Long term trends in resource exergy consumption and useful work supplies in the UK, 1900 to 2000

doi:10.1016/j.ecolecon.2008.02.019

Ecological Economics

Volume 68, Issues 1–2, 1 December 2008, Pages 126-140

https://doi.org/10.1016/j.ecolecon.2008.02.019 Get rights and content

Abstract

Our aim is to explain historical economic growth in the UK economy by introducing an empirical measure for useful work derived from natural resource energy inputs into an augmented production function. To do this, we estimate the long-term (1900–2000) trends in resource exergy supply and conversion to useful work in the United Kingdom. The exergy resources considered included domestic consumption of coal, crude oil and petroleum products, natural gas, nuclear and renewable resources (including biomass). All flows of exergy were allocated to an end-use such as providing heat, light, transport, human and animal work and electrical power. For each end-use we estimated a time dependent efficiency of conversion from exergy to useful work. The 3-factor production function (of capital, labour and useful work) is able to reproduce the historic trajectory of economic growth without recourse to any exogenous assumptions of technological progress or total factor productivity. The results indicate that useful work derived from natural resource exergy is an important factor of production.

Introduction

Economic growth theory was formulated in its current production function form by Robert Solow (Solow, 1956, Solow, 1957) and Trevor Swan (Swan, 1956). The theory assumes that production of goods and services (in monetary terms) can be expressed as a function of capital and labour. Incomes allocated to factor shares are assumed proportional to their relative productivities, as predicted by the theory of income allocation in a perfectly competitive market economy. However, such a model is able to explain only a small fraction of the observed growth. The major contribution to growth had to be attributed to ‘technical progress’ — an exogenous multiplier. The failures to integrate the physical components of economic growth, by excluding natural resource consumption from the model, and assumptions of ‘abstract’ exogenous technical progress have undesirable consequences for any forecasting of future economic growth. Firstly, because the driver of growth is unexplained, future economic growth is therefore assumed to continue at historical rates. Secondly, by ignoring the relationship between technology, natural resource consumption and economic growth, the direct impacts of alternative sustainability scenarios, for example with much lower energy intensity than in the past, cannot be explored.

Ayres (Ayres et al., 2003) suggested a thermodynamic approach to account for the productive inputs or ‘useful work’ provided by natural resources to the production processes. By doing so they reproduced historical trends of economic growth for the US, without recourse to any assumption of exogenous technical progress (Ayres and Warr, 2005), which permits investigation of economic growth trajectories under alternative energy intensity and efficiency scenarios Warr and Ayres (2006). They argue that the most important technical progress driving output growth in the past relates to improvements in the efficiency with which fuels (from natural resources) are converted into useful forms required to power economies. It is not the available work per se that powers economic activity but rather the useful work that it delivers to an end-use, such as heating or providing movement (Ayres and Warr, 2005, Warr and Ayres, 2006). The quantity of useful work that can be obtained from natural resources is determined by the efficiency of the technology used to convert them into useful work.

The energy efficiency characteristics of an economy change as it grows and with the exploitation of new or ‘alternative’ sources of energy, the introduction of new energy consuming technologies and new patterns of consumer driven demand. Technically, energy is a conserved quantity, which changes only in form as it is used. Exergy is actually what people mean when they refer to energy. Exergy refers to the maximum available work that an energy carrier can provide. While energy is conserved (as a consequence of the first law of thermodynamics), exergy is consumed in the process of conversion to useful work delivered to the point of use (as a consequence of the second law of thermodynamics). The fraction of natural resource exergy that is destroyed (and wasted) depends on the efficiency of the exergy conversion process. Therefore exergy analyses are invaluable to assess issues of ‘energy’ scarcity (or availability) and ‘energy’ efficiency.

Exergy accounting and resource-utilisation analysis is most commonly used to investigate the energy efficiency characteristics of engineering systems and processes. As the awareness of potential resource scarcity and the negative impacts of fossil fuel consumption have increased, exergy analysis has been used to investigate the exergy consumption patterns of socio-economic systems at various scales and levels of detail. At the macro-economic scale, providing estimates for a single year, studies have been realised for the US (Reistad, 1975), Sweden (Wall, 1987), Japan (Wall, 1990), Canada (Rosen, 1992), Italy (Wall et al., 1994), Turkey (Ertesvag and Mielnik, 2000), and the UK (Hammond and Stapleton, 2001). Fewer studies have examined the historical evolution of resource exergy supply and utilisation. Examples include studies for China covering the period 1980 to 2002 (Chen and Chen, 2007) and over a much longer period (1900–1998) for the entire US economy (Ayres et al., 2003).

The present work is a geographical extension of this work to the UK, to quantify the historical evolution and structural variation of natural resource exergy supplies, changes in the demand for energy services and efficiency improvements in service provision, namely the delivery of useful work to the point of use. By examining the long-run historical trends we provide an insight into the possible future developments of each dimension of the energy supply and demand structure, and the potential for efficiency improvements.

We also test the hypothesis put forward by Ayres and Warr (2005) for the UK economy over a historical period from 1990 to 2000. We compile a data set for natural resource exergy, allocate exergy inputs to categories of final use and arrive at a measure for useful work by applying conversion efficiencies. We use the time series of useful work we develop as an input to a three-factor production function (of capital, labour ad useful work) to model historical economic growth as measured by GDP.

Section snippets

Exergy, efficiency and useful work

The thermodynamic quantity known as exergy is formally defined as the maximum amount of work that a subsystem can do on its surroundings as it approaches thermodynamic equilibrium reversibly (Szargut et al., 1988). Fossil fuels, hydro-power (falling water), nuclear heat and products of photosynthesis (biomass, i.e. crops and timber) are the major sources of natural resource exergy input to the economy. Most other materials have little exergy in their original form, but gain exergy from fuels.

