Download Ayres, Bob – Exergy, economic growth and degrowth

Exergy, Economic Growth and
Degrowth
Presentation at the International
Energy Economics Workshop
University of Sussex
Brighton, U.K.
July 13-15, 2016
Origins of Exergy-Economics
• Physics and thermodynamics
• Economic ideas since the
physiocrats
• Life as a dissipative system far
from equilibrium
• The ecological analogy
Origins of Physical Ideas
•
•
•
•
•
•
•
•
Three laws of motion (Newton, 16xx )
Phlogiston (Becher,1667)
Conservation of vis viva (Leibnitz (1695)
Caloric (Lavoisier/Laplace, 1783)
Mechanics (Lagrange, Hamilton, et al)
Heat engine theory (Carnot, 1826)
Kinetic energy (Coriolis, 1829)
Mech equiv. of heat (Mayer 1842)
Physics, con’t
• Conservation of energy (Helmholtz, 1847)
• Entropy definition (Clausius 1854)
• Thermodynamics as a subject (Kelvin/
Joule/ Rankine, 1860s)
• Chemical potential (exergy) (Gibbs 1874)
• Statistical mech. (Maxwell, Boltzmann/
Gibbs)
• Non-equilibrium thermo (Prigogine et al)
• APS summer study (Carnahan et al 1975)
A Critical Perspective: Energy,
Exergy and Useful Work
• Energy is conserved. The energy input to a
process or transformation is always equal to
the energy output. This is the First Law of
thermodynamics.
• However the output energy is always less
available to do useful work than the input. This
is the Second Law of thermodynamics,
sometimes called the entropy law.
• Energy available to do useful work is exergy.
• Exergy is a factor of production.
Exergy and Useful Work, Con’t
• Capital is inert. It must be activated. Most
economists regard labor as the activating agent.
Labor (by humans and/or animals) was once the
only source of useful work in the economy.
• But machines (and computers) require a
different activating agent, exergy that can be
converted to useful work (in the
thermodynamic sense).
• For economic growth models, useful work can
be considered as a factor of production.
Efficiency: Two kinds
• Energy efficiency (First Law) is “useful output”
divided by total input (of energy as fuel or
feedstock). This measure is quite deceptive,
but common. (See slides following)
• Exergy efficiency (Second Law) is a different
ratio. The numerator is work actually done in
the process. The denominator is the potential
work (exergy) that could have been done in an
ideal process allowing only for irreversibilities.
Energetics, biology, ecology
• Energetics (Helm, 1887)
• As Monism W. Ostwald (1895-…)
• Technocracy H. Scott with M. King
Hubbert (1931- 55)
• Mathematical biology (Lotka, Rashevsky)
• In ecology (H. Odum, R. Costanza, Hall, et
al)
• In economics & ecology (B. Hannon et al)
Economics w/o Energy
• Trade and division of labor as source of
added value (Smith, Ricardo, et al)
• Labor surplus as source of wealth (Marx)
• Production function of K,L (Cobb, Douglas)
• Optimal growth (Ramsey, 1929)
• Neoclassical growth in equilibrium (Solow,
et al, 1954)
• “Limits to growth” debunked (Solow,
Stiglitz, Nordhaus et al, 1974…)
• Endogenous theory (Romer, Lucas et al)
Economics with Energy
•
•
•
•
•
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The coal question (Jevons, 1954)
From “energetics” F. Soddy (1922- 36)
From “cowboy to spaceship” (Boulding 1966)
Mass balance economics (Kneese et al,1969)
“Limits to Growth” (Meadows et al, 1972)
Entropy in economics (Georgescu-Roegen,
1971)
• Energy as factor of production (Hannon, 1981,
Kuemmel, 1985)
Most economist’s assumption #1
• That resource (i.e. energy, or exergy)
scarcity is not a problem. Increased
consumption, from (assumed) economic
growth, can be met by increased supply
at no increase in price. (This was explicit
in the 2010 IMF forecast and all IEA and
EIA forecasts up to 2006.) It implies that
the energy return on energy investments
(EROEI) will be constant over time.
Economists Assumption #2
• That the global economy grows, in
equilibrium, at a steady rate (around 3 -4
percent p.a.) driven by “labor
augmenting” technical progress, which is
constant. People living 100 years from
now will therefore have incomes more
than 10-fold greater than today.
Economists assumption #3
• That investment choices (in the equilibrium
model) are always optimal because firms
maximize profits and consumers maximize
