Is declining energy quality a root cause of the current recession?
In a paper published this November in the journal Environmental Research Letters by energy expert Dr. Carey King of the Center for International Energy and Environmental Policy, a center based at the University of Texas at Austin’s Jackson School of Geosciences, he concluded that an overlooked cause of the economic recession in the United States is a decade long decline in the quality of the nation’s energy supply, often measured as the amount of energy we get out for a given energy input.
King suggests the real estate bubble burst because individuals were paying a higher percentage of their income for energy — including electricity, gasoline and heating oil — leaving less money for their home mortgages. He goes on the state that economists don’t think of energy as being a limiting factor to economic growth that, in fact, they believe continual improvements in technology and efficiency have completely decoupled the two factors. His research, however, is part of a growing body of evidence that says energy still plays a big role.
The paper focuses on a new way to measure energy quality, the Energy Intensity Ratio (EIR), which measures how much profit is obtained by energy consumers relative to energy producers. The higher the EIR, the more economic value consumers (including businesses, governments and people) get from their energy. Further, King’s analysis suggests if EIR falls below a certain threshold, the economy stops growing.
To get the U.S. economy growing again, Americans will have to produce and use energy more efficiently as the U.S. did after the last energy crisis by raising fuel efficiency standards for cars, increasing use of natural gas for electric power generation and developing new technologies like the distributed energy sources of wind and solar.
“If we aren’t fundamentally changing the way we produce or consume energy now, don’t expect the economy to grow as much as the past two decades,” he says.
Dr. King is engaged areas of study that include the economics of carbon capture and sequestration, the design of beneficial combinations of renewable energy and storage systems, and the creation of tools to help the public and policymakers understand the tradeoffs among different electricity generation sources. To read Dr. King’s paper, click here.