Decoupling economic growth from energy use: The role of energy intensity in an endogenous growth model

Tobias Bergmann and Matthias Kalkuhl

Ecological Economics, 2025, vol. 230, issue C

Abstract: We develop a theory of endogenous economic growth with explicit consideration of energy in the production process. Following basic thermodynamic considerations, energy is modeled as a (perfect) complement to machines. Long-run economic growth is driven by expanding product varieties. While energy flows on Earth are currently abundant, extrapolation of past consumption trends suggests that energy supply might be a binding constraint in a few centuries to millennia. We show that constant economic growth with bounded energy use is possible if the energy intensity of newly developed products declines at a constant, positive, and arbitrarily small rate. Hence, aggregate decoupling is possible even when no decoupling at the product level is possible. Aggregate decoupling is, however, not possible if there exists a strictly positive lower bound for the energy intensity of newly invented products. We further show that increasing energy prices decrease growth rates by reducing the incentive to innovate. Our results suggest that the energy intensity of structural change is decisive for future growth.

Keywords: Limits to growth; Endogenous growth; Exhaustible resources; Renewable energy; Product variety; Thermodynamic laws; Energy; Decoupling (search for similar items in EconPapers)
JEL-codes: O31 O44 Q20 Q43 Q55 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolec:v:230:y:2025:i:c:s0921800925000023

DOI: 10.1016/j.ecolecon.2025.108519

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