II. OECD & G-7 OECD Development Trends

G-7 Energy Intensity

• Between 1980 and 2001, the largest overall increases occurred in electricity demand and GDP, which grew 69% and 73%. These reflect average annual growth rates of 2.5% and 2.6%, respectively. By comparison, energy consumption increased just 27% overall (1.2% per year), and carbon dioxide emissions grew even more slowly, rising 0.7% per year.
• This strongly suggests that the OECD has entered a phase of development where GDP growth is no longer contingent upon energy intensive heavy industries.
• Only population continued to grow during the early 80s as the oil price shocks and economic downturn slowed energy consumption, carbon dioxide emissions, economic growth, and electricity consumption. GDP and electricity consumption remained more or less constant while energy consumption and carbon dioxide emissions declined slightly.
• Once the price of oil declined in the mid-1980s, energy consumption and carbon dioxide emissions steadily increased, with energy consumption rising slightly faster than carbon dioxide emissions.
• Though it grew consistently over the period, the OECD’s population only registered an overall increase of 16% (0.7% per year).

G-7 Economic Output

• Between 1980 and 2001, OECD real GDP grew by 2.6% per year, rising from $13.4 trillion to $23.1 trillion. The economic output of the G-7 countries grew slightly faster (2.7% per year).
• Because the G-7 countries experienced little population growth (just 0.6% per year), their economic expansion led to considerable growth in real per capita incomes (1.7% per year) during the 1980s and 1990s. Canada’s real GDP per capita grew the slowest (1.5% per year) between 1980 and 2001, but still increased by more than 36% overall.
• The growth of the G-7 economies slowed only during the recessions of the early 1980s, early 1990s, and between 2000 and 2001.
• U.S. real per capita GDP grew the third most rapidly (2% per year) within the G-7 between 1980 and 2001. Only Japan and the United Kingdom grew faster, both experiencing average annual increases of 2.2%.
• Between 1980 and 2001, the annual growth rates in real per capita GDP for France, Germany, and Italy were 1.7%, 1.8%, and 1.8%, respectively.

Commercial Services Share of GDP in the G-7

• Commercial services’ (defined here to include financial intermediation, real estate, renting, and business activities) share of G-7 economic output grew between 1980 and 2000. On average, commercial services accounted for 26% of a G-7-member’s real GDP in 2000, up from 21% in 1980.
• The industrial sector consumes considerably more energy per unit of output than the services sector used. This indicates that, other things being equal, as the economy becomes more service-oriented, energy intensity should decline since an increasingly large share of economic output is produced with comparatively little energy.^[11]
• Also reducing G-7 energy intensity during this period was the shift of many heavy industrial processes to the developing world. In part, this reflects the mobile nature of capital in a global economy.

Energy Consumption by Fuel Type in the G-7

• The G-7’s total energy consumption grew an average of 1% a year between 1980 and 2001, rising from 142 quads to 174 quads. Of this increase (32 quads), nuclear, hydroelectric, and other renewables accounted for 15 quads. G-7 fossil fuel consumption grew almost 18 quads during this period, of which natural gas accounted for 11 quads, coal for 4 quads, and oil for 3 quads.
• While the G-7 used more of each type of fuel in 2001 than it did in 1980, the share of fossil fuels in overall energy consumption declined from 88% to 82%.
• The G-7’s fossil fuel mix also became less carbon intensive. Both oil's and coal's shares of total energy consumption declined, from 48% to 40%, and from 20% to 19%, respectively. Natural gas increased its share from 21% to 23%.
• The decline in oil’s share of G-7 energy consumption began in the 1970s in response to large oil price spikes. Despite the oil price collapse of 1985/1986, oil’s share did not recover to 1980 levels.
• During the same period, nuclear energy almost tripled its share of G-7 energy consumption, from 4% to 11%. Since the early 1990s, however, nuclear energy’s share has remained almost constant.
• Between 1980 and 2001, hydroelectric power’s share declined from 6% to 5%. During the same period, non-hydroelectric renewables increased their share from 0.2% to 1%.

