Chapter 1 - World Energy and Economic Outlook
| In the IEO2007 reference case, total world consumption of marketed energy
is projected
to increase by 57 percent from 2004 to 2030. The largest projected
increase
in energy demand is for the non-OECD region. |
The IEO2007 reference case—which reflects a scenario where current laws
and policies remain unchanged throughout the projection period—projects
strong growth for worldwide energy demand from 2004 to 2030. Total world
consumption of marketed energy is projected to increase from 447 quadrillion
Btu in 2004 to 559 quadrillion Btu in 2015 and then to 702 quadrillion Btu
in 2030—a 57-percent increase over the projection period (Table 1 and Figure
8).
The largest projected increase in energy demand is for the non-OECD region.
Generally, countries outside the OECD3 have higher projected economic growth
rates and more rapid population growth than the OECD nations. In the IEO2007
reference case, energy consumption in the non-OECD region is projected
to grow at an average annual rate of 2.6 percent from 2004 through 2030.
In the OECD region, where national economies are more mature and population
growth is expected to be relatively slower, energy use is projected to
grow at the much slower average rate of 0.8 percent per year over the projection period. Energy use in the non-OECD region is projected to
surpass that in the OECD region by 2010, and to be 35 percent greater than
the non-OECD total in 2030 (Figure 9).
Much of the growth in energy demand among the non-OECD economies occurs
in non-OECD Asia, which includes China and India. Energy demand in the
non-OECD Asia region is projected to grow at an average rate of 3.2 percent
per year, more than doubling over the 2004 to 2030 period and accounting
for more than 65 percent of the increase in energy use for the non-OECD
region as a whole. In 2004, energy consumption in the countries of non-OECD
Asia made up just over 48 percent of the non-OECD total; in 2030, its share
is projected to be above 56 percent (Figure 10).
Strong growth in energy demand is also projected for the other non-OECD
regions. In the reference case projections, energy consumption increases
at average annual rates of 2.4 percent in Central and South America, 2.3
percent in the Middle East and in Africa, and 1.4 percent in non-OECD Europe
and Eurasia.
This chapter presents an overview of the IEO2007 outlook for energy consumption
by primary energy source and a look at the major assumptions that form
the basis for the projections that appear in the report. It includes a
discussion of the IEO2007 macroeconomic forecast in the context of the
key OECD and non-OECD regions.
As with any set of projections, there is significant uncertainty associated
with the IEO2007 energy projections. This chapter includes discussion of
two sets of sensitivity cases, which vary some of the assumptions behind
the IEO2007 projections: high and low macroeconomic growth cases and high
and low world oil price cases. These cases are intended to illustrate alternative
scenarios rather than to identify any bounds on uncertainty, which can
be affected by policy and technology developments, as well as price and
growth paths. Also included is a discussion of the possible effects of
future trends in energy intensity (the relationship between energy use
and economic growth) on the reference case projections.
Outlook for World Energy Consumption
The IEO2007 reference case projects increased world consumption of marketed
energy from all sources over the 2004 to 2030 period. Fossil fuels continue
to supply much of the increment in marketed energy use worldwide throughout
the projections. Liquids (primarily, oil and other petroleum products)
are expected to continue to provide the largest share of world energy consumption
over the projection period, but their share falls from 38 percent in 2004
to 34 percent in 2030 (Figure 11), largely because rising world oil prices
dampen the demand for liquids after 2015.
Worldwide liquids consumption is projected to increase from 83 million
barrels per day in 2004 to 97 million barrels per day in 2015 and 118 million
barrels per day in 2030. Liquids remain the most important fuels for transportation,
because there are few alternatives that can be expected to compete widely
with petroleum-based liquids; however, the role of oil outside the transportation
sector continues to be eroded because of high world oil prices in most
regions of the world. On a global basis, the transportation sector accounts
for 68 percent of the total projected increase in liquids use between 2004
and 2030, followed by the industrial sector, which accounts for another
27 percent of the increment in world liquids demand.
