12 June, 2011

BP's energy review in the Economist

BP was demonized for reasons we all know well, but I am glad to see their energy review is still on track.

Developing countries' use of coal is alarming. What can developed countries do to help wean developing countries off coal, when developed countries do not seem to be particularly enthusiastic in weaning themselves off oil?

Salient points:

Energy demand tends to fall faster than GDP when things go wrong, and grows faster when the situation improves. That is because energy responds to changes in investment, industrial production and transport, which rise and fall by more than the economy as a whole.

This helps explain why energy consumption handily outstripped 2010’s 4.9% growth in global GDP. But there is also a structural change at work. Economic activity is growing faster in developing countries, in general less efficient energy users, than in developed ones. Even if global GDP were static, this shift would increase consumption.

Growth in developing countries is the main reason why coal consumption rose so much. The wealthy countries of the OECD still consume more oil than the rest of the world, but non-OECD countries use 69% of the world’s coal—two-thirds of that in China. This is a big part of the reason why energy-related carbon-dioxide emissions have been growing even faster than energy use. In 2010 they grew by 5.8%—the highest rate since 1969.

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