G-7 Energy Consumption

• The United States is by far the largest consumer of energy in the G-7. Between 1980 and 2001, U.S. energy consumption grew from 79 quads to 97 quads. Among the rest of the G-7, only Japan’s energy consumption was higher than 20 quads in 2001.
• Between 1980 and 2001, energy consumption per capita fluctuated throughout the G-7. In response to higher oil prices, it declined in the early 1980s. Following the oil price collapse in 1985 and 1986, energy consumption per capita rose until the global economic downturn in 2000 and 2001. In 2001, G-7 per capita energy consumption was 248 million Btu, up 16% from 1983.
• In 2001, the United States and Canada consumed 342 million Btu’s per person and 403 million Btu’s per person, respectively. No other G-7 member’s per capita consumption exceeded 200 million Btu’s in that year.
• Unlike in Japan or in Western Europe (except for North Sea oil), Canada and the United States contain considerable natural resource deposits, which have led to the development of sizable extractive and processing industries. These industries are heavily energy intensive.
• Japan’s per capita energy consumption increased an average of 1.7% per year between 1980 and 1996. From 1997 to 2001, however, its annual growth rate was -0.1%, which likely reflects the country’s economic downturn. Japan’s low overall per capita consumption rate is indicative of Japan’s comparatively smaller share of energy intensive industries, as well as different standards of consumption in the residential and transportation sectors. ^[12]

G-7 Energy Intensity

• Between 1980 and 2001, the G-7’s energy intensity declined 28% overall -- an average of 1.6% per year -- from 13,039 Btu per $1995-PPP to 9,254 Btu per $1995-PPP. The most rapid decline took place prior to the oil price collapse of 1985 – 1986. Between 1980 and 1985, G-7 energy intensity fell an average of 2.7% per year; from 1986 to 2001, it fell 1.2% per year.
• Structural shifts in the G-7 countries’ economies towards activities that are relatively less energy intensive accounted for much of the reduction in energy intensity. This is especially true after the oil price collapse of 1985 – 1986 reduced some of the need to improve efficiency. The changes in economic structure included faster relative growth in the service sector as well as changes in countries’ manufacturing mixes. For example, manufacturing information technology equipment, an increasingly important activity, is much less energy-intensive than producing raw materials such as steel.^[13]
• Especially since the 1990s, a number of crosscutting factors have moderated declines in energy intensity within G-7. These factors include increased residential energy intensity (in part a result of larger homes, space heating, and appliance penetration), and growing consumption in the transportation sector (a result of increased travel and slowing fuel intensity declines during the 1990s).^[14]
• The presence of large extractive and natural resource-processing industries help to explain why the United States' and Canada’s energy intensities are significantly higher than they are elsewhere in the G-7. Such industries consume more energy per unit of economic output than do most other types of activities.

G-7 Carbon Dioxide Emissions Overview

• The G-7’s carbon dioxide emissions grew relatively slowly – just 0.5% per year -- between 1980 and 2001, rising from 8,722 MMT to 9,697 MMT. However, emissions growth accelerated during the 1990s, rising to around 1% per year. This rate increase reflects a number of factors, including: slowing energy savings in most sectors, less switching from carbon intensive fuels for electricity production (in some countries), rising household emissions, and dramatic increases in emissions from the transportation sector. ^[15]
• Most of the absolute growth in G-7 emissions occurred in the United States. The U.S. accounted for 59% of all G-7 carbon dioxide emissions in 2001. Between 1980 and 2001, U.S. carbon dioxide emissions increased an average of 0.9% per year, rising from 4,742 MMT to 5,739 MMT.
• While U.S. carbon dioxide emissions grew the most in absolute terms between 1980 and 2001, other nations’ carbon dioxide emissions increased at similar rates. Italy, Japan, and Canada all had similar growth rates.
• Between 1980 and 2001, annual per capita carbon dioxide emissions in the G-7 fell from 14.2 metric tons to 13.8 metric tons. This decline echoes the experience of the United States, where per capita emissions decreased from 20.8 metric tons to 20.2 metric tons.
• France is the smallest carbon emitter in the G-7, both in overall and per capita terms. To a great extent, this reflects France’s status as the state with the largest share of nuclear energy in its fuel mix. This makes France far less dependent on carbon-emitting fossil fuel combustion for its electricity generation needs. Between 1980 and 2001, France’s carbon dioxide emissions actually declined an average of 1.1% per year.