Natural gas consumption increases by 1.9 percent per year on average over
the projection period, from about 100 trillion cubic feet in 2004 to 163
trillion cubic feet in 2030. Rising world oil prices increase the demand
for natural gas, as it is used to displace the use of liquids in the industrial
and electric power sectors in many parts of the world. Industrial uses
throughout the world are projected to make up 43 percent of total natural
gas use in 2030. In addition, natural gas is both a more efficient fuel
for electric power generation and less carbon intensive than other fossil
fuels, and as a result it is an attractive energy source for the world’s
power generation. It is the world’s fastest-growing energy source for electricity
generation in the IEO2007 reference case projection, leading to an increase
in the electric power sector share of total natural gas use worldwide,
from 31 percent in 2004 to 36 percent in 2030.
Natural gas prices are likely to vary from region to region, depending
on the size of available resources and their distance from end-use markets.
In the United States, dependence on relatively expensive domestic supplies
of unconventional natural gas and imports of liquefied natural gas (LNG)
is expected to increase over the projection period, and projected prices
in the U.S. market thus tend to be at the high end of the range. In Russia
and the Middle East, where domestic resources of conventional natural gas
are both abundant and readily accessible, natural gas prices are among
the lowest in the world.
World coal consumption increased sharply from 2003 to 2004, largely because
of a 17-percent increase on a Btu basis in non-OECD Asia (China and India).
As a result, coal’s share of total world energy use climbed from 25 percent
in 2003 to 26 percent in 2004. With oil and natural gas prices expected
to continue rising, coal is an attractive fuel for nations with access to
ample coal resources—notwithstanding government policies aimed at reducing
coal use—and its share of world energy consumption is projected to increase
further, to 28 percent in 2030. In the IEO2007 reference case projection,
coal use worldwide increases by 37 quadrillion Btu from 2004 to 2015 and
by another 48 quadrillion Btu from 2015 to 2030. In particular, the United
States, China, and India are well-positioned to displace more expensive
fuels with coal, and together the three nations account for 86 percent
of the expected increase from 2004 to 2030 (Figure 12). Decreases in coal
consumption are projected only for OECD Europe and Japan, where population
growth is slow or declining, electricity demand growth is slow, and natural
gas and nuclear power are likely to continue providing significant amounts
of electricity.
Worldwide, electricity generation in 2030 is projected to total 30,364
billion kilowatthours, nearly double the 2004 total of 16,424 billion kilowatthours.
The strongest growth in net electricity consumption is projected for the
non-OECD region, averaging 3.5 percent per year in the IEO2007 reference
case (Figure 13). Robust economic growth in many of the non-OECD countries
is expected to boost demand for electricity to run newly purchased home
appliances for air conditioning, cooking, space and water heating, and
refrigeration and to support the expansion of commercial services, including
hospitals, office buildings, and shopping malls. In the OECD nations, where
infrastructures are well established and population growth is slower, electricity
generation is expected to grow by 1.3 percent per year on average over
the projection period.
Natural gas and coal are projected to provide larger shares of the total
energy used for electricity generation worldwide in 2030 than they did
in 2004. The natural gas share increases from 20 percent to 24 percent
and the coal share from 41 percent to 45 percent. The relative environmental
benefits and efficiency of natural gas make it an attractive fuel choice
for generation in many nations; however, higher oil and natural gas prices
make coal the economic choice in the United States and non-OECD Asia, where
coal resources are ample.
Electricity generation from nuclear power is projected to increase from
2,619 billion kilowatthours in 2004 to 2,972 billion kilowatthours in 2015
and 3,619 billion kilowatthours in 2030. Higher fossil fuel prices, energy
security concerns, and environmental considerations are expected to improve
the prospects for new nuclear power capacity in many parts of the world.
In the IEO2007 reference case, the world’s total installed nuclear capacity
rises from 368 gigawatts in 2004 to 481 gigawatts in 2030. Declines in
nuclear capacity are projected only for OECD Europe, where several countries
have either plans or mandates to phase out nuclear power, and some older
reactors are expected to be retired and not replaced.
