This time I would like to dwell a little bit on energy “consumption” and its relation to Gross Domestic Product (GDP) creation. (In fact, the term “energy consumption” is misleading, as energy cannot be destroyed nor created, according to the First Law of – more about that later.) For this discussion, I’m using data from the 2006 Report of the International Energy Agency. There are several ways to look at the raw data, three of which are described below.
First, one feels intuitively that the amount of energy that a nation uses is related to its productivity, as expressed in its GDP and its population, which of course drives GDP. Therefore, in order to compare nations with different outputs and populations, it seems wise to divide both consumed energy and GDP by population. This is expressed in Figure 1 below.
Figure 1. GDP versus energy consumed for selected nations and regions
What we notice is the huge range in power levels (in KW/capita) between the lowest consumer (India) and the highest (USA). In the USA, each citizen needs an average power level of more than 10KW every second to keep the society going (this includes everything: transportation, work, food, housing, leisure, etc.). But when we look to productivity levels (expressed as GDP/capita), we see that the productivity of the USA (ca. $36,000/capita) is more than 70 times than that of India (ca $500 /capita). Based on that, the USA is perhaps not such a bad performer in terms of energy efficiency (10KW/capita vs. about 1KW/capita for India), but more on this later. There seems to be a rough overall correlation between GDP/capita and energy/capita. This is understandable, since higher productivity per individual will cause a higher energy need for each.
There is, however, another interesting fact. In the example above, we compared an underdeveloped country with a highly developed one, which may be like comparing apples with oranges. So let’s compare Japan with the USA. The productivity per capita of both countries is comparable and actually are the best in the world, from a productivity point of view. Yet Japan needs only half of the kilowatts that the USA needs! If the USA could be as frugal with energy as Japan, that would instantly solve its dependence on oil imports and vastly decrease the production of greenhouse gases! On that score, Japan emits 9.5 tons of CO2/capita, whereas the USA emits 19.7 tons per capita, roughly proportional to the energy consumption ratio of the two countries. (For perspective, consider that worldwide per-capita CO2 emission is only 4 tons (4000 kg) per year!)
Now let’s look at the problem from the angle of energy efficiency, as in Figure 2.
Figure 2. Energy efficiency of selected countries and regions
In this figure, we plotted total primary energy supply (TPES) divided by GDP for several nations and regions. The TPES is a calculated number where factors such as energy production, imports, exports and stock changes are taken into consideration. It is expressed in millions of tons of oil equivalents (MTOE) and can be converted into GWh: 11630MTOE = 1GWh. The more to the right you are in the graph, the better your energy efficiency.
What we notice is that the industrialized countries are working most efficiently, with Japan in the lead. Russia is doing the poorest job in terms of energy efficiency, whereas less industrialized regions are factors lower than the best performers. This is an important fact, because rapidly industrializing countries such as China and India can improve greatly by implementing known methods from the Western nations. However, let’s not fool ourselves. While it’s good to strive for energy-efficient production, the impact on the climate is simply proportional to the absolute amount of energy consumed. Have a look at Figure 3.
Figure 3. Absolute energy “consumption” per nation or region
From Figure 3, I believe the conclusion is clear: global climate change can be addressed only by international measures. And it can be managed only if we humans bring down our total energy requirements. This can be done partly with greater efficiency, and (this is the hard part) by decreasing usage as well. The big users of energy such as the USA, China, and Europe must act together as responsible planetary citizens.
© Copyright 2007, John E.J. Schmitz
September 24, 2007 at 3:10 pm
Hi,
I am working on my dissertation. I will soon finish my master in petroleum.
I have seen your GDP VS. Energy plot. Can you please send the excel file to me, and let me know the references?
I am wondering if there are any linear relation between consumption of energy and GDP.
Thank you!
Greeting
Anders Bratholm
September 24, 2007 at 7:58 pm
Hi Anders,
Thanks for your comment. I have sent you the spreadsheet in a seperate mail. The data source used is:
http://www.iea.org/Textbase/publications/free_new_Desc.asp?PUBS_ID=1199
rgds, John
October 16, 2007 at 3:51 pm
Hi John,
Thanks for the wonderful chart and trend on Energy Consumption per capita and GDP per capita.
Im doing my dissertation on Energy Security of BRIC countries with specific attention to India. Will be extremely glad if you send me the excel file. I have downloaded the World Energy Statistics already.
Do you think it would be fair to extend the correlation of GDP and energy consumption and extrapolate over the next 20 years to estimate the energy needs of a fast growing country ?
