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The Two Most Important Graphs in the Energy Biz
Submitted by ben on Sun, 02/17/2008 - 05:33.
If you listen to theWatt Podcast, you might have heard me say from time-to-time something along the lines of “Energy is the most important factor influencing the quality of our lives” (actually, I say this almost every show). This is one of the inspirations for starting theWatt. So today I’m going to back that statement up, and post what I consider to be the most important graph in the energy biz.
The link between GDP and energy consumption
I’m sure almost everybody knows the link between GDP and energy consumption. Typically, as GDP increases, a country needs to use more energy to maintain the growth. Growth from the influx of industry which attracts people (or vice versa) who buy homes in the suburbs and need to drive to work everyday. Not to mention the resources required to maintain roads and build all of the new services that people typically require (hospitals, grocery stores, hockey rinks, yadda yadda yadda). As GDP goes up, so does energy consumption, they’re closely linked.
If you look hard enough though, you can find some instances where the link between GDP and energy consumption is broken. A commonly cited example of this phenomenon is during the second U.S. oil shock, between 1977-1985, when GDP in the U.S. increased by 27% while oil consumption fell by 17%. This is encouraging and shows how far efficiency and a 55mph speed limit can actually take us in only a short period of time. For the record, total energy consumption during this time fell by 2% with coal consumption increasing by 26%, natural gas consumption falling by 11% and healthy growth from cleaner energy sources (which started from a low base) of 27% for hydroelectric, 51% for nuclear energy and 65% from other sources (such as biomass, wind). Breaking the link between energy consumption and GDP are very rare though because they require investment in efficiency and thought rather than the a brute force approach of simply consuming more.
The ineffectiveness of GDP
The thing about GDP though is – well - it’s basically a load of BS at gauging the development of a country. To learn why, I highly recommend the book “Confessions of an economic hitman
”, which clearly explains how the rich get richer and the poor stay poor, especially in developing countries.
The ineffectiveness of using GDP per capita to gauge a persons well being is recognized by some, which is why the Human Development Index (HDI) was invented. The HDI incorporates factors such as life-expectancy, education, income inequality, poverty rates, GDP per capita and the environment into a normalized measure on a scale of 0-1. Countries with an HDI of 1 have a very high standard of living (currently Norway is in the lead at 0.968) and countries with an HDI close to 0 are have a very bad standard of living (Sierra Leone is at the bottom with an HDI of 0.336).
The plateau of energy consumption and CO2 emissions
So, to backup my claim that “Energy is the most important factor influencing the quality of lives”, I present the plateau of the energy consumption curve, as well as the plateau of the CO2 emissions curve, which I think are the most important graphs in the energy business.
The plateau of the energy consumption curve and the plateau of the CO2 emissions curve. Data from United Nations Development Programme from 2003. Raw data available here.
These are busy graphs, so let me explain them a bit. Every data point represents a country, I’ve marked off a few of them. Although there are a couple of outliers, there’s a clear trend. Countries with higher human development indices consume more energy and as a result, produce more CO2. Note that there is not necessarily a direct link between CO2 emissions and HDI, more appropriately, there’s a direct link between energy consumption and CO2 emissions. I should also mention that I did cut out a few countries such as Qatar, which has a per capita energy consumption of 21395 kg oil equivalent per person, and an HDI of 0.875.
These graphs also indicate how efficient a country is. On the microscale, Norway has the highest HDI at 0.968 but Norwegians consume 1.4 times less energy than Canadians and 1.3 times less energy than Americans. Many people can come up with excuses for North Americans being so energy inefficient, but I don’t buy most of them. On these graphs I’ve also taken the liberty of marking off the plateau. This is roughly the point where any additional energy consumption produces relatively insignificant improvements in quality of life. I think the plateau in energy consumption is roughly 2400 kg of oil equivalent per person, or the same energy consumption of Hong Kong (this data is from 2003 by the way) which results in a CO2 plateau of 5.5 tonnes CO2/person.
Some difficult questions
Pitting quality of life versus energy consumption in this way brings up some difficult questions, such as: 1) Is it possible to increase the standard of living of everybody in the world to around the 0.9 HDI range given that energy resources are limited? 2) If question 1 is not possible, what levels of HDI might be possible?
Question 1: Can we all live at an HDI of 0.9?
