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On Economic Growth, Energy Consumption and Technological Change Jussieu 24 Avril 2006 Dr Benjamin Warr Professor Robert Ayres

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Page 1: Warr Jussieu Presentation 240406

On Economic Growth, EnergyConsumption and Technological

ChangeJussieu 24 Avril 2006

Dr Benjamin Warr Professor Robert Ayres

Page 2: Warr Jussieu Presentation 240406

Sommaire

• Critique de l’approche «neo-classique » de la croissance économique

• Considération de la rôle d’énergie• Estimation d’une « proxy » mesure de

Technologie• Développement d’une méthode pour

estimer la croissance du Produit Intérieur Brut.

Page 3: Warr Jussieu Presentation 240406

Problématique

• L’approche neo-classique économique

– Ignore l’environnement et des ressources naturelles

• Comme facteur de production• Comme bien collectif

– Considère la technologie comme exogène, continue et perpétuelle.

• Mais le progrès technologique est plutôt non linéaire (learning by doing) avec des limites

Page 4: Warr Jussieu Presentation 240406

Une fonction de production

• Décrit les relations entre le « output »(PIB) et les « inputs », (les facteurs de production)

• Cobb-Douglas ont développe la forme le plus utilisé,

Y = A K ααααLββββ where αααα + ββββ = 1• Y=PIB, A=technology multiplier, K=capital,

L=labour, α et β les élasticités de production

Page 5: Warr Jussieu Presentation 240406

Quelques problèmes

• Les ressources naturelles exclus….• Constant returns to scale (rendement constant)• Le dérivative défini la productivité marginal de

chaque facteur en tant que constant, égal au « factor cost » α =0.3 capital, β =0.7 labour.

• Static substitution• Rendu dynamique avec multiplicateur

technologie (A), l’erreur d’une modèle OLS.• PAS de RETROACTION suites aux

changements dans le quantité et qualité du bilan énergétique.

Page 6: Warr Jussieu Presentation 240406

PIB et les facteurs de production, K, L, B, US 1900 -2000

0

5

10

15

20

25

2000199019801970196019501940193019201910

année

inde

x (1

900=

1)

PIB (Y)Capital (K)Labour (L)Ressources Naturelles (B)

Page 7: Warr Jussieu Presentation 240406

PIB empirique et estimé, et l'erreur (le progres te chnologique)

0

5

10

15

20

25

2000199019801970196019501940193019201910

année

inde

x (1

900=

1)

PIB empirique

PIB estimé (Cobb-Douglas)

Erreur (technological progress)

Page 8: Warr Jussieu Presentation 240406

Observations

• Même avec inclusion des ressources naturelles (B) le PIB estimé est inférieur au valeur empirique si on utilise les « factor costs » pour définir les paramètres.

• Le progrès technologique (l’erreur) est responsable pour plus que 80% de la croissance.

• Si on utilise pour prévision on est obligé de faire l’hypothèse que la technologie va développer comme avant. La croissance économique est assuré malgré nos actions.

Page 9: Warr Jussieu Presentation 240406

Industrial Metabolism(Ayres and Simonis 1994)

• New conceptualisation of society’s relation to and pressures on the environment.

• The economy is physically embedded into the environment.

• The economy is an open-system with regards matter & energy.

• Matter and energy societal throughputs must => minimum requirements = technological progress.

• RESOURCE SCARCITY: Societies intervene withpurpose to gain better access to supplies of naturalresources (through technology and resourcesubstitutions .i.e. energy) – a supply-side problem.

• ASSIMILATIVE CAPACITY: Societies must restrictwaste flows to the environment (output side).

Page 10: Warr Jussieu Presentation 240406

The Salter Cycle, an engine for growth.

Lower Prices of

Materials &

Energy

INCREASED REVENUES

Increased Demand for

Final Goods and Services

R&D Substitution of

Knowledge for Labour;

Capital; and Exergy

Product

Improvement

Substitution of

Exergy for Labour

and Capital

Process

Improvement

Lower Limits to

Costs of

Production

Economies of

Scale

Page 11: Warr Jussieu Presentation 240406

Criteria for EnvironmentalAccounting

• Environmental accounting must be:– Politically relevant – strength of the concept to

provide information for policy decision and public discourse.