Im also wondering if i should be adjusting the GDP per capita for purchasing power parity.
Thanks in advance.
Sridhar Pabbisetty,
IIM Bangalore
October 16, 2007 at 6:43 pm
Dear Sridhar,
Thanks for your comment.
– I will sent you the spreadsheet in a seperate mail.
– To extrapolate is probably OK as long as you mention clearly that you did that while using numbers from that extrapolation. I must say, however, that 20 year sis quite a long period so be careful!
– Good point you have to correct for purchasing power. I am not an economist but my take would be that both GDP and energy consumption are influenced by the purchasing power. But, give it a try and see what you get.
Best regards, John
May 2, 2008 at 2:36 pm
Hello John,
I am researching on relationship between GDP and Energy Consumption in India, China, UK and USA with the focus on decoupling concept.
It will be extremely helpful if you could forward me the excel file you have used.
I am wondering what you have to say about the notion of energy decoupling, does it happen in real or it is just virtual.
Thanks in advance.
rvibek
May 4, 2008 at 1:40 pm
Hi rvibek,
Thanks for your note. I will sent you the spreadsheet in a mail.
I am not sure what you mean with “energy decoupling”. Please eleborate.
Best regards, John
July 28, 2008 at 10:21 pm
kW (kilowatts) is a measure of power, not energy. I think you meant to put kWh (kilowatthours) on your graph.
decoupling means the process by which nations, as there economies develop, tend to “decouple” energy use from GDP so that their energy intensity (kWh/$) over time tends to reach a peak, then decrease. This is well documented.
In order to really understand the nature of the relationship between energy, wealth, and modern society, it’s important to understand all these concepts.
July 29, 2008 at 6:45 am
hi,
i’m a college student working on a research on the philippine’s power statistics. what possible topics could you suggest?
thanks.
July 29, 2008 at 8:46 pm
Dear Joy,
Thanks for your comments. Two remarks:
1) Certainly KW is a unit for power and KWh for energy. But the numbers in the graph really are ment as KW. If you multiply with 8760 hours (for a year) you will obtain the KWh per year figures per person. But indeed you are right that it would be better to replace “Energy/capita” in the graph by “Power/capita).
2) Thanks for pointing out the concept of “decoupling”. Perhaps you can recommend a reading?
Best regards, John
July 29, 2008 at 8:54 pm
Hi Kay,
I would certainly look for a breakdown in what energy sources would be used, impact on environment/sustainability, which natural energy sources are available in the Philippines and how much of the demand would be needed from outside the country. Are bio fules considered or not?
Then what are the energy requirements for the next 50 years.
I wish you a lot of success in your study.
Best regards, John
August 10, 2008 at 2:36 am
Hai john.
Now i am preparing research about gdp and energy consumption in indonesia and malaysia. could you give me some materials and references about its. thank’s for yours help.
August 12, 2008 at 6:58 am
Dear Yuniarti,
A good starting point would be: http://www.iea.org/Textbase/publications/free_new_Desc.asp?PUBS_ID=1199
where you can find lots of data per country and the different energy sources. Also have a look at i-R square blog in my blogrole and references you can find there.
Best regards, John
August 14, 2008 at 3:25 pm
Hello John –
I have the same question Anders Bratholm, asked you nearly one year ago. I also would like to have the excel file and references. Im trying to put together a similar chart and update it with whatever new information i can find.
Thanks
Jason
August 14, 2008 at 7:15 pm
Hi Jason,
I will forward you the mail I have sent at that time to Anders.
All the best with your work.
Best Regards, John
September 5, 2008 at 9:20 am
hi john i am a college student doing ME in power electronics . I have seen your GDP Vs energy plot its really very nice .
September 6, 2008 at 3:24 pm
Hi Ankur,
Thanks for your nice comment. Let meknow if I canbe of further help.
Best regards, John
September 13, 2008 at 6:45 am
The primary solution the GHG emissions lies in tax reform.
i.e. move the whole tax system from income and VAT to taxes on GHG emissions. The bulk of the taxes will be much easier to collect. People’s expenditure is mostly driven by financial incentives.
The fear of tax reform is the effect on economic growth. Your article and the tables show, as is already clear to me, that that fear is unfounded.
For more information on the suite of emissions solutions you can contactg me at terry_weir@yahoo.com
September 13, 2008 at 1:14 pm
Hi Terry,
Thanks for your comment. I think I agree with your statement but would welcome to learn more about your ideas.
Rgds, John
September 25, 2008 at 3:58 pm
Hello John!