Assuming today’s world population, our target energy consumption of 2400 kg oil equivalent per person, which would theoretically raise everybody’s HDI up to the 0.9 range, is equivalent to a total world energy consumption of 628 quadrillion Btu’s (at this point it’s easier to talk about energy in terms of quadrillion Btu’s, or quads). In 2004, the world’s total energy consumption was 447 Quads. So, if we want everybody in the world to have an HDI of around 0.9, then we would need to find an additional 181 Quads of energy (and all the rich countries would have to be much more reasonable in their energy consumption). This amount of energy is roughly equivalent to 6700 nuclear reactors, but there’s also plenty of room for increasing efficiency, so 6700 nukes probably will not be required. This situation is likely doable if the world takes a “Manhattan project approach” to energy, the type that Barack Obama has spoken about. The trouble is, this situation is not sustainable because: 1) it would still require us to use fossil fuels 2) population growth is nowhere close to being stagnant. That being said, the prospect of having the technology to improve almost everybody’s standard of life to the 0.9 HDI range is encouraging.
Question 2: Without oil, what HDI levels might be possible?
Oil will become too expensive, even for the west, within the next 50 years, and more likely within the next 20 years. Out of the world’s total 2004 energy consumption of 447 Quads, oil contributed roughly 175 quads, 40%. So, if we want to live in an equitable world where everybody has the same standard of living, but at the same time we recognize that we are limited in our energy resources, we would have to consume less energy. Cut oil out of our energy supply, and we’re left with the world using at most 1038 kg oil equivalent. Looking purely at the numbers, this level of energy consumption corresponds to an HDI of around 0.8, or, the same quality of life as the average person living in Brazil. But, unfortunately, having the world live like the average Brazilian isn’t really possible because not everybody would be able to make extensive use of efficient sugar cane ethanol in the same way that Brazil is able to do, and in this scenario, the world’s HDI would be slightly lower than 0.8. Still good on average though.
Other possibilities
There are some major assumptions in the quick analysis above. Mostly that population is stagnant and that fossil fuels other than oil will remain relatively available. Also, I haven’t addressed the CO2 issue adequately. It doesn’t need to be said, but a major challenge of this century is figuring out how to live in an equitable and more sustainable way. Cutting the link between quality of life and energy consumption as well as energy consumption and CO2 emissions, is the key, and this can only be done through increased efficiency. With a combination of increased fossil fuel efficiency and more extensive use of wind/solar/nuclear power, I think we can crack this.
The link between GDP and energy consumption
I’m sure almost everybody knows the link between GDP and energy consumption. Typically, as GDP increases, a country needs to use more energy to maintain the growth. Growth from the influx of industry which attracts people (or vice versa) who buy homes in the suburbs and need to drive to work everyday. Not to mention the resources required to maintain roads and build all of the new services that people typically require (hospitals, grocery stores, hockey rinks, yadda yadda yadda). As GDP goes up, so does energy consumption, they’re closely linked.
If you look hard enough though, you can find some instances where the link between GDP and energy consumption is broken. A commonly cited example of this phenomenon is during the second U.S. oil shock, between 1977-1985, when GDP in the U.S. increased by 27% while oil consumption fell by 17%. This is encouraging and shows how far efficiency and a 55mph speed limit can actually take us in only a short period of time. For the record, total energy consumption during this time fell by 2% with coal consumption increasing by 26%, natural gas consumption falling by 11% and healthy growth from cleaner energy sources (which started from a low base) of 27% for hydroelectric, 51% for nuclear energy and 65% from other sources (such as biomass, wind). Breaking the link between energy consumption and GDP are very rare though because they require investment in efficiency and thought rather than the a brute force approach of simply consuming more.
The ineffectiveness of GDP
The thing about GDP though is – well - it’s basically a load of BS at gauging the development of a country. To learn why, I highly recommend the book “Confessions of an economic hitman
”, which clearly explains how the rich get richer and the poor stay poor, especially in developing countries.
The ineffectiveness of using GDP per capita to gauge a persons well being is recognized by some, which is why the Human Development Index (HDI) was invented. The HDI incorporates factors such as life-expectancy, education, income inequality, poverty rates, GDP per capita and the environment into a normalized measure on a scale of 0-1. Countries with an HDI of 1 have a very high standard of living (currently Norway is in the lead at 0.968) and countries with an HDI close to 0 are have a very bad standard of living (Sierra Leone is at the bottom with an HDI of 0.336).
The plateau of energy consumption and CO2 emissions
So, to backup my claim that “Energy is the most important factor influencing the quality of lives”, I present the plateau of the energy consumption curve, as well as the plateau of the CO2 emissions curve, which I think are the most important graphs in the energy business.
The plateau of the energy consumption curve and the plateau of the CO2 emissions curve. Data from United Nations Development Programme from 2003. Raw data available here.
