the role of energy on the economic system by analyzing this latter as

a subsystem of the world´s whole open system. In this respect, substitutability seems unviable since

energy flows from and to the subsystem cannot be stopped and there are side effects that need to be

included such as pollution.

Additionally, it discusses some of the empirical observation given by Stern (2011) that supports a

decoupling effect in USA and Japan. Even though this effect can be accounted for a shift to higher

quality fuels, it can also be accounted for energy efficient technologies, increases in productivity by

technology, transition to a service-based economy but also by outsourcing manufacturing energy

intensive activities to the developing world [Stern, environmental]. Furthermore it discusses the

rebound effects of energy efficient technologies which can turn to be quite significant if not taken into

account when policy planning.

Finally, (Ockwell) reemphasizes two policy requirements: 1) Decarbonizing the energy supply and 2)

developing and deploying energy-efficient technologies . The first is urgent if the effect of the energy on

economic development is confirmed and according to ecological economics view. The second is for

reducing energy intensity of economic activities. Besides these two policies should be follow by a

constant understanding of innovation which as well implies new technologies as the spreading of certain

technology (among the energy sector and from academy to the industry sector). In addition recognizes

the need of analyzing the discussed effect through different economical view institutional and

evolutionary, the former for approaching the interdisciplinary aspect and institutional effect on behavior,

while the latter for accounting for the complex “interaction between social technical and environmental

systems”.

“What I do intend to emphasize is a need for urgently renewed effort on behalf of all economists to

engage with the problem of the physical limits implied by the laws of thermodynamics, and the existing

and potential catastrophic ecosystem impacts that result from environmentally unsustainable natural

resource use.”

OCKWELL, D. G. 2008. Energy and economic growth: Grounding our understanding in physical reality. Energy Policy, 36, 4600-4604.

STERN, D. I. 2011. The role of energy in economic growth. Annals of the New York Academy of Sciences, 1219, 26-51.