Nuclear power generation in the non-OECD countries is projected to increase
by 4.0 percent per year from 2004 to 2030. The largest increase in installed
nuclear generating capacity is projected for non-OECD Asia, which accounts
for 68 percent of the total projected increase in nuclear power capacity
for the non-OECD region as a whole (Figure 14). Of the 58 gigawatts of
additional installed nuclear generating capacity projected for non-OECD
Asia between 2004 and 2030, 36 gigawatts is projected for China and 17
gigawatts for India. Russia also is expected to add substantial nuclear
generating capacity over the mid-term projection, increasing capacity by
20 gigawatts. Several OECD nations with existing nuclear programs also
increase their nuclear capacity in the IEO2007 reference case, with South
Korea adding a net 16 gigawatts, Japan 14 gigawatts, the United States
13 gigawatts, and Canada 6 gigawatts.
The use of hydroelectricity and other grid-connected renewable energy sources
is expected to continue to expand over the projection period, increasing
by 1.9 percent per year, at the same rate of growth as natural gas consumption
in the reference case. Higher fossil fuel prices, particularly for natural
gas in the electric power sector, along with government policies and programs
to support renewable energy, allow renewable fuels to compete economically.
The renewable share of total world energy use increases from 7 percent
in 2004 to 8 percent in 2030.
Much of the growth in renewable energy consumption is projected to come
from mid- to large-scale hydroelectric facilities in non-OECD Asia and
Central and South America, where several countries have hydropower facilities
either planned or under construction. In non-OECD Asia, India has about
12,020 megawatts of hydroelectric capacity under construction, and letters
of award have been issued for the 1,000-megawatt Tehri Pass project (scheduled
for completion by 2012) and the 1,200-megawatt Kotlibhel-IA project [1].
China also has a number of large-scale hydroelectric projects under construction,
including the 18,200-megawatt Three Gorges Dam project (expected to be
fully operational by 2009) and the 12,600-megawatt Xiluodu project on the
Jisha River (scheduled for completion in 2020, as part of a 14-facility
hydropower development plan) [2]. In the non-OECD region of Central and
South America, Brazil has plans for a number of new hydropower projects
that the country hopes to complete to keep up with electricity demand after
2010, including the 3,150-megawatt Santo Antonio and 3,300-megawatt Jirau
projects on the Madeira River [3].
Outside of Canada and Turkey, hydropower capacity is not expected to grow
substantially in the OECD nations, because most hydroelectric resources
in the region already have been developed or lie far from population centers.
Instead, most of the increase in OECD renewable energy consumption is expected
to be in the form of nonhydroelectric resources, such as wind, solar, geothermal,
municipal solid waste, and biomass.
World Economic Outlook
Economic growth is among the most important factors to be considered in
projecting changes in the world’s energy consumption. In the IEO2007 projections,
assumptions about regional economic growth—measured in terms of GDP in
real 2000 U.S. dollars at purchasing power parity rates—underlie the projections
of regional energy demand.
The macroeconomic framework employed for the economic growth projections
reflects the interaction of many important economic variables and underlying
relationships, both in the short term and in the medium to long term. In
the short term, households and businesses make spending decisions (the
demand side) based on current financial conditions—for example, interest
rates or the price of goods to be purchased.
In the long term, it is the ability to produce goods and services (the
supply side) that ultimately determines the growth potential for any country’s
economy. Growth potential is influenced by population growth, labor force
participation rates, productivity growth, and capital accumulation. In
addition, for the developing economies, progress in building human and
physical capital infrastructures, establishing credible regulatory mechanisms
to govern markets, and ensuring political stability play more important
roles in determining their medium- to long-term growth potential.
Over the 2004 to 2030 period, world real GDP growth is projected to average
4.1 percent annually in the reference case (Table 2 and Figure 15). When
compared with the IEO2006 reference case projection, the world economic
growth projection in the IEO2007 reference case is higher primarily because
of more optimistic assumptions about the growth prospects of non-OECD countries,
particularly, China and India.