These are busy graphs, so let me explain them a bit. Every data point represents a country, I’ve marked off a few of them. Although there are a couple of outliers, there’s a clear trend. Countries with higher human development indices consume more energy and as a result, produce more CO2. Note that there is not necessarily a direct link between CO2 emissions and HDI, more appropriately, there’s a direct link between energy consumption and CO2 emissions. I should also mention that I did cut out a few countries such as Qatar, which has a per capita energy consumption of 21395 kg oil equivalent per person, and an HDI of 0.875.
These graphs also indicate how efficient a country is. On the microscale, Norway has the highest HDI at 0.968 but Norwegians consume 1.4 times less energy than Canadians and 1.3 times less energy than Americans. Many people can come up with excuses for North Americans being so energy inefficient, but I don’t buy most of them. On these graphs I’ve also taken the liberty of marking off the plateau. This is roughly the point where any additional energy consumption produces relatively insignificant improvements in quality of life. I think the plateau in energy consumption is roughly 2400 kg of oil equivalent per person, or the same energy consumption of Hong Kong (this data is from 2003 by the way) which results in a CO2 plateau of 5.5 tonnes CO2/person.
Some difficult questions
Pitting quality of life versus energy consumption in this way brings up some difficult questions, such as: 1) Is it possible to increase the standard of living of everybody in the world to around the 0.9 HDI range given that energy resources are limited? 2) If question 1 is not possible, what levels of HDI might be possible?
Question 1: Can we all live at an HDI of 0.9?
Assuming today’s world population, our target energy consumption of 2400 kg oil equivalent per person, which would theoretically raise everybody’s HDI up to the 0.9 range, is equivalent to a total world energy consumption of 628 quadrillion Btu’s (at this point it’s easier to talk about energy in terms of quadrillion Btu’s, or quads). In 2004, the world’s total energy consumption was 447 Quads. So, if we want everybody in the world to have an HDI of around 0.9, then we would need to find an additional 181 Quads of energy (and all the rich countries would have to be much more reasonable in their energy consumption). This amount of energy is roughly equivalent to 6700 nuclear reactors, but there’s also plenty of room for increasing efficiency, so 6700 nukes probably will not be required. This situation is likely doable if the world takes a “Manhattan project approach” to energy, the type that Barack Obama has spoken about. The trouble is, this situation is not sustainable because: 1) it would still require us to use fossil fuels 2) population growth is nowhere close to being stagnant. That being said, the prospect of having the technology to improve almost everybody’s standard of life to the 0.9 HDI range is encouraging.
Question 2: Without oil, what HDI levels might be possible?
Oil will become too expensive, even for the west, within the next 50 years, and more likely within the next 20 years. Out of the world’s total 2004 energy consumption of 447 Quads, oil contributed roughly 175 quads, 40%. So, if we want to live in an equitable world where everybody has the same standard of living, but at the same time we recognize that we are limited in our energy resources, we would have to consume less energy. Cut oil out of our energy supply, and we’re left with the world using at most 1038 kg oil equivalent. Looking purely at the numbers, this level of energy consumption corresponds to an HDI of around 0.8, or, the same quality of life as the average person living in Brazil. But, unfortunately, having the world live like the average Brazilian isn’t really possible because not everybody would be able to make extensive use of efficient sugar cane ethanol in the same way that Brazil is able to do, and in this scenario, the world’s HDI would be slightly lower than 0.8. Still good on average though.
Other possibilities
There are some major assumptions in the quick analysis above. Mostly that population is stagnant and that fossil fuels other than oil will remain relatively available. Also, I haven’t addressed the CO2 issue adequately. It doesn’t need to be said, but a major challenge of this century is figuring out how to live in an equitable and more sustainable way. Cutting the link between quality of life and energy consumption as well as energy consumption and CO2 emissions, is the key, and this can only be done through increased efficiency. With a combination of increased fossil fuel efficiency and more extensive use of wind/solar/nuclear power, I think we can crack this.
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Average per capita energy consumption
World average per capita energy consumption = ~1745 kgoe/person
World average HDI = 0.76 (higher than I thought)
World average CO2 emissions = 6.5 t CO2/person
The world's population is growing at , or 75 million people/year. This means that in order to maintain today's world per capita energy use, we'd have to build the equivalent of 174GW of power capacity (equivalent to roughly 174 nuclear reactors/coal power plants) every year.
So, for Q1 in the article above, we had everybody in the world using 2400kgoe/person and had to build 6700GW to bring everybody's HDI up to 0.9. To account for population increases, we would also have to build roughly 240GW per year on top of this.