I’m doing a master degree in Bioenergy in Portugal. Just read your article and, like many other as it seems, I’d like to ask you for the first graphic’s spreadshit. Thank you so much!
September 26, 2008 at 6:58 pm
HiJoanna,
I will sent you that in a seperate mail.
Rgds, John
October 16, 2008 at 6:26 am
Hi,
I am doing a dissertation on energy security of India.It would be of great help if you send me the excel that you have used. Also can you suggest me the area that I should focus on majorly..
Regards,
Sandeep
October 17, 2008 at 7:16 pm
Hi Sandeep,
I will sent you the spreadsheet.
Rgds, John
October 26, 2008 at 7:55 am
Hi John,
I would appreciate a copy of the spreadsheet as well. Can’t find it on on the IEA website unfortunately.
many thanks,
Taimur
October 29, 2008 at 7:30 am
Hi Taimur,
Will sent the spreadsheet in a seperate mail shortly.
best regards, John
December 17, 2008 at 11:14 am
Hi John,
was interested to know whether this GDP vs Energy Consumption debate holds true for India.
would appreciate if you can send a copy of the spreadsheet and any other India specific data that you have on this.
Best,
S. Prasad
December 18, 2008 at 9:08 pm
Dear S. Prasad,
I will sent you the spreadsheet in a seperate mail. I believe that for any country theer will be a relationship between energy consumption and GDP. But……. depending on energy sourcing from fosil fuels, nuclear, wind, solar etc there may be very well an offsett versus other countries.
Best regards, John
February 13, 2009 at 12:15 am
hi,
i stumbled upon this page recently cos i’m working on the effects of energy on Industrialisation and the GDP. Please, can you give me a guideline and some references?
thanks, Ayo
February 16, 2009 at 8:44 pm
Hi Ayo,
Well the best reference is the link about the International Energy Agency. You will find tons of data in that report. If you wish I can sent you also the spreadsheet from which I drawed the figures in the blog.
Rgds, John
April 27, 2009 at 11:58 am
Dear John
Very interesting article. Thanks for that. I’m currently working on energy intensive industry policy. We want to promote investment in Saudi but we want to make sure that we are not exporting power through these projects. Do you suggest any relation to consider. GDP vs. kwh, worker vs. kwh!
I would appreciate if you could send me the excel files for these data.
Thanks in advance
May 12, 2009 at 8:19 pm
Dear Abdul,
I believe that GDP vs kWh is a good approach since it will tell you something about how energy intensive the entire production of your country is. It will also allow you to compare with other countries!
I will sent you the data in a seperate mail.
Best regards, John
July 17, 2009 at 11:10 am
Dear John
Very interesting article. I’m working on reduction of materials intensity in the automotive industry and it relates with CO2 emissions in transport.
I would appreciate if you could send me the excel files for these data.
Thanks in advance
July 17, 2009 at 7:21 pm
Hi Marco,
I will sent you the files in a seperate mail.
Rgds, John
August 10, 2009 at 1:02 pm
Hi John
Thanks for your analysis and graphs. I am doing research on correlation between GDP and electricity consumption for my dissertation.
I have same requests as most others, can you kindly provide the excel file for your charts.
Thanks in advance
Regards
Rangeela
August 11, 2009 at 8:07 pm
Hi Rangeela, will do. Rgds, John
October 27, 2009 at 8:57 am
Hi John,
Thanks for all the data that you have given. I am currently working on a project that asks for policies that should be implemented to meet the energy requirement at 5% GDP growth rate in the next 5 years. Can you suggest some readings that can help me with this? Thanks.
November 5, 2009 at 7:23 pm
Hi Mae, have a look at
http://www.economicswebinstitute.org
there is tons of material and data on that web site.
Best regards, John
January 24, 2010 at 6:47 am
I have just come across this website and the series of comments regarding energy consumption and GDP. In the earlier discussion of fig 1, it was pointed out by Joy that GDP should be correlated with energy, not power. I agree. The graph of GDP per capita vs power per capita, which seems to be the same as posted on Wikipedia, is fundamentally wrong. Of course there will always be some kind of connection between the amount of energy generated and the installed capacity of power generators but there are obvious problems in assuming that the connection is a linear one. Firstly, there is no ‘power’ figure that can be attached to the energy consumed outside the electricity generation sector. So where do these ‘kW per capita’ data come from? Secondly, the relationship between installed power and energy is clearly non-linear. For example, in a given period a wind turbine will produce only a fraction of the energy produced by a fossil-fuel powered generator of the same power rating, simply because the turbine runs intermittently.