The projected annual growth in world GDP over the next 25 years is higher
than the rate recorded over the past 25 years, mainly because the countries
that are expected to see more rapid growth make up an increasing share
of world GDP. A number of the developing non-OECD nations have undertaken
significant reforms over the past several years. Improved macroeconomic
policies, trade liberalization, more flexible exchange rate regimes, and
lower fiscal deficits have lowered their national inflation rates, reduced
uncertainty, and improved their overall investment climates. More microeconomic
structural reforms, such as privatization and regulatory reform, have also
played key roles. In general, such reforms have resulted in growth rates
that are above historical trends in many of the emerging economies over
the past 5 to 10 years.
OECD Economies
In the United States, compared with the second half of the 1990s, GDP growth
rates were lower from 2000 to 2002 but rebounded to 2.5 percent in 2003,
3.9 percent in 2004, and 3.2 percent in 2005. GDP growth in 2006 is estimated
at 3.3 percent. A downturn in the housing sector has been the major source
of weakening over the past year, and reductions in manufacturing output
indicate that the slowdown has spread throughout the economy. At the same
time, however, corporate finances have been healthy, and real nonresidential
investment has remained robust. The depreciation of the U.S. dollar against
other major currencies has also boosted demand for domestic output.
In the reference case projections, the U.S. economy stabilizes at its long-term
growth path by 2010. GDP is projected to grow by an average of 2.9 percent
per year from 2004 to 2030—slower than the 3.1-percent annual average over
the 1980 to 2004 period—because of the retirement of the baby boom generation
and the resultant slowing of labor force growth.
Canada’s labor force growth is projected to slow in the medium to long
term, however, as baby boomers retire. The country’s overall economic growth
is projected to fall from the current average of 2.9 percent per year to
averages of 2.6 percent per year from 2007 to 2015 and 2.1 percent per
year from 2015 to 2030.
In Mexico, real GDP is projected to grow by an average of 3.6 percent per
year from 2004 to 2030. Mexico’s strong performance in the past 5 years
has been the result of favorable developments in several areas. First,
lower inflation has allowed the central bank to lower key policy rates,
which has encouraged domestic demand through greater investment. Second,
high oil prices continue to spur government spending, including investment
in infrastructure projects. Third, remittances from Mexicans working abroad
continue to grow rapidly, boosting domestic consumption. Finally, Mexico’s
industrial production follows, and is heavily influenced by, U.S. GDP growth
and outsourcing of employment. Global financial markets remain friendly
to Mexico in terms of the availability and cost of credit and the volume
of foreign direct investment. In general, strong trade ties with the United
States are expected to help cushion Mexico from deeper economic troubles.
By the same token, Mexico’s future growth is also more dependent on U.S.
growth.
Over the long term, OECD Europe’s GDP is projected to grow by 2.3 percent
per year from 2004 to 2030 in the reference case, in line with what OECD
considers to be potential output growth in the region’s economies [4].
According to the International Monetary Fund, structural impediments to
economic growth still remain in many countries of OECD Europe, related
to the region’s labor markets, product markets, and costly social welfare
systems. Reforms to improve the competitiveness of European labor and product
markets could yield significant dividends in terms of increases in regional
output [5].
After a decade of stagnation and several false starts, economic growth
in Japan has been more robust since 2003. While low by the standards of
pre-1990 Japan, the recent growth in GDP exceeds the potential (no more
than 2 percent real growth) for a country with a declining labor force
and population and an industrial technology that has already caught up
with, and in some cases surpassed, the best elsewhere in the world [6].
With the continued decline in its labor force over the projection period,
Japan’s annual GDP growth is projected to slow, averaging 1.4 percent from
2007 to 2015 and 0.7 percent from 2015 to 2030. In the short term, Japan’s
highly skilled labor force and strong work ethic are expected to support
the projected average growth rate of 1.4 percent per year, as more flexible
labor policies allowing greater mobility for workers are adopted.
