Useful Exergy as an Intermediate Input in a Two-Sector Model of the United States Economy

João Gonçalves (), João Santos, Matthew Heun, Paul E. Brockway and Tiago Domingos
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João Gonçalves: MARETEC—Marine, Environment and Technology Center, Instituto Superior Técnico (IST), University of Lisbon, Avenida Rovisco Pais 1, 1049-001 Lisbon, Portugal
João Santos: MARETEC—Marine, Environment and Technology Center, Instituto Superior Técnico (IST), University of Lisbon, Avenida Rovisco Pais 1, 1049-001 Lisbon, Portugal
Matthew Heun: Engineering Department, Calvin University, 3201 Burton St. SE, Grand Rapids, MI 49546, USA
Paul E. Brockway: Sustainability Research Institute, School of Earth and Environment, University of Leeds, Leeds LS2 9JT, UK
Tiago Domingos: MARETEC—Marine, Environment and Technology Center, Instituto Superior Técnico (IST), University of Lisbon, Avenida Rovisco Pais 1, 1049-001 Lisbon, Portugal

Energies, 2024, vol. 17, issue 6, 1-32

Abstract: Conventional economic growth models treat production/consumption as abstractions linked only by money flows, disregarding their connection to the physical world. Nevertheless, the existing literature suggests that energy flows can influence production and links useful exergy prices with economic growth. Useful exergy is energy measured at the stage where it produces an end-use (and is a measurement of energy quality). Not all approaches in the literature use this metric and they often consider energy as a primary input (despite it being an intermediate input). We explore the relationship between energy flows and economic growth for the US through a framework where useful exergy, the output of an “extended energy sector” (where all effects of increasing primary-to-final-to-useful exergy efficiency are located), is an intermediate input for a “non-energy sector”. Together, they encompass the entire economy. We conclude that the share of investment in the extended energy sector grew with the overall economic growth throughout 1960–2020, while the labour share decreased. The non-energy sector contributed the largest share of consumption, exports, imports and labour. In recent years, the energy sector has overtaken it in terms of investment. Our two-sector model has important implications for current climate policy, namely regarding the Integrated Assessment Models on which it is based.

Keywords: multisector economy; useful exergy; national accounts; economic growth (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2024
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