– Feasibility often requires reduced complexity

– Definition of scale and then system boundaries

– Accurate source information

– Methods to estimate stocks & flows

Page 12: Warr Jussieu Presentation 240406

Energie comme facteur de production – quel mesure faut il?• Pas tout l’énergie utilisé est utile dans

l’économie – conséquence du 2eme loi de Thermodynamique.

• Faut considérer la quantité plus qualité de l’énergie utilisé

• Faut quantifier le progrès technologique et l’effet sur la quantité et le façon qu’on utilise énergie.

Page 13: Warr Jussieu Presentation 240406
Page 14: Warr Jussieu Presentation 240406

Task efficiency: specify service & define the task

• The first objective of any technical study of energy use isto establish a standard of performance.

• What is the difference between a service and a task?– (service) keeping warm, (task) providing heat to a home– (service) structures in society, (task) making aluminium– (service) mobility, (task) moving a vehicle

• Services must consider non-technical trade-offs, tasksrequire only a physics perspective.

• This permits,a) Evaluation of the efficiency of present uses.b) Definition of goals towards which technical

innovation can strive .

Page 15: Warr Jussieu Presentation 240406

Thermodynamics and « available work »

Necessary to define a Minimum Task Energy to allow consideration of :

• Interchanging devices or systems (mass transport vs. Cars)• Seeking technological innovations (aluminium for steel)

• The 1st Law (convervation of energy) isinadequate for considering minimimum taskenergy.

• The 2nd law (the entropy law) indicates that « in any process involving heat, there is an inexorable increase of entropy (disorder), meaning that not all the energy is available in useful form »

Page 16: Warr Jussieu Presentation 240406

The 1st Law (conservation of energy) isinadequate for considering minimimum

task energy.• η = energy transfer (of desired kind) /

energy input• Maximum value may be greater than 1.• No explicit consideration of the quality of

the energy and its ability to do useful work.• Cannot be generalised to complex

systems with work and heat outputs.

Page 17: Warr Jussieu Presentation 240406

The 2nd law (the entropy law)

• indicates that « in any process involving heat, there is an inexorable increase of entropy(disorder), meaning that not all the energy isavailable in useful form »

• For any device or system the 2nd Law Efficiencyε is the ratio of the minimum exergy that couldperform the task (Bmin), to the exergy actuallyconsumed in doing the job (Bactual).

• Its maximum value is 1.• Maximising ε minimises exergy demand and

wastes generated for a given task.

Page 18: Warr Jussieu Presentation 240406

Exergy and Exergy Balance

• Exergy is the useful part of the energy.• There are 4 components:

– Kinetic exergy of bulk motion– Potential gravitational or electro-magnetic field

differentials– Physical exergy from temperature and pressure

differentials– Chemical exergy arising from differences in

chemical composition

• We can ignore the first two for many industrialand economic applications.

Page 19: Warr Jussieu Presentation 240406

Exergy or « Available Work »

• So, not all energy can be made available in useful form(consequence of 2nd Law).

• Available work is an energy measure that is actuallyconsumed in a process.

• Work is the highest quality (lowest entropy) form of energy. It is often called exergy.

• Exergy = The maximum amount of work that a subsystem can do on it’s surroundings as it approachesthermodynamic equilibrium reversibly.

• Exergy is proportional to the future entropy production, but has units of energy.

• Exergy is gained or lost in physical processes.• Minimising exergy consumption is a measureable

objective to optimise energy consuming tasks.

Page 20: Warr Jussieu Presentation 240406
Page 21: Warr Jussieu Presentation 240406
Page 22: Warr Jussieu Presentation 240406
Page 23: Warr Jussieu Presentation 240406

Example: Chemical exergy

• Production of pure iron (Fe2) from iron oxide(Fe2O3)

• This requires exergy from burning coke (pure carbon)

• Carbon dioxide (CO2) is the waste product2Fe2O3 + 3C � 4Fe + 3CO2

Correct mass balance – all atoms in ome out. Conversion of mass causes inevitable joint product CO2

• 0.75 moles of CO2 per Kg of Fe.

