Will developing countries leapfrog on their energy consumption needs?

There is a group of experts who believe that today’s developing world has lesser energy intensity than advanced economies which were once developing themselves. This implies that as today’s developing world develops. they will require lesser energy than the developed world. This means lesser demand for energy in future and hence a less impact on environment.

K@W discusses recent research work of Prof. Arthur van Benthem, of Wharton. He analyzed data on energy consumption, prices and GDP for 76 countries in an effort to answer these and other questions about patterns of energy use worldwide.

The findings are not as rosy as projected:

A key finding was that despite dramatic improvements in energy efficiency, economic growth in today’s developing countries is not less energy-intensive than past growth in industrialized countries, notes van Benthem. “Energy savings from access to more efficient technologies have been offset by other trends, such as a shift towards more energy-intensive consumption bundles” – specific combinations of goods and services that individuals buy during a given period – “and industrial outsourcing,” he writes. Growth in today’s emerging economies is “certainly not less energy intensive than that in industrialized countries 40 years ago,” states van Benthem, adding that this finding “appears to be at odds with leapfrogging.”

What do these findings suggest for energy forecasts? Some studies have predicted that developing nations would significantly improve their energy efficiency by leapfrogging to advanced energy-saving technologies developed in industrial countries. “I am not saying that the energy projections of the International Energy Agency (IEA) or Royal Dutch Shell are wrong or are too optimistic,” van Benthem says. “But I am saying that we should be cautious” about assumptions that leapfrogging will be the predominant pattern in the future. “My study doesn’t prove that there won’t be some leapfrogging, but that we need to use caution” about saying it will be the predominant factor.

Why do such findings have significant implications for prominent forecasts of future energy consumption and carbon emissions? Van Benthem notes that such forecasts typically assume a substantial amount of leapfrogging. Even the highest energy-use projection in the IEA’s latest World Energy Outlook implicitly assumes that future economic growth in developing countries will be 50% less energy-intensive than today’s industrialized nations experienced in the past. Unfortunately, “the results in this paper show that there is no empirical support for that hypothesis during the last half century,” says van Benthem.

He looks at the broad trends in energy consumption. Some things have declined but others have come up:

Indeed, van Benthem notes that many individual technologies have become dramatically more energy-efficient. “It is well-documented that the energy efficiency of, for instance, electric appliances, lighting, passenger vehicles and industrial processes has improved considerably in the last several decades.” According to one study, refrigerators in the U.S. used only one-quarter as much energy in 2008 as they did in 1970, even as prices of refrigerators fell over the same time period. Other energy-saving improvements have been documented for freezers, washing machines, dishwashers and air conditioners, according to van Benthem.

In the automotive sector, improvements have been slow, but steady. Between 1970 and 2008, the average fuel economy of vehicles in industrialized countries improved by 22%. Using data for the United States, one study estimates that the fuel-efficiency improvements from 1980 to 2006 would have been four times larger if the vehicles had maintained the same weight and horsepower as those in a typical 1980 model-year.

Other studies show that heavy industrial processes have become more energy-efficient in today’s developing economies than those used by today’s industrialized nations in their past. “Although there is considerable variance depending on the energy sources, equipment efficiency and the output quality of steel produced, today’s [developing nations] generally produce a ton of steel using less energy,” writes van Benthem. Today’s developing countries also use more energy-efficient technology to manufacture vehicles than industrialized nations did in the past.

Then why do we see energy consumption higher?

The first trend is industrial outsourcing. Nowadays, many energy-intensive goods that are consumed in industrialized nations are manufactured in less-developed nations. “This is a relatively recent phenomenon, which was certainly not present in the 1960s, not in the least because there was no comparable group of ‘even richer’ countries [in Asia or elsewhere] that could outsource their industrial activities to Europe, the United States and Japan,” van Benthem says.

Second, there has been a noticeable shift towards more energy-intensive consumption bundles. “This phenomenon can explain the absence of leapfrogging across non-industrial economic sectors.”

For example, as energy-saving cars like the Toyota Prius become more affordable, their users are encouraged by transportation infrastructure improvements to use them for broader bundles of activities. “You start doing other things with your cars,” says van Benthem, which you could not do in the past. Thus, in large parts of the United States, a wide range of ancillary vehicle-focused activities has emerged that were unimaginable when the U.S. auto industry was in its infancy – including drive-through fast-food restaurants, banks and even [drive-through] dry cleaning establishments. The proliferation of such location-specific secondary services is a main reason why “you don’t see much leapfrogging in transportation,” he adds.

Hmm..

Nice bit..

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