Energy efficiency becomes the engine of growth for the economy
PwC Global Economy Watch
Wednesday 7 August 2019 - Investments in energy efficiency are bearing fruit for economic growth, according to the latest Global Economy Watch from PwC. The energy intensity of the Belgian and the global economy is expected to decrease further, but we will have to leverage technology to boost energy efficiency, all the while looking for ways to decrease the energy consumption of emerging technologies.
The world economy is becoming more energy efficient
The July edition of PwC’s Global Economy Watch highlights that the world economy is using energy much more efficiently. According to World Bank figures, energy intensity has fallen by no less than 32% in the last 30 years. In Belgium, energy intensity fell by 28% in the same period. The PwC report shows that this trend will continue in the next 20 years, predicting that global energy intensity can fall further by a third. With global energy demand increasing by nearly a third by 2050 and an average growth in global GDP of 2.5% per year, the analysis shows how economic growth is gradually decoupling from energy intensity.
Serge Loumaye, Partner at PwC Belgium: “Activity levels in sectors such as the steel industry, have fallen sharply in recent decades, which largely explains this decline in energy intensity. What we do see is that our energy consumption has remained stable over the years, while our economy has grown. This suggests that Belgium has made great strides in recent decades to decouple economic growth from energy consumption. With a view to a necessary energy transition, our country will have to focus even more on energy efficiency. The report shows that it is indeed possible to grow the world economy and at the same time make serious efforts to combat climate change.”
Services and technology for greater energy efficiency
The question that arises is whether governments and companies can achieve this objective. In the report, PwC compares the energy intensity of 20 economies identifying three key factors: a combination of structural economic change, technological progress and government action. The analysis confirms that countries that are transforming their economies into service economies have a positive impact on energy efficiency. According to the Ministry of Economy, the services sector accounts for 57.3% of total gross value added, while its share in total energy consumption in Belgium is only 13.4%.
However, the report showed that such a structural economic change must be accompanied by two other factors: the use of technology, which in turn is often stimulated by government measures. Emerging economies have a lower propensity to invest in technology compared to more prosperous countries, explaining why the correlation between structural economic change and energy efficiency in emerging markets is often negative. In other words, countries that are transforming their economies into service economies will make the greatest gains in terms of energy intensity when they use technology to improve their energy efficiency.
“The analysis shows how important the use of technology is to make our economy more energy efficient. More prosperous countries are inclined to invest in technology while awareness of climate change is more established in these countries, so that consumers are more likely to limit their energy consumption. However, a contrasting conclusion is that new technologies also consume a lot of energy at the same time. Just think of the development of data centers, the introduction of 5G telecommunication technologies or bitcoin mining, the latter of which consumed 30 TWh/year in the last two years, representing a higher energy consumption than London. We still have a lot of progress to make in that respect ”, explains Serge Loumaye, Partner at PwC Belgium.
The full report of PwC’s Global Economy Watch is available here:
https://www.pwc.com/gx/en/issues/economy/global-economy-watch.html.