Page 24: Warr Jussieu Presentation 240406

Iron production 1

1. 2Fe2O3 + 3C � 4Fe + 3CO2

2. Making 4 moles of Fe requires generation of 3 moles of CO2

3. And 1505.6 Kj whichcomes from thisoxidation of carbon

4. But 3 moles of C contain only 1230.9

5. We need 0.76 C extra. 4.432O2

19.944CO2

410.312C

16.5160Fe2O3

376.456Fe

kJ/moleexergy

Weight

Page 25: Warr Jussieu Presentation 240406

Iron Production 2

2Fe2O3 + 3C � 4Fe + 3CO2Correct mass balance, incorrect exergy balance

2 Fe2O3 + 3.76 C + 0.76 O2 � 4 Fe + 3.76 CO2(33.0) (1542.7) (3.0) (1505.6) (74.8)

On the input side oxygen has been added to fulfill the balance of the extra C required

1580 kJ in � 1580 kJ out• This is for an ideal reversible transformation. No entropy

generated or exergy lost.• Hence 0.94 moles of waste CO2 are inevitable per mole

Fe produced (corresponds to 0.74kg CO2 per kg Fe)• This is the thermodynamic minimum.

Page 26: Warr Jussieu Presentation 240406

Iron Production: Reality

• The 410.3 kJ/mole from source C is never used100% efficiently

• Blast furnace average have efficiencies of 33%.• So, one mole of C one obtains only 135.4kJ• As a result need 12.42 moles of C instead of

3.76.2 Fe2O3 + 12.42 C + 9.42 O2 � 4 Fe + 12.42 CO2+ heat(33.0) (5095.9) (37.7) (1505.6) (247.2)

• B lost = 3413.8 kJ• 2/3 rd of waste produced is unecessary.

Page 27: Warr Jussieu Presentation 240406

Types of Exergy Service

• Prime Movers ( electricity)• Transport• High Temperature Process Heat• Mid and Low Temperature Process Heat• Lighting• Non-Fuel

Page 28: Warr Jussieu Presentation 240406

Petroleum Products

Apparent Consumption

Gasoline

Diesel

Aviation Fuel

Furnace Oil Heavy Fuel Oil

Kerosene

Feedstock

Petroleum Coke

Bitumen/ Waxes

Process Heat

Process Heat

Transport

Space Heating

Non Fuel

LPG

Lighting

Transport

Allocated to gas flows

Electricity

Petroleum Exergy Flows

Page 29: Warr Jussieu Presentation 240406

Coal, Petroleum, Gas: Exergy breakdown by use, US 1900-2000

Figure 8. Coal consumption: Exergy allocation among types of work, USA 1900-1998

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000199019801970196019501940193019201910

year

Fra

ctio

n (%

)

HEATELECTRICITYPRIME MOVERSNON-FUEL

Figure 9. Petroleum and NGL consumption: Exergy allocation among types of work, USA 1900-1998

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000199019801970196019501940193019201910

year

Fra

ctio

n (%

)

HEATELECTRICITYPRIME MOVERSNON-FUELLIGHT

Figure 10. Natural Gas consumption: Exergy allocati on among types of work, USA 1900-1998

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000199019801970196019501940193019201910

year

Fra

ctio

n (%

)

HEATELECTRICITYPRIME MOVERSNON-FUEL

Declining fraction to heat

Increasing fraction to electricity

Transport uses

Page 30: Warr Jussieu Presentation 240406

Total Exergy Breakdown by Use, US 1900-2000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

2000199019801970196019501940193019201910

year

Fra

ctio

n (%

)

