Authors Iain Begg | Gabriel Glöckler | Anke Hassel ... - The Europaeum

Energy and carbon use depend on four components (the so-called Kaya
identity): population, GDP per capita, the energy intensity of GDP and the
carbon intensity of energy use. The first component is usually assumed to
be exogenous to policymaking, and it is also salient that the bulk of the
projected population growth in the coming decades will be in low income
countries. If only for this reason, lower per capita growth rates – the
second component of the identity - would imply that the poor of the world
would be condemned to remain in poverty, so that any attempt to curb
growth would be contrary to social justice, not to mention incompatible
with commitments to development in the Millennium Development
Goals.
It is therefore in the energy intensity of GDP and in the carbon intensity of
energy that the scope for change lies. It is well established that energy
consumption and GDP are strongly correlated: as countries grow, so too
does their consumption of energy for transport, production, heating and
cooling, and other quality of life purposes. These rates of consumption
have increased steadily over the last two hundred years, especially for the
countries which have grown most, and, today, the richest countries
consume amounts of energy several times those of the poorer countries.
The solution is, again, obvious: the relationship between GDP and energy
used needs to be “decoupled”. The trouble, though, is that the countries
which, over the next fifty years, are expected to add most to GDP (above
all the most populous emerging economies in Asia) tend to see economic
development as the primary goal and will be reluctant to forgo growth in
the interests of lower emissions.
Even though demand for energy has proved not to be very responsive to
price changes, rising prices will have some effects, notably on the wellbeing
of low income households. For public policy, the result may be calls
for compensatory social transfers, especially for social groups at risk of
“fuel poverty”. To the extent that rising oil prices create windfall gains for
government revenues, such compensation is affordable. Energy mix is
partly about whether to favour renewables or nuclear power, but can also
refer to using hydrocarbons in ways that emit less. In all of this there are
tricky trade-offs: nuclear safety against the uncertainty of renewables; the
unintended consequence that bio-fuels crowd out food production, raising
the price for basic foodstuffs, and so on.
But it is also clear that sizeable commitments of public resources will be
needed to develop the necessary technologies of the future, such as carbon
capture and sequestration, which will require burden-sharing at the global
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After the crisis: A new socio-economic settlement for the EU