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Economic Growth Becoming More Energy Efficient, Says PwC

Jul 16
Tags: PwC
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Far from damaging the planet, economic growth is actually delivering improved energy efficiency, according to a new report from PwC.

Pointing to “significant strides” made over the past three decades, the study revealed that the amount of oil equivalent required to generate $1,000 of global GDP – a metric referred to by PwC as “energy intensity” – has reduced substantially.

In 1990, around 181kg of oil equivalent was needed to produce $1,000 of GDP, but this figure had dropped to 123kg by 2015, representing an improvement in energy efficiency of more than a third.

PwC predicts that this trend will continue in the years to come. By 2040, it expects global energy intensity to drop by a further third, meaning that 78kg of oil equivalent will be required to deliver $1,000 of global GDP. 

Despite – or perhaps because of – this increased efficiency, PwC also anticipates that global GDP will continue to grow over the same period.

A combination of technological progress and structural economic change has been the driving force behind this trend, the consulting firm claimed. For instance, increased electrification and the introduction of smart appliances have had a positive impact on GDP while limiting the rise in demand for energy.

The report noted also that an increasing number of economies have moved away from manufacturing and toward services, which can be delivered with greater efficiency. 

Indeed, in the UK, services now account for around four-fifths of GDP, but are only responsible for just over half of the country’s total energy consumption. By comparison, the industrial sector only produces about 15% of GDP, while making up 15% of all energy usage.

While the UK’s example was heralded, PwC pointed out that the greatest strides have been made in Central Asia and Eastern Europe, where energy intensity has dropped by an average of 20% – despite these regions being home to many of the world’s fastest-growing economies.

Eastern Europe’s economic uptick has coincided with the region’s increased focus on the service sector, which has grown as a proportion of GDP by an average of ten to 15 percentage points since 1990.

At the same time that Eastern European countries have seen their economies expand, they have been subject to stronger governance and placed greater focus on energy-efficient technology, the report explained.

Mike Jakeman, senior economist at PwC UK, said: “Becoming more energy efficient is crucial in limiting climate change, while also ensuring that the global economy continues to grow and the world’s population becomes prosperous. 

“This report is a positive story for the global economy, as it suggests that governments and businesses can continue to pursue climate change policies that limit energy consumption without eliminating economic growth.

“However, while improved energy efficiency is very encouraging, it's only part of the story and needs to be combined with a continual push to reduce emissions.”

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