utility, over time. In this case there are no
“free lunches” – meaning no investment
opportunities that would have negative costs
or very low costs compared to typical practice.
It follows that GHG abatement policies must
be costly.
Standard production functions
• If the cost share theorem is accepted, if the cost shares of
capital and labor are constant over time, and if the two factors
(capital and labor) are independent and substitutable) one
obtains the standard Cobb-Douglas production function with
constant exponents (next slide).
• If substitution between the factors is restricted, but constant
over time, one obtains the “Constant elasticity of
substitution” (CES) model. (Not discussed).
• If energy is included in either model, the cost-share theorem
is still assumed to be valid.
• The constant elasticity of scale requirement simply means
that the exponents add up to unity.
Ayres IIASA 10 August 2007
Standard (Cobb-Douglas) production
functions
Y t = Q ( A t , H t K t , G t L t , F t R t ),
Yt =
a
b
g
(
)
(
)
(
)
At H t K t
G tLt
FtRt
Yt is output at time t, given by Q a function of,
• Kt , Lt , Rt inputs of capital, labor and natural
resource services.
a, + b + g = 1, (constant returns to scale assumption)
•
• At is total factor productivity
• Ht , Gt and Ft coefficients of factor quality
The Role of Energy in Economics
• Endogenous economic growth theory since
Solow assumes that energy is an intermediate
good produced by capital and human labor,
plus knowledge embodied in “human capital”.
• The energy sector is small, a few percent of
GDP (depending on prices) and cannot explain
growth
• An old income allocation theorem says that
the output elasticity of energy must be equal
to its cost share. But the cost share is too
small to matter.
Exergy (E) Austria, Japan, UK & US: 1900-2005 (1900=1)
index
18
USA
Japan
UK
Austria
16
14
12
10
8
6
4
2
0
1900
1920
1940
1960
1980
2000
Useful Work (U) Austria, Japan, US, UK: 1900-2000
index
90
80
USA
Japan
UK
Austria
70
60
50
40
30
20
10
0
1900
1920
1940
1960
1980
2000
US Exergy and Useful Work per $ GDP
watts total exergy / $GDP
watts useful work / $GDP
10 year moving average
18
16
kWh / $GDP
14
12
10
8
6
4
2
19
00
19
05
19
10
19
15
19
20
19
25
19
30
19
35
19
40
19
45
19
50
19
55
19
60
19
65
19
70
19
75
19
80
19
85
19
90
19
95
20
00
20
05
-
Year
KWh Useful Work / $GDP
kWh of useful work per $GDP
10 per. Mov. Avg. (kWh of useful work per $GDP)
1.0
0.9
0.8
0.6
0.5
0.4
0.3
0.2
0.1
Year
20
00
19
90
19
80
19
70
19
60
19
50
19
40
19
30
19
20
19
10
0.0
19
00
kWh / $GDP
0.7
US Electric Efficiency,1900-2005
Primary Efficiency, Delivered Electricity
Ten year Moving Average
Final Efficiency raw energy to useful work
10 year moving average
35%
30%
20%
15%
10%
5%
Year
20
00
19
90
19
80
19
70
19
60
19
50
19
40
19
30
19
20
19
10
0%
19
00
% Efficiency
25%
Conversion Efficiency, Exergy to Useful Work
14%
12%
10%
8%
6%
4%
2%
Year
20
00
19
90
19
80
19
70
19
60
19
50
19
40
19
30
19
20
19
10
0%
19
00
Percent of raw exergy to useful work
Conversion efficiency to useful work
5 per. Mov. Avg. (Conversion efficiency to useful work)
Conversion Efficiency, Exergy to Useful Work work 1960-2005
% input exergy to useful work
5 per. Mov. Avg. (% input exergy to useful work)
13%
12%
11%
10%
Year
20
05
20
00
19
95
19
90
19
85
19
80
19
75
19
70
19
65
9%
19
60
% efficiency of conversion
14%
Alternate economic assumption #2
• That the economy is never in general
equilibrium. Economic growth for the past 200
years has depended very largely on
innovations, such as mechanization and
automation, requiring cheap energy. The term
“labor-enhancing” is misleading; “labor
displacing” is more accurate. See Ayres &
Warr “The Engine of Growth”
LINEX theory (Including ICT)
• physics assumptions (constraints) determine the
mathematical form of the output elasticities,
which are partial derivatives. Partial integration
yields the LINEX production function.
• Parameters are determined by non-linear fits of
the theoretical function against real economic
history over the past 100 years.
• ICT has become important since 1990. We treat
information capital as a perturbation of total
capital, using the standard Taylor expansion.
Setting the ICT correction term to zero yields the
simpler form.
ICT adjusted LINEX