Economic growth in the rest of OECD Asia is expected to be somewhat stronger
than in Japan. In the medium to long term, South Korea’s growth is projected
to taper off and be sustained by productivity growth as labor force growth
slows. Prospects in both Australia and New Zealand are healthy, given their
consistent track records of fiscal prudence and structural reforms aimed
at maintaining competitive product markets and flexible labor markets.
Non-OECD Economies
Over the 2004 to 2030 period, economic growth in non-OECD Europe and Eurasia
as a whole is projected to average 4.3 percent annually. For the past several
years, the non-OECD nations of Europe and Eurasia have largely been sheltered
from global economic uncertainties, recording strong economic growth in
each year since 2000, primarily as a result of robust domestic demand,
the growth bonus associated with ascension of some countries (including
Estonia, Latvia, Lithuania, and Slovenia) to the European Union, and the
impacts of rising oil prices on the oil-exporting nations of the region
(including Russia, Kazakhstan, Azerbaijan, and Turkmenistan). High world
oil prices have stimulated investment outlays, especially in the energy
sector of the Caspian region; however, given the volatility of energy market
prices, it is unlikely that the region’s economies will be able to sustain
the growth rates recently achieved until diversification from energy becomes
more broadly based. The long-term growth prospects for the former Soviet
Republic economies of Eurasia hinge on their success in economic diversification,
as well as further improvements in domestic product and financial markets.
Much of the growth in world economic activity between 2004 and 2030 is
expected to occur among the nations of non-OECD Asia, where regional GDP
growth is projected to average 5.8 percent per year. China, non-OECD Asia’s
largest economy, is expected to continue playing a major role on both the
supply and demand sides of the global economy. IEO2007 projects an average
annual growth rate of approximately 6.5 percent for China’s economy over
the 2004 to 2030 period. The country’s economic growth is expected to be
the highest in the world.
Structural issues that have implications for medium- to long-term growth
in China include the pace of reform affecting inefficient state-owned companies
and a banking system that is carrying a significant amount of nonperforming
loans. The development of domestic capital markets to maintain macroeconomic
stability and ensure that China’s large savings are used efficiently supports
the medium-term growth projection.
India is another Asian country with a rapidly emerging economy. The medium-term
prospects for India’s economy are positive, as it continues to privatize
state enterprises and increasingly adopts free market policies. Average
annual GDP growth in India over the 2004 to 2030 projection period is 5.7
percent. Accelerating structural reforms—including ending regulatory impediments
to the consolidation of labor-intensive industries, labor market and bankruptcy
reforms, and agricultural and trade liberalization—remains essential to
stimulate potential growth and reduce poverty in the medium to long term.
With its vast and relatively cheap labor force, India is well positioned
to reap the benefits of globalization.
In the rest of non-OECD Asia, economic activity has remained robust, with
exports increasing in response to a rebound in global demand for high-technology
products and stronger import demand from China [7]. Over the medium term,
national economic growth rates in the region are expected to be roughly
constant over the 2004 to 2015 period, before tapering off gradually to
an average of 4.3 percent per year from 2015 to 2030 as labor force growth
rates decline and economies mature.
Although the nations of Central and South America registered a combined
6-percent increase in GDP in 2004 (their best performance in 20 years),
the region’s growth prospects are hampered by a weak international credit
environment, as well as domestic economic and/or political problems in
a number of countries. Growth in the region remains heavily dependent on
the volume of foreign capital flows.
Rising oil production and prices have helped boost economic growth in the
oil-exporting countries of the Middle East. Many of the oil-importing countries
in the region have also benefited from spillover effects on trade, tourism,
and financial flows from the region’s oil exporters. Real GDP growth in
the Middle East region in 2006 is estimated at 5 percent. Medium-term prospects
for the region remain favorable, given that a significant portion of the
recent increase in oil revenues is expected to be permanent.
