Main driving forces for the development of energy consumption

In this report, we identify the main driving forces for the development of energy consumption. We present figures for the development of energy consumption in Norway from 1980 and up till now, both in total and for individual sectors of the economy. Consumption of energy per unit of GDP (the energy intensity) has gradually fallen over the last 30 years. However, the growth in GDP has been larger than the decline in the energy intensity of the economy, leading to an increase in energy consumption. In the period 1980 – 2012, the average annual growth rate in domestic energy consumption has been 0.9 percent.

By the means of a computable general equilibrium model for the Norwegian economy we analyze the development of energy consumption towards 2050, under different assumptions regarding population growth and productivity. The starting point of the analysis is the reference scenario from Perspektivmeldingen (2013). We simulate two shifts: one where we assume larger population growth than in the reference scenario (Population), and another where we assume larger growth in the productivity than in the reference scenario (Technology). Both of these scenarios lead to larger energy consumption than the reference scenario, both regarding stationary energy consumption and energy used for transportation. The two shift scenarios lead to large differences in the distribution of energy consumption across sectors and between stationary energy consumption and energy used for transportation.

We find that Technology gives the largest stationary energy consumption, while Population leads to the largest consumption of energy used for transportation. The difference in stationary energy consumption can partly be explained by the substantially increased wages in Technology, whereas the wages have fallen in Population. Higher wages lead to higher prices on domestically produced labor-intensive products. In Technology, the households have substituted dwellings and residential energy demand for labor intensive products. The energy consumption in Population is growing mainly because the expansion in employment also leads to expansion of energy consumption in production sectors. The wage rate is reduced due to the expansion of the labor supply. This generates substitution towards labor intensive products, from stationary residential energy consumption.

As Population has a larger labor force than in Technology, we have assumed that the public expenditures are larger in Population than in Technology. This contributes to a larger use of stationary energy in the service industries (including public services) in Population compared with the corresponding energy use in Technology.