 u l
y = q * u exp  f  a
 k 

l


  ab  c 
u
l

y = GDP
u = useful work
l = labour
k = capital stocks (total)
δ = ICT capital stocks
[q,a,b,c] = fitting parameters
Ayres IIASA 10 August 2007
Empirical and estimated GDP US 1900-2000 excluding 1941-1948
US GDP (1900=1)
25
GDP estimate
LINEX
20
GDP estimate CobbDouglas
Empirical
GDP
15
10
POST-WAR COBB DOUGLAS
alpha=0.51
beta=0.34
gamma=0.15
PRE-WAR COBB DOUGLAS
alpha=0.37
beta=0.44
gamma=0.19
5
0
1900
1920
1940
1960
1980
2000
year
Empirical GDP from Groningen GGDC Total Economy Growth Accounting Database: Marcel P. Timmer, Gerard Ypma and Bart van Ark (2003), IT in the European
Union: Driving Productivity Divergence?, GGDC Research Memorandum GD-67 (October 2003), University of Groningen, Appendix Tables, updated June 2005
US GDP 1946-2000
US GDP 1946-2000
30.00
GDP index (1900=1)
25.00
20.00
GDP
estimate
15.00
Parameters
10.00
5.00
q
1.66
a
0.37
b
2.43
c
0.62
0.00
1946 1950 1954 1958 1962 1966 1970 1974 1978 1982 1986 1990 1994 1998
year
Conclusion
• Useful work explains past economic growth
rather well, with only 2(or 3) parameters,
replacing the exogenous productivity
multiplier.
• Granger causality analysis confirms that GDP
growth does not drive energy consumption,
but useful work does drive GDP growth.
• This relationship holds significant implications
for economic policy
I’ll stop here. Thanks for listening
The rest is an Appendix
US Estimated Energy “Efficiencies” (LLNL, Based on DOE)
Sector
1950
1970
1990
2000
2008
Electricity
Generation
Residential &
Commercial
0.25
0.36
0.33
0.31
0.32
0.73
0.75
0.75
0.75
0.80
Industrial
0.72
0.75
0.75
0.80
0.80
Transport
0.26
0.25
0.25
0.20
0.24
Aggregate
0.50
0.50
0.44
0.38
0.42
A dangerous deception
• Even the “first law” efficiency (useful output
divided by total input) of the industry and
buildings sectors cannot be 80%. But the energy
department has been publishing this nonsense
since the early 70s (and back-dated to 1950)
mainly to “prove” that US energy efficiency is
high, so conservation is a waste of effort and new
(nuclear) supply is needed.
• In reality, the opportunities for energy efficiency
are the most cost-effective source of new supply
today.
Energy Intensity vs Energy Efficiency
• A great many analysts try to use energy
intensity (inverted) as a proxy for energy
efficiency.
• They use decomposition analysis to allow for
structural change over time (the changing mix
of outputs). However, the residual is not a
good measure of changing efficiency.
• Because energy intensity will decline anyhow
for other reasons (the Solow residual term) :
• Calculate E/Y using the Cobb-Douglas P.F.
Energy Intensity and Work Intensity
• Energy intensity is defined as the energy required
to produce a unit (dollar) of GDP, or E/GDP.
• E is in physical units, such as Exajoules, GDP in $
• Work intensity is the work required to produce a
dollar of GDP. Notice that work intensity
continued to increase untilt he early 1970s.
Model - Energy Intensity of GDP, USA 1900-2000
index
30
25
20
15
r/gdp
10
5
e/gdp
0
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
Exergy Intensity of GDP Indicator
60
50
•Distinct grouping of
countries by level, but
similar trajectory
40
•Evidence of convergence in
latter half of century
EJ / trillion $US PPP
US
UK
•Slowing decline
30
20
Japan
10
0
1905
1925
1945
1965
year
1985
2005
Exergy to Useful Work Conversion Efficiency
Evidence of stagnation –
Pollution controls,
Technological barriers
Ageing capital stock
Wealth effects
25%
efficiency (%)
20%
High Population
Density Industrialised
Socio-ecological
regimes
Japan
Resource limited
15%
US
10%
UK
Low Population Density
Industrialised New
World Socio-ecological
regime
5%
Resource abundant
0%
1905
1925
1945
1965
year
1985
2005