Economic growth in Africa has maintained a healthy pace of more than 4
percent per year since 2000, driven by increased earnings from hydrocarbon
exports, strong global demand and favorable international prices for some
other export commodities, vigorous domestic demand, and significant foreign
direct investment and foreign aid [8]. Over the 2004 to 2030 period, Africa’s
combined economy is projected to grow at an annual rate of 4.9 percent.
This projection, optimistic by historical standards, is supported by the
region’s strong economic activity over the past 5 years, which has resulted
from expansion of primary exports and robust domestic demand in many of
Africa’s national economies. Nevertheless, both economic and political
factors—such as low savings and investment rates, lack of strong economic
and political institutions, limited quantity and quality of infrastructure
and human capital, negative perceptions on the part of international investors,
protracted civil unrest and political disturbances, and especially the
impact of HIV/AIDS on population growth—present formidable obstacles to
growth in a number of African countries.
Alternative Macroeconomic Growth Cases
Expectations for the future rates of economic growth are a major source
of uncertainty in the IEO2007 projections. To illustrate the uncertainties
associated with economic growth trends, IEO2007 includes a high macroeconomic
growth case and a low macroeconomic growth case in addition to the reference
case. The two alternative growth cases use different assumptions about
future economic growth paths, while maintaining the same relationship between
changes in GDP and changes in energy consumption that is used in the reference
case.
In the high economic growth case, 0.5 percentage point is added to the
growth rate assumed for each region or country in the reference case. In
the low economic growth case, 0.5 percentage point is subtracted from the
reference case growth rate. The IEO2007 reference case shows total world
energy consumption reaching 702 quadrillion Btu in 2030—298 quadrillion
Btu in the OECD countries and 404 quadrillion Btu in the non-OECD countries.
In the high economic growth case, total world energy use in 2030 is projected
at 773 quadrillion Btu, 72 quadrillion Btu (or about 36 million barrels
oil equivalent per day) higher than in the reference case. In the low economic
growth case, world energy consumption in 2030 is projected to be 68 quadrillion
Btu (34 million barrels oil equivalent per day) lower than in the reference
case. Thus, there is a range of 140 quadrillion Btu—about one-fifth of
the total consumption projected for 2030 in the reference case—between
the projections for 2030 in the high and low macroeconomic growth cases
(Figure 16).
Alternative World Oil Price Cases
The impacts of world oil prices on energy demand and its composition are
another large source of uncertainty in the IEO2007 projections. To illustrate
the impacts, IEO2007 includes two alternative price cases. In the IEO2007
high world oil price case, world oil prices climb from $43 per barrel (2005
real dollars) in 2004 to $100 per barrel in 2030. In the low price case,
oil prices moderate fairly quickly to $49 per barrel in 2010 and then further
to $34 per barrel in 2015 and remain at that level through 2030 (Figure
17). Despite the considerable difference between oil prices in the low
and high price cases in 2030 (around $70 per barrel), the projections for
total world energy consumption in the reference and alternative oil price
cases do not vary substantially.
There is, however, a larger impact on the energy mix. In 2030, total world
energy use in the high and low world oil price cases is separated by only
38 quadrillion Btu (Figure 18). In comparison, the difference between the
low and high macroeconomic growth case projections is 140 quadrillion Btu.
The potential effects of higher and lower oil prices on world GDP can also
be seen in the low and high world oil price cases (see discussion on "World GDP: Potential Impacts of High and Low Oil Prices").
In the long run, the projections for economic growth are not affected substantially
by the oil price assumptions. The most significant variations are GDP increases
of around 1 percent in the low price case relative to the reference case
in 2015 for some regions outside the Middle East and, in the oil-exporting
Middle East region only, a 1-percent drop in GDP in 2015. In 2030, however,
there are virtually no differences among GDP projections for any region
in the different cases, because the world’s economies have had sufficient
time to adjust to the lower or higher oil prices.
