chapter  4
29 Pages

Energy and the Economy: Effects of Changes in Energy Conditions

ByChristopher J. Pleatsikas, Edward A. Hudson, Richard Goettle

The energy-economy interactions that underlie the changes are complex, but several important mechanisms can be identified. The lower costs for renewable energy supplies mean that the same amount of delivered energy services can be produced for a smaller commitment of capital, labor and other economic resources. As economic growth is increased under conditions of lower renewables costs, so too is the economy's use of energy. Cost reductions for renewable energy technologies enable economic resources to be released for other, more productive uses. Higher costs for nonrenewable energy supplies have a large, adverse impact on the growth and performance of the US economy. The decline in energy growth is much greater than the reduction in the growth of the economy, indicating a continuing improvement in the overall economic efficiency of energy use as compared to the Reference Case. Energy production absorbs more of the scarce capital, labor, materials and other resources available in the economy.