Energy and capital

Christopher Kennedy

Journal of Industrial Ecology, 2020, vol. 24, issue 5, 1047-1058

Abstract: Energy is required both to build the capital stock and to produce goods and services from the use of the capital stock. These two energy demands are together constrained by the available energy in the macroeconomy. Here, I develop a mathematical theory expressing the relationship between available energy and the capital stock as a first‐order differential equation. Three specific solutions are derived for the cases of a steady‐state economy with fixed capital stock, for an economy with a linearly increasing capital stock, and for an exponentially growing capital stock. Empirical data for the United Kingdom's nineteenth century economy are used to examine the energy required to access energy supplies; the energy intensity of capital formation; and the energy intensity of capital use. Magnitudes and trends in the energy intensity of capital use differ for four sectors of the economy—mining, residential, utilities, and railways. Data for the United Kingdom's ratio of available energy to capital from 1850 to 1913, are examined for the case of a linearly increasing capital stock. This corroborates the overall theoretical model and demonstrates that the change in energy to capital ratio is impacted by the magnitude of the capital stock. Further analysis of the mining sector shows that higher coal prices follow after increases in capital investment and increased coal production. This helps demonstrate how energy constraints play out in the macroeconomy. This article met the requirements for a gold – gold JIE data openness badge described at http://jie.click/badges.

Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://doi.org/10.1111/jiec.13014

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:inecol:v:24:y:2020:i:5:p:1047-1058

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1088-1980

Access Statistics for this article

Journal of Industrial Ecology is currently edited by Reid Lifset

More articles in Journal of Industrial Ecology from Yale University
Bibliographic data for series maintained by Wiley Content Delivery ().