When energy and GDP data are treated correctly, there is a much closer linear relationship than shown if Fig 1. This linearity is what one would expect, given the key role of energy in creating wealth.
The Wikipedia graph is actually misleading in this regard and really should be replaced with a physically correct representation.
October 17, 2011 at 8:27 pm
Hi Tom,
I was just wondering if you found any graph which plotted this energy GDP relationship?
November 13, 2011 at 3:58 am
I have plotted some of the IEA data for 2007 (from IEA Key World Energy Statistics 2009) and the graph was published in the Australian industry magazine Energy Generation earlier this year – it can be accessed at http://www.flipemag.com.au/APT/emagEG_secondquarter_2011/, on page 6. Per capita figures are used and the GDP is adjusted to constant purchasing power so as better to reflect actual quantities of goods and services. The data show that many economies are clustered around the world average energy productivity figure but there are also quite a few outliers which I think would need to be considered on a case-by-case basis. I discuss this a little in the above article but it really needs further work.
October 20, 2011 at 4:50 am
best investing blog…
[…]Energy “Consumption” and GDP « The Second Law of Life[…]…
April 15, 2012 at 12:09 pm
Hello John,
Greetings!
I am persuading an MBA and in completion of final project. For my current capstone project, I have selected Insulator demand and supply in potential countries like USA, MEXICO and Latin America.
I would request you to kindly send me a spreadsheet for Electricity consumption Vs GDP growth to establish correlation between them in the mentioned countries.
I shall be grateful to receive your quick response.
Thanks in advance.
Tushar Balar
April 29, 2012 at 8:41 am
It is an interesting article indeed, which I was looking for. Thanks to John and others who made comments. I will visit all links that have been cited in the replies. I may come back sometimes later.
May 23, 2012 at 3:36 am
HI John,
I found this website and its comments very interesting…
I am pursuing studies for the correlation of GDP and power consumption (for different types of fuel) for countries in North and South East Asia. Would you be able to provide the Excel file for your charts. Also, have you realeased other books on the matter since 2007?
June 27, 2012 at 3:38 pm
Hi Enrique, I will send you the chart shortly. No I have not released other books. Regards, John
June 27, 2012 at 10:35 pm
It is very good to see so many students interested in this topic. The fundamental issue in drawing such correlations is the choice of the two quantities. There are many ways to measure energy and prodcution. I have argued before (see comment above) that economic output needs to be expressed in constant dollars adjusted for purchase parity, because energy does not produce money, it produces goods and services. And energy must be expressed in terms of true energy units, not power or installed electricity generation capacity etc. For thermodynamic reasons, the correct energy quantity to use is the Total Primary Energy Supply. Once those principles are accepted you are on the right track. But then further complications arise, which soon lead to suspicions about how good some of these statistics really are, especially the ones for purchase parity GDP. In the end one has to be selective about which countries’ statistics to trust. If the correlations don’t look good for Asian economies then try the OECD statistics. China, by the way, seems to have an energy intensity (or productivity) pretty much the same as the USA, and Australia (where I am) for that matter.
August 5, 2012 at 4:09 pm
Dear Dr. Schmitz,
I am requesting permission to reproduce a figure of Energy and GDP (Figure 1. GDP versus energy consumed for selected nations and regions) from your website. I would like to use this figure in a textbook I am preparing for publication later this year by Taylor and Francis. The book is called Energy and Society, and will be the second edition of this book. I would use this figure in the chapter on Energy and Us. Of course I will be pleased to acknowledge the source in the book.
Thank you.
Sincerely,
Dr. Harold H. Schobert
Professor Emeritus of Fuel Science
Penn State University
August 18, 2012 at 8:13 pm
Harold, No problem. Regards, John
September 6, 2012 at 3:33 am
John,
Thank you very much. I will give credit in my book.
Harold
August 19, 2012 at 12:11 am
As I have explained before, the units used in Schmitz Figure 1 do not represent a relationship between GDP and energy. That figure shows GDP plotted against installed electricity generation capacity, which is not energy. Energy must be measured in units of the joule or its many equivalents. Kilowatt is a power unit, that is, energy/time. Power is simply the wrong quantity for seeking the true connection between prosperity and energy, though of course wealthier economies are bound to have more generating capacity than poor economies. When the right energy and GDP units are used, the relationship is much simpler and more direct than shown in Figure 1. I think it is really important that this error is not perpetuated. Wikipedia no longer carries a diagram (now archived) that wrongly plotted GDP against power and hence presented a very confusing picture. Presumably someone (not me) pointed out the error.