HEATELECTRICITYPRIME MOVERSNON-FUELLIGHT

Heat

Other Prime Movers

Electricity

Non-Fuel

Page 31: Warr Jussieu Presentation 240406

Efficiency (%) Year Kerosene Incandescent Fluorescent Average Efficiency Efficiency (%) 1% 5% 15% Market Share (%) 1900 20% 80% 0% 1.400% 1950 5% 70% 25% 2.433% 1972 1% 65% 33% 2.737% 2000 1% 60% 39% 2.953%

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

3.00%

3.50%

20001990198019701960195019401930192019101900

year

effic

ienc

y

Lighting Efficiency

Page 32: Warr Jussieu Presentation 240406

Bauxite Ore 3.9kg (4.1MJ)

Cokes 1900 = 20 MJ/kg 2000 = 10 MJ/kg

Electricity 1900 = 190 MJ/kg

2000 = 66 MJ/kg

Aluminium 1kg (32.8MJ)

Refining

Electrolysis

Casting

Coal, Oil, Gas 1900 = 82 MJ/kg

2000 = 28 MJ/kg

Simplifiedprocess view:

Aluminium

MJ/1000kg % of total Coal 4092 5%

Oil 10912 14% Gas 8281 11%

Electricity 56559 70% Total 79845 100.00%

Table 1. Breakdown of total fuel exergy inputs for the production of 1 ton of primary aluminium (source: IAI LCS 2000).

Page 33: Warr Jussieu Presentation 240406

Exergy consumption per kg of Al produced

0

50

100

150

200

250

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

year

MJ/

kgBauxite

Coke

Coal, oil and gas

Electricity

Figure 1. Exergy consumed per kg primary aluminium produced. *electricity consumption adapted from Energy Implications of the Changing World of Aluminium Metal Supply (JOM 2004).

Page 34: Warr Jussieu Presentation 240406

Efficiencies and GDP/Exergy Input

0%

5%

10%

15%

20%

25%

30%

35%

40%

2000199019801970196019501940193019201910year

effic

ienc

y

Low Temperature Space Heating

Mechanical Work

Medium Temperature Industrial Heat

High Temperature Industrial Heat

Electric Power Generation &Distribution

Page 35: Warr Jussieu Presentation 240406

Technical efficiency, US 1900-2000

0

0,02

0,04

0,06

0,08

0,1

0,12

0,14

0,16

0,18

25 695 1486 2660 4677 7113

cumula tive prima ry exergy production (eJ)

tech

nica

l eff

icie

ncy

, f

empir ica l (U/ R)"

b ilogistic model

Source Data : Ayres, Ayres and Warr, 2003

Page 36: Warr Jussieu Presentation 240406

Useful Work/GDP Ratios,US 1900-2000

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2000199019801970196019501940193019201910

year

ratio

work (Ue) / GDP ratio

work (Ub) / GDP ratio

1st OilCrisis - US

Peak OilProduction

Page 37: Warr Jussieu Presentation 240406

How does our model work ?

Cobb-Douglas or LINEX

• At the ‘total factor productivity’ is REMOVED• Rt natural resource services replaced by Useful

Work, where U = F * R• Ft technical efficiency of energy to work conversion

( )( ) ( ) (

tttt RLKQY = ,,,

( ) ( ) ( ) γβαγβαtttttttt ULKRFLKY ==

−+

+−= 12expU

Lab

K

ULaUYt

Page 38: Warr Jussieu Presentation 240406

REXS economic output module

CumulativeProductionMonetaryMonetary

Output

Gross Output

Labour Capital

Linexparameter a

Linexparameter b

Exe rgyServ ices

ICT Fraction ofCapital

LinexParameter c

ICT CapitalGrowth Rate

Page 39: Warr Jussieu Presentation 240406

Labour supply feedback dynamics

Parameters for USA 1900-2000• Structural Shift Time C=1959, Structural Shift Time D=1920• F Labour Fire Rate A=0.108, F Labour Fire Rate B=0.120• F Labour Hire Rate A=0.124 F Labour Hire Rate B=0.135

