“Minus 1” and energy costs constants: Empirical evidence, theory and policy implications

Igor Bashmakov, Michael Grubb, Paul Drummond, Robert Lowe, Anna Myshak and Ben Hinder

Structural Change and Economic Dynamics, 2024, vol. 71, issue C, 95-115

Abstract: This paper demonstrates an apparent long-term constancy of economy-wide energy expenditures relative to income – an inter-decadally-constrained sustainable (“Bashmakov-Newbery”) range of 4.2 ± 0.8 % relative to Gross Output, and 7.2 ± 1.5 % relative to GDP, based on data from industrialised countries. Initial evidence suggests the range to be narrower when external trade effects are accounted for. Statistically equivalent to a very-long-term price-to-energy-intensity elasticity of -1 (“Minus 1”), this indicates long-period economic dynamics including induced innovation and structural change, and we probe theories and policy implications. Either higher energy prices are fully offset by reduced energy intensity, or they later decline to match energy intensity improvements. Complementary theoretical approaches help to explain the observations but challenge the conventional economic logic that high environmental pricing should be the principal instrument to drive transformation. Rather, energy efficiency, innovation, deployment, structural change and pricing co-evolve, suggesting need for a diversity of complementary policy strategies implemented over extended periods of time.

Keywords: Economic cycles; Energy prices; Energy cost share; Energy intensity; Price elasticity; Affordability thresholds; Carbon pricing; Energy transitions (search for similar items in EconPapers)
JEL-codes: E25 E3 N7 O1 O4 O5 P52 Q3 Q4 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0954349X24000948
Full text for ScienceDirect subscribers only

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:eee:streco:v:71:y:2024:i:c:p:95-115

DOI: 10.1016/j.strueco.2024.06.010

Access Statistics for this article

Structural Change and Economic Dynamics is currently edited by F. Duchin, H. Hagemann, M. Landesmann, R. Scazzieri, A. Steenge and B. Verspagen

More articles in Structural Change and Economic Dynamics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().