For centuries, gross domestic product and energy have risen almost in lockstep around the world. Growth demands energy which enables more growth. But in the US, that correlation is weakening, even as standards of living rise. Economic growth appears to be decoupling from energy generation.
The trend is clear in US electricity data. In the last 20 years, GDP has more than doubled. At the same time, electricity generation has barely budged. Since 1990, electricity production has grown around 40% while US GDP has more than doubled.
Three factors are at work. As countries develop, their economies become more efficient, more electrified, and more service-oriented, according to a McKinsey study analyzing energy use in 146 countries. Not every country is in the same place, yet almost all are traveling along the same trajectory. In OECD countries, which account for most of the world’s economic output, 80% of GDP is already derived from services rather than energy-hungry manufacturing and heavy industry.
It’s easy to assume that the gap between energy use and the economy will continue to widen. That is, we can grow the economy while using less energy forever. But evidence suggests it still takes an enormous and growing amount of energy to power the global economy. What seems to be happening is that we are burning less fuel, but we’re not necessarily using much less energy. We’re just getting better at using it more efficiently.
According to researchers in Environmental Research Letters, countries are turning a larger share of energy generated from burning coal or spinning wind turbines into “useful energy.” More electricity is converted into light (LEDs), motion (electric cars), or heat (ovens), with less lost as waste. By this measure, “useful energy” still remains tightly linked to GDP.
By analyzing 835 peer-reviewed articles on the topic, the researchers found few countries cut energy use and emissions over the long-term. While it identified 18 “peak-and-decline” nations such as Sweden and the UK where emissions have fallen even as the economy expanded, GHG emissions remain high. Between 2005 and 2015, GHG emissions in those countries fell around 2.4% per year while GDP rose by about 1.5% annually (a significant share of these emission reductions was offset by GHG emitted abroad from the manufacturing of imported goods).
Even this increasing efficiency falls far short of what is required to keep global temperature increase below the 1.5°C target set by the Paris climate accords. “The analyzed literature provides ample evidence that a continuation of past trends will not yield absolute reductions of resource use or GHG emissions,” the authors state.
What’s needed, they argue, is cleaner energy and less consumption: “Perhaps the question to what extent GDP can be decoupled from resource use or emissions will turn out to be less important than the question how a good life for all on the planet can be organized within the planet’s environmental limits.”