LabourLabour Hire

RateLabour Fire

Rate

FractionalLabour Hire Rate

A

FractionalLabour Hire Rate

B

FractionalLabour Fire Rate

A

FractionalLabour Fire Rate

B

Structural ShiftTime C

<Time>

Structural ShiftTime D

Page 40: Warr Jussieu Presentation 240406

Labour “hire and fire” parametersSimulated labour hire and fire rate, USA 1900-2000

0

0,05

0,1

0,15

0,2

0,25

0,3

0,35

0,4

0,45

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

year

rate

(st

anda

rdis

ed la

bou

r un

its p

er y

ear)

Labour Hire Rate

Labour Fire Rate

Page 41: Warr Jussieu Presentation 240406

Labour – validation by empirical fitSimulated and empirical labour, USA 1900-2000

0

0,5

1

1,5

2

2,5

3

3,5

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000

year

norm

alis

ed

labo

ur (

1900

=1)

empirical

simulated

Page 42: Warr Jussieu Presentation 240406

Capital accumulation feedback loop

Parameters for USA 1900-2000• Investment Fraction A=0.081 Investment Fraction B=0.074

• Depreciation Rate A=0.059 Depreciation Rate B=0.106

• Structural Shift Time A=1970 Structural Shift Time B=1930

CapitalInvestment Depreciation

Inve stmentFraction

<Time>

DepreciationRate

<GrossOutput>

InvestmentFraction A

InvestmentFraction B

DepreciationRate A

DepreciationRate B

Structural ShiftTime A

Structural ShiftTime B

Page 43: Warr Jussieu Presentation 240406

Capital investment and depreciationSimulated investment and depreciation, USA 1900-200 0

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

year

norm

alis

ed c

apita

l (19

00=

1)

investment

depreciation

Page 44: Warr Jussieu Presentation 240406

Capital – validation by empirical fitSimulated and empirical capital, USA 1900-2000

0

2

4

6

8

10

12

14

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

year

norm

alis

ed c

apita

l (19

00=

1)

empirical

simulated

Page 45: Warr Jussieu Presentation 240406

Output – validation of full model, US 1900-2000

0

2

4

6

8

10

12

14

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

year

norm

alis

ed c

apita

l (19

00=1)

empirical

simulated

Page 46: Warr Jussieu Presentation 240406

LINEX fits for GDP, Japan and US 1900-2000.

0

1000

2000

3000

4000

5000

6000

7000

8000

1900 1920 1940 1960 1980

year

GD

P (

thou

sand

bill

ion

1992

$)

empirical GDP, Japan

predicted GDP, Japan

empirical GDP, US

predicted GDP, US

Page 47: Warr Jussieu Presentation 240406

Estimates of GDP, France 1960-2000

0

0.5

1

1.5

2

2.5

3

3.5

4

1963 1968 1973 1978 1983 1988 1993

outp

ut (

1960

=1)

YLINEXTime Dependent CDTime Average CD

Page 48: Warr Jussieu Presentation 240406

A commonly used reference modeEnergy Intensity of Capital, USA 1900-2000.

8

10

12

14

16

18

20

22

24

26

28

20001990198019701960195019401930192019101900

year

inde

x

b/k - total primary exergy supply(energy carriers, metals, minerals and phytomass exergy)

e/k - total fuel exergy supply(energy carriers only)

Start of the Great Depression

End of World War II

Page 49: Warr Jussieu Presentation 240406

The REXS alternativeSimulated and empirical primary exergy intensity of output,

USA 1900-2000

0

0.2

0.4

0.6

0.8

1

1.2

1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

year

r/y

(190

0=1)

empirical

simulated

Average rate of decline 1.2% per annum

Page 50: Warr Jussieu Presentation 240406

Declining resourceintensity of output

Continuing historicaltrends of technicale fficiency growth

Use ful worksupply

Economicoutput

cumulativeoutput

experience

cumulative exergyproductionexperience

The “dematerialising” dynamics

Page 51: Warr Jussieu Presentation 240406

Primary exergy intensity ( B/GDP) of output decay feedback mechanism.

