Reality Blind - Vol. 1

The Coupling: Energy and GDP

Per neoclassical economics, the size of an economy can be measured by an accounting statistic called Gross Domestic Product (GDP), which is the monetary sum total of all goods and services ‘produced’ during a certain period – usually three months or a full year. (Globally, this is known as Global Gross World Product – GW P). Economic ‘growth’ is when the GDP increases from one year to the next. An economy is considered healthy when this GDP figure grows more than 3-4 percent from the previous year. When GDP shrinks it’s called a recession – when it shrinks for a protracted period (such as the early 1930s USA) it’s called a depression. The amount of energy used to generate an additional unit of GDP varies by product and activity -$100 of aluminum smelting uses much more energy than $100 worth of a physical therapy session. But if you add it all up – during the past 100 years there has been a correlation of energy use and economic growth of over 99%.

But this tight relationship between energy and economy is often confused. Shown above is an oft-cited graph showing the energy intensity (energy use per dollar of GDP) of the US economy since 1950. A casual glance might make one believe that an additional unit of economic growth in 2012 only requires 42% of the energy than the previous unit – implying significant ‘decoupling’ . But this 42% is relative to a dollar of GDP in the USA in 1950. Which means the annual improvement in energy efficiency over that


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