G-7 Carbon Dioxide Intensity

• Across the G-7, countries reduced their carbon dioxide intensities between 1980 and 2001. Overall, the G-7’s carbon dioxide intensity fell 36% during the period -- an average of 2.1% per year -- from 0.8 metric tons per thousand $1995-PPP to 0.51 metric tons per thousand $1995-PPP.
• As with energy intensity, the most rapid declines occurred prior to the oil price declines of the mid-1980s. Some analysts attribute this to the slower reductions in energy savings during the late 1980s and 1990s. ^[16] It also likely reflects the slowdown in the shift away from coal and oil in the region’s fuel mix. This trend can be seen in the fuel mix charts above.
• G-7 countries have moved away from energy intensive industries while increasing the share of non-fossil energy in their fuel mixes. If the G-7 had not reduced its carbon dioxide intensity from 1980 levels, ceteris paribus, carbon dioxide emissions in 2001 would have been almost twice the actual figure of 9,697 MMT.
• As previously noted, carbon dioxide intensity levels largely reflect the sectoral composition, resource endowments, and fuel mixes of individual countries. For example, France with its large nuclear sector had a lower carbon intensity than natural resource intensive Canada.
• Setting Germany aside, the countries with the largest overall declines in carbon dioxide intensity between 1980 and 2001 were France (49%) and the United Kingdom (45%). These two countries made the largest relative shift away from carbon intensive coal and oil consumption.

G-7 Electricity Consumption

• Electricity consumption grew rapidly in the G-7 between 1980 and 2001 -- 2.4% annually -- from 4,019 bkwh to 6,628 bkwh. Most of this growth in power consumption took place in the United States, by far the G-7’s largest electricity consumer throughout this period. The increase in U.S. electricity consumption accounted for 58% of all G-7 growth.
• Between 1980 and 2001, the U.S.’ share of G-7 electricity consumption rose from 52% to 54%. During this time, U.S. power demand grew from 2,094 bkwh to 3,602 bkwh, a 2.6% average annual rate of increase.
• Electricity demand in other G-7 countries grew at a similar pace to that in the United States. France’s and Japan’s electricity consumption grew an average of 2.7% and 3.1% per year, while Canada’s and Italy’s grew 2.3% and 2.6%, respectively. The United Kingdom grew slightly more slowly, increasing 1.6% per year.
• According to International Energy Agency data, the most rapid growth in G-7 electricity consumption took place in the commercial and residential sectors. While industrial demand for electricity grew as well, it did so at a comparatively slow pace.^[17]Commercial sector power consumption growth was driven by demand for electric cooling, lighting, and ventilation systems, as well as the new demand for office equipment (e.g. computers, routers, printers).^[18] Recent estimates suggest that computers and other information technology equipment account for perhaps 2% to 4% of all electricity consumption in the U.S.^[19]

Per Capita Electricity Demand in the G-7

• Between 1980 and 2001, G-7 per capita electricity consumption increased 44% overall -- an average of 1.8% per year -- from 6,550 kwh to 9,449 kwh.
• The United States remains the second largest per capita electricity consumer in the G-7 behind Canada. U.S. per capita electricity consumption grew at a comparatively modest pace between 1980 and 2001 -- an average of 1.5% per year -- from 9,197 kwh to 12,685 kwh.
• Canada is the G-7’s largest per capita electricity consumer. To a considerable extent, this is because of Canada’s large, hydro-powered aluminum-manufacturing sector. Between 1980 and 2001, Canadian per capita power consumption increased an average of 1.0% per year, from 13,100 kwh to 16,200 kwh.
• Between 1980 and 2001, per capita power electricity consumption in France, Italy, and Japan grew at annual rates of 2.3%, 2.4%, and 2.7%, respectively. Despite this relatively rapid growth, these three countries consumed far less electricity per person than in the United States or Canada throughout the period.

G-7 Electricity Intensity

• Relative levels for G-7 electricity intensity between 1980 and 2001 closely resemble those for energy and carbon dioxide intensity. Canada had the highest intensity, followed by the United States and, another notch down, the rest of the G-7 countries.
• Electricity intensities declined little throughout the period for most countries in the G-7. In part, this reflects growing electricity use in the expanding service sector offsetting efficiency gains in home and office appliances, machines, etc.
• Canada’s high electricity intensity reflects its large aluminum processing industry, which requires very large quantities of electricity. This industry is powered mainly by hydroelectricity.
• While many home appliances are now much more efficient than in the past, this has not necessarily translated to substantially reduced electricity intensities overall. This is largely due to increases in both appliance ownership and usage.