The most significant impacts of the higher and lower world oil price assumptions
are on the mix of energy fuels consumed in each region, particularly liquids
and coal (Figure 19). In the high price case, total world energy use in
2030 is about 20 quadrillion Btu lower, and world liquids consumption is
29 quadrillion Btu lower, than projected in the reference case. Natural
gas consumption is also lower in 2030, by a more modest 5 quadrillion Btu,
whereas the projections for coal, nuclear power, and renewable energy consumption
are higher than those in the reference case.
In the low world oil price case, lower prices both allow consumers to increase
their use of liquids for transportation purposes and discourage the migration
away from liquids to other energy sources in sectors where fuel substitution
is fairly easy to achieve (as opposed to the transportation sector, where
there are still relatively few alternatives to petroleum-based fuels).
Total liquids consumption in 2030 is 33 quadrillion Btu higher in the low
price case than projected in the reference case, reflecting increased demand
in all the end-use sectors. The transportation sector shows the largest
increase in liquids consumption in 2030 in the low world oil price relative
to the reference case, at 18 quadrillion Btu (Figure 20).
In the IEO2007 reference case, world oil prices rise steadily after 2015, to $59 per barrel in 2030. As a result, liquids consumption is curtailed in countries that have other fuel options available—especially in the electric power sector, where coal and other fuels can be substi-tuted. In the reference case, worldwide use of liquids for electricity generation grows by only 1.0 quadrillion Btu from 2004 to 2030. In the low world oil price case, the corresponding increase is 4.0 quadrillion Btu, as coun-tries in both the OECD and non-OECD regions retain their oil-fired generating capacity in the lower price environment.
Trends in Energy Intensity
Another major source of uncertainty in the projections is the changing relationship of energy use to GDP—or energy intensity—over time. Economic growth and energy demand are linked, but the strength of that link varies among regions. In the OECD nations, history shows the link to be a relatively weak one, with energy demand lagging behind economic growth (Figure 21). In the non-OECD region, except for non-OECD Europe and Eurasia, economic growth has been closely correlated with energy demand growth for much of the past three decades (Figure 22). Only recently, within the past decade or so, has economic growth begun to outpace the growth in energy use among the world’s emerging economies.
Historically, non-OECD Europe and Eurasia have had higher levels of energy intensity than either theOECDor other non-OECD economies. In non-OECD Europe and Eurasia, energy consumption generally grew more rapidly than GDP until 1990 (Figure 23), when the collapse of the Soviet Union created a situation in which both income and energy use declined but GDP fell more quickly. As a result, energy intensity increased. Only since the late 1990s, after the 1997 devaluation of the Russian ruble, did the Russian and Ukrainian industrial sectors begin to strengthen. Since then, economic growth in non-OECD Europe and Eurasia has begun to outpace growth in energy use significantly, and energy intensity has begun a precipitous decline. The region’s energy intensity is projected to continue declining in the IEO2007 reference case, while still remaining higher than in any other part of the world (Figure 24).
The stage of economic development and the standard of living of individuals in a given region strongly influence the link between economic growth and energy demand. Advanced economies with high living standards have relatively high levels of energy use per capita, but they also tend to be economies where per capita energy use is stable or changes very slowly. In the OECD economies, there is a high penetration rate of modern appliances and motorized personal transportation equipment. To the extent that spending is directed to energy-consuming goods, it involves more often than not pur-chases of new equipment to replace old capital stock. The new stock is often more efficient than the equipment it replaces, resulting in a weaker link between income and energy demand.
The pace of improvement in energy intensity may change, given different assumptions of macroeconomic growth over time. Faster growth in income generally leads to a faster rate of improvement (decline) in energy intensity. In the IEO2007 high macroeconomic growth case, worldwide energy intensity is projected to decline by 2.3 percent per year on average from 2004 to 2030, as compared with 2.2 percent in the reference case. On the other hand, slower economic growth generally leads to a slower rate of improvement in energy intensity. In the low macroeconomic growth case, world energy inten-sity is projected to decline by an average of only 2.1 percent per year over the projection period.
Notes and Sources
References
Chapter 1 Tables 
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