August 21, 2012 at 7:02 pm
Hi Tom, you are absolutly right. In fact the legend on the x axis should read: (GWh/capita)/8760. I divided by 8760 to get at an easy readable number and 8760 is the number of hours in a year. Thus if you multiply the number for the USA (10.5) with 8760 you get at 92012 GWh/capita.
Sorry for the confusion.
Rgds, John
August 25, 2012 at 12:29 pm
Hi John I am doing my thesis on environment. Energy use per GDP (third indicator for MDG7 ) is one specific topic of my paper. Do you mind if u send be what about of it?
Best regards. my mail is
God bless u.
September 5, 2012 at 8:23 am
Hi john,
I enjoyed reading your report and all the interesting comments below. It is great to see that many people are interested in that topic.
I actually write a study about energetic and economical development in the USA, India , Brazil, China and Europe with an inkluding forecast to 2050. so if you dont mind, it would be great if you would provide me your excell sheet of figure 1?!
And have you a clue if a specific type of formula exists wich already shows the correlation betwenn GDP and Energy of different countries?!
So, thanks in andvance and regards.
hivo
January 28, 2013 at 5:01 am
Hi there friends, how is all, and what you want to say
concerning this piece of writing, in my view its truly
remarkable designed for me.
February 1, 2013 at 6:21 pm
Oh my goodness! Amazing article dude! Many thanks, However I am having difficulties with your RSS.
I don’t understand the reason why I can’t subscribe to it.
Is there anyone else having identical RSS issues?
Anyone who knows the solution can you kindly respond?
Thanx!!
June 20, 2013 at 3:24 pm
Hello John, I am having a problem in linking GDP and Energy Consumption.
Thnaks
September 5, 2013 at 8:05 pm
Indeed link is broken.I will check the link
September 5, 2013 at 8:34 pm
Link repaired
September 10, 2013 at 8:48 am
hi,
I am working on energy security and per capita energy consumption of Bangladesh. Can you please help me in this regard with data or reference?
Thanks
Akhi
October 6, 2013 at 4:05 pm
The best you can do is to go to the website of the International Energy Agency (http://www.worldenergyoutlook.org/) where you can find lots of materials. Rgds, John
February 28, 2014 at 4:22 am
You actually make it seem so easy with your presentation but I find this
matter to be really something that I think I would never understand.
It seems too complex and extremely broad for me.
I am looking forward for your nrxt post, I will try to get
the hang oof it!
April 8, 2014 at 8:16 am
can i get idea about the electricity consumption which has to be increased if 1% GDP goes up for south Asian countries??
May 9, 2014 at 9:25 pm
While there is a general connection between economic output (like GDP) and energy consumption, the relationship is certainly not a constant for all economies like one finds in the laws of physics. However, for most advanced economies the connection is roughly $150 per gigajoule of primary energy, with a range (again roughly) between $100 and $230 per GJ. There are variations between economies, and for any given economy there are variations from year to year, especially as energy efficiency improves. Sometimes the statistics are not very reliable; the connection is more convincing for OECD countries where data collection is more trustworthy. So one needs to be careful in applying the relationship to any particular economy or region. Also, the above relationship is for total primary energy consumption, not just electricity, which of course is a refined form of energy that usually needs around three times the amount of primary energy to produce. I know that’s not very encouraging for finding an answer to the question posed above, but it still ought to be possible to look at GDP vs electrical energy consumption for a specific Asian economy and extrapolate from that.
May 10, 2014 at 8:42 am
OF COURSE, RELATIONSHIP BETWEEN GDP VS PER CAPITA CONSUMPTION IS LINEAR
January 28, 2015 at 6:03 pm
Great info. Lucky me I discovered your site by accident (stumbleupon).
I have book-marked it for later!
September 29, 2016 at 3:14 am
Hi John,
I am working on a paper on correlation between the Energy Consumption and the GDP. I recently attended a lecture by Dr Stephen Mayfield from Univ of California and he as well shared this chart.
He spoke of the fact that movement of needle seems to be quick-paced in third-world countries and exponentially higher in countries like India and China.
Will you have an updated sheet on the same. It’ll come in really handy for this paper that I am writing.
Happy to share more information if required.
Regards,
Shweta
October 23, 2016 at 6:57 pm
Hi Shweta, I did not update the sheet but if you wish I can share the spreadsheet on the topic. Regards, John