energy-fueled economic growth

World economic activity has historically grown slowly. From the Middle Ages to until the early eighteen hundreds, average per capita income rose only about 50 percent. But since the advent of the Industrial Revolution the pace has picked up, with global per capita income rising more than eightfold in just the last two hundred years.

Energy consumption has also risen dramatically, from under 20 gigajoules (GJ) per person per year in the pre-industrial era to over 75 GJ per person today (and more than 300 GJ per person in the United States). During this period, energy consumption and economic activity have stoked each other in a self-reinforcing feedback loop. Once the fossil fuel tap was opened for the modern world in eighteenth-century Britain, the high-energy content of coal (and, later, oil) enabled unprecedented productivity—spurring more consumption, more demand for energy, and better technology to get at yet more fossil fuels.

Despite the clear link between energy and economic growth, economists have interpreted and normalized growth as resulting from factors such as “market efficiency” and “labor productivity,” which (it is assumed) can be counted upon to produce more and more growth, ad infinitum. Policy makers have therefore built dependence on growth into the design of our economic system. Investors demand constant growth and high rates of return. Future growth is assumed to wipe away the debts taken on today by governments, businesses, and households. Most Americans are even betting their retirement savings, sitting in mutual funds on Wall Street, on continued growth.

As the global bonanza of cheap fossil fuels winds down, what will happen to economic growth? Certainly it’s possible to get more benefit per joule through smarter use of energy, but using energy efficiency to “decouple” economic growth from energy consumption can only go so far. After the easy efficiencies are found, further efficiency measures often require greater cost for less benefit; and while greater efficiency may reduce costs at first, it can have the effect of spurring yet more consumption.

It’s intuitively clear that it takes energy to do things, and modern civilization has exploited high-energy-content fossil fuels to dramatically reshape the living conditions and experiences of billions of people. (Altering the climate and destroying natural ecosystems around the globe were unintended consequences.) In the future, humanity will need to cope with both more expensive energy and less energy available per capita. Maintaining an acceptable level of productivity—let alone growth—may constitute one of society’s foremost social, political, technical, and economic challenges.