Analysis

The methodology comprises three distinct stages. The first is the compilation of apparent consumption of natural resource exergy into the domestic economy, the second is allocation of exergy to each category of useful work (final exergy consumption), and the third is the estimation of the useful work provided by each (see Fig. 1).

We consider five forms of useful work, heat, light, mechanical drive, muscle work and electricity. Electricity can be regarded as ‘pure’ useful work, because it can

Apparent consumption of natural resource exergy

We compiled a database of resource inputs including coal, crude oil and petroleum products, natural gas, and renewable resources (including biomass). Our main sources for data were the British Historical Statistics compiled by Mitchell (1988), John Nef's comprehensive work on coal (1932) and the Statistical Abstract for the United Kingdom, in later years Annual Abstracts of Statistics (1870ff) as well as earlier work on the UK social metabolism (Schandl and Schulz, 2002, Krausmann and Schandl,

Conversion energy estimates

To arrive at an efficiency estimate for electricity generation (i.e. for prime movers) we estimate the aggregate efficiency of electricity generation by fossil fuels as the ratio of net electricity output at a facility to the exergy content of input ‘fuels’ provided by statistics (Mitchell, 1988). The exergy inputs used to generate electricity from renewable and nuclear resources are not reported and therefore had to be estimated. The exergy input for hydro and nuclear power supplies was

Total useful work and aggregate efficiency

Fig. 7 presents the aggregate economy-wide efficiencies of conversion for each type of useful work. The most marked improvements are for high and medium temperature heat for industrial processes. Similarly the efficiency of electricity generation and distribution and utilisation has improved greatly, although no marked improvement is evident post 1980. The exergy efficiency of transportation (other mechanical work) has doubled over the century, but has not improved significantly since 1970,

Modelling historic economic growth with useful work as a factor of production

We model output growth as a function of capital stock (monetary value), labour (hours worked) and useful work inputs (Joules).³ For comparison we used two models, an energy-augmented Cobb–Douglas production function without exogenous technical progress, $y = k^{α} l^{β} u^{1 - α - β}$ and an alternative model, the LINEX

Conclusions

Estimation of the economy-wide trends in exergy supply, consumption and use efficiency over such a long period is not without its difficulties. Clearly it is not possible to reflect the complex reality of all the processes and transformations that occur. The principal sources of uncertainty stem from the estimation of the exergy flows to each type of useful work and the efficiencies of conversion. Also there have been efficiency improvements that we have not been able to account for, but whose

Acknowledgements

This research was supported by the Austrian Science Fund project ‘The Historical Transformation of Society's Natural Relations’ (Project No. P16759) headed by Marina Fischer-Kowalski. The authors are grateful to Fridolin Krausmann for his continuous inputs during the research process and to Franzi Poldy and Ejaz Qureshi for their useful comments on a draft version.

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Citation Excerpt :
The upper right-hand and lower left-hand and right-hand graphs in Fig. 1 also illustrate how quality-adjusted measures for capital, labor and energy, respectively, grow faster than unadjusted measures. The useful exergy accounting methodology employed by Serrenho et al. (2016) for the Portuguese economy is based on previous country-level useful exergy analyses conducted for the US, UK, Japan, and Austria (Ayres, 2008; Ayres et al., 2003; Ayres and Warr, 2005; Warr et al., 2010; Warr et al., 2008). However, Serrenho et al. (2016) refine the useful exergy accounting methodology employed by the aforementioned studies, enabling a separate accounting of different electricity useful exergy uses.46
The role of energy in economic growth is controversial. Models based on aggregate production functions (APF) range from the neoclassical, which downplay energy due to a cost-share theorem, but typically rely on exogenous total factor productivity (TFP), to the ecological economic, which acknowledge energy's importance. The validity of the APF concept itself is questioned. Here, we apply cointegration analysis to identify APFs between output, capital, labor, and possibly energy, measured as primary energy or useful exergy. We test for TFP growth by including a time trend. We require that plausible APFs verify cointegration, non-negative output elasticities, and Granger-causality linking inputs to output. Our method recognizes cases where: a) plausible APFs do not exist (thereby addressing the APF critique); b) energy impacts growth directly; c) energy impacts growth indirectly, through capital and labor. We apply the method to Portugal (1960–2009), considering standard and quality-adjusted capital/labor measures. With a time trend or disregarding energy, plausible APFs are never found. Without a trend, plausible APFs are found only when considering capital-energy-labor combinations. Within these, with quality-adjusted capital and labor and useful exergy, results are consistent with the cost-share theorem but energy plays a central role, through a constraint on all factors of production.

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ANALYSISLong term trends in resource exergy consumption and useful work supplies in the UK, 1900 to 2000

Abstract

Introduction

Section snippets

Exergy, efficiency and useful work

Analysis

Apparent consumption of natural resource exergy

Conversion energy estimates

Total useful work and aggregate efficiency

Modelling historic economic growth with useful work as a factor of production

Conclusions

Acknowledgements

Structural Change and Economic Dynamics

Energy

Energy

Resources, Conservation and Recycling

Energy

Ecological Economics

Ecological Economics

Structural Change and Economic Dynamics

Energy – The International Journal

Ecological Economics

Resources and Energy

Energy – The International Journal

Structural Change and Economic Dynamics

Energy Sources the Wealth of the World

Efficient Use of Energy. A Physics Perspective

Resource analysis of the Chinese society 1980–2002 based on exergy. Part 1: fossil fuels and energy minerals

Energy Policy

Theoretical Minimum Energies to Produce Steel for Selected Conditions

ANALYSIS
Long term trends in resource exergy consumption and useful work supplies in the UK, 1900 to 2000