Parameters• Rate of Decay = Fractional

Decay Rate*Primary Exergy Intensity of Output

• Fractional Decay Rate=0.012

Primary Exe rgyIntensity of Output

Rate of Decay

FractionalDecay RatePrimary Exe rgy

Demand

<GrossOutput>

Lower Prices of

Materials &

Energy

INCREASED REVENUES

Increased Demand for

Final Goods and Services

R&D Substitution of

Knowledge for Labour;

Capital; and Exergy

Product

Improvement

Substitution of

Exergy for Labour

and Capital

Process

Improvement

Lower Limits to

Costs of

Production

Economies of

Scale

To the right:

Processes aggregated inthe REXS dynamics

Page 52: Warr Jussieu Presentation 240406

Projections of future outputAltering the future rates of the energy intensity o f output

•The average decay rate of the exergy intensity of output ( R/GDP) for the period 1900-1998 is 1.2%

•The simulations involved increasing or decreasing this parameter from 1998 onwards, while keeping the values of all other parameters fixed.

•The following illustrations provide a summary of the results.

Page 53: Warr Jussieu Presentation 240406

Varying rates of dematerialisation

Primary Exergy Intensity of Output Decline Rate

0

-0.5

-1

-1.5

-2 1900 1938 1975 2013 2050

Year

(%)

historical trend 50% 75% 95% 100%

The constant rate of exergy intensity decline was altered to vary between –0.55 and –1.65 % p.a.

Page 54: Warr Jussieu Presentation 240406

Effects on ‘efficiency’ improvements

Technical Efficiency of Primary Exergy Conversion 0.4

0.3

0.2

0.1

0 1900 1938 1975 2013 2050

Year

historical data 50% 75% 95% 100%

effic

ienc

y

The ‘business as usual’ case:

If technical efficiency does not increase in pace with ‘de-materialisation’

The rate of growth slows .

Page 55: Warr Jussieu Presentation 240406

GDP forecasts “dematerialisation scenarios” ,US 2000-2050

Gross Output 200

150

100

50

0 1900 1938 1975 2013 2050

Year

historical data 50% 75% 95% 100%

Inde

x (1

900=

1)

The sensitivity of future projections of GDP were assessed, the red line indicates the ‘business as usual’for a fractional decay rate of energy intensity of output –1.2 % per annum and technical efficiency at 1% p.a.

Page 56: Warr Jussieu Presentation 240406

0

20

40

60

80

100

120

1950 1975 2000 2025 2050

year

GD

P (

1900

=1)

1.2% per annum1.3% per annum1.4% per annum1.5% per annumempirical

Historical and forecast GDP for alternative rates of decline of the energy intensity of

output, US 1900-2000

Page 57: Warr Jussieu Presentation 240406

Forecast GDP growth rates for three alternative technology scenarios (US 2050).

2.63%1.23%1.75%0.89%0.92%0.62%Maximum

2.20%1.18%0.38%0.72%-1.29%0.40%Average

1.94%1.11%-1.89%0.43%-2.97%0.16%Minimum

GDPfGDPfGDPfGrowth rate

HighMidLow

Alternative Technology Scenarios

Note the feedback between f growth and GDP growth

Page 58: Warr Jussieu Presentation 240406

Historical and forecast technical efficiency of ene rgy conversion, for 3 alternative rates of technical

efficiency growth, US 1950-2000.

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

1950 1975 2000 2025 2050

year

tech

nica

l effi

cien

cy (

f)

lowmidhighempirical

Page 59: Warr Jussieu Presentation 240406

Historical and forecast GDP, for 3 alternative rates of technical efficiency growth, US 1950-

2050

0

10

20

30

40

50

60

70

1950 1975 2000 2025 2050

year

GD

P (

1900

=1)

lowmidhighempirical

Page 60: Warr Jussieu Presentation 240406

Conclusions

• Travail utile comme facteur de production

• Application du 2°loi pour « proxy » de progrès technologique

• Fonction LINEX et représentation Systèmes Dynamique permettant– Estimation historique– « substitution dynamique » suite aux progrès– Feedback entre progrès technologique et le quantité

et qualité des sources énergétique et l’efficacitéd’utilisation