In an earlier article, "World Energy to 2050" I developed a scenario for the changing global energy supply picture between now and 2050. That article concluded that the total energy available to the world would drop by about 30% in that time. That single figure, however, didn't give much insight into the the changes that will occur as the world is forced to transition from an fuel-based energy economy to one based primarily on electricity.
The impact of energy changes on different parts of the world was examined a subsequent article, "World Energy and GDP to 2050". That analysis looked at changes to the energy circumstances of individual nations and regions, in the context of national population changes projected by the United Nations. Changes to national GDP driven by changing energy supplies were translated into changes to the average per-capita GDP of various countries and regions.
In that article I used the conclusions from a paper by ecological economist Robert Ayres to derive the effect of energy on GDP. While Ayres' research appears to offer an improvement over the assumptions of classical economists, it has yet to be independently validated, and was tested only against the economy of the USA. In retrospect, extending its assumptions to other countries was somewhat premature.
Accordingly, I felt that a more standard approach to modeling energy and GDP would provide a more accessible and acceptable analytical foundation. This article revisits the question of national GDP in 2050 using the more standard approach of Energy Intensity.
Caveat: As with the previous articles in this series, the analysis is intended solely to clarify future trends based purely on the situation as it now exists and the directions it shows obvious signs of taking. The model does not include any effects of the various large-scale changes in direction that have been proposed to cope with declining oil supplies or rising levels of greenhouse gases. Solar or nuclear power "Manhattan Project" style efforts, for example, are not considered. Treat this scenario as a cautionary tale: Given projected trends in energy supplies, energy efficiency and population levels, this is a probable outcome if we just continue business as usual.
National Energy Budgets
In the first article of the series I defined global supply curves for the next 43 years for each of our main energy sources - oil, gas, coal, hydro, nuclear, solar and wind power. I then used the national energy consumption figures from the BP Statistical Review of World Energy 2007 and my supply curves to estimate each country's energy mix in 2050.
Energy intensity is a measure of the amount of energy it takes to produce a dollar's worth of economic output, or conversely the amount of economic output that can be generated by one standardized unit of energy. This value varies widely between countries, depending on their level of industrialization, the mix of services and manufacturing in their economies, and the attention they pay to energy efficiency. I will use projections of countries' energy intensities to examine how energy changes may influence national economic performance over the next 4 decades.
The American Energy Information Administration maintains extensive data on national energy intensity, all of which is summarized in this spreadsheet. I used this EIA data, which gives the energy intensity of every country on Earth from 1980 to 2005, as the basis for my intensity projections.
I first plotted each country's intensity data on a graph in Excel, then used the trendline feature to project the 25 years of historical data forward for the following 45 years. This process required a certain amount of judgment. The data for many countries is very noisy, with large swings over the years, and so does not show clear trends. For some other countries their energy intensity rises or falls so steeply that simple linear projections result in absurdly high or absurdly low values. In these cases I investigated the other equations Excel provides for calculating trendlines, to find one that matched the existing data well and gave what seemed like a "reasonable" value in 2050. If no clear trend could be determined for a given country, I assumed that their energy intensity would remain unchanged from its current value. I found that I could get acceptable results for the vast majority of countries using either a linear or exponential extrapolation.
This process was unavoidably subjective. As a result I caution readers not to place too much trust in the specific values of individual nations' projected energy intensities. After all, 2050 is too far away for accurate predictions and there will inevitably be changes between now and then that will alter energy intensities either positively or negatively. Instead, consider that I made the projections as carefully as I could, and take them as indicators of trends that become more accurate when you consider groups of similar nations rather than single countries.
National Population and Per Capita GDP
As in the previous article, I used current national population and GDP figures from the CIA World Factbook. The figures for 2050 were obtained from the medium-fertility data from the United Nations Population Fund report of 2004.
Per capita GDP is derived by dividing the actual (2006) or projected (2050) national GDP by the actual or projected national populations.
The data used in this article is available in the Excel spreadsheet WEAP2_data.xls.
Comparison of Methodologies
The first thing we should do is make a high level comparison between the results obtained from the Energy Intensity model with the results from the earlier Ayres model.
Figure 1: National average per capita GDP using Energy Intensity and the Ayres models
Figure 1 shows the sorted output of the two methods, along with the l2006 actual data as a baseline. It is obvious that the two models generate somewhat different results, and that the difference increases at higher GDP values. The Ayres model approximately matches results of the the Energy Intensity approach for moderate values of per-capita GDP (from about $5,000 to $18,000. It underestimates values over $10,000, and consistently overestimates values below about $10,000.
The main reason for the divergence of the two models is that Ayres' paper proposed a constant ratio of 0.7 to 1 for the GDP change produced by a 1% change in energy. With the Energy Intensity model, the GDP produced by a unit of energy varies depending on the energy intensity of the national economy being examined. Since every country has a different energy intensity, a constant ratio like the one in the Ayres model will rarely reflect the situation in any particular country.
In addition, national energy intensities change over time. Countries with higher GDP tend to have energy intensities that improve, helping to insulate them from some of the the erosive effects of declining energy supplies. Countries at the bottom of the GDP scale tend to require more and more energy to produce the same amount of GDP as time goes by, rendering them doubly vulnerable to energy declines.
As a result of this comparison, I have concluded that national energy intensities is probably the better predictive tool for future GDP in the context of changing energy supplies. This article re-develops the global GDP picture using this approach, and will form the basis of any further analysis in this series.
Winners and Losers
The research disclosed some of the profound economic changes that will affect the nations of the world over the next four or five decades. To start getting a sense of these changes, let's first take a look at the top 20 and bottom 20 nations in terms of average per capita GDP, in 2006 and 2050. All GDP figures are in 2006 dollars.
|20 Richest Nations
|Belgium & L'bourg
Table 1: Top 20 nations in 2006 (actual) and 2050 (projected)
|20 Poorest Nations
|Other Middle East
|Other C&S America
||Other C&S America
||Other Middle East
Table 2: Bottom 20 nations in 2006 (actual) and 2050 (projected)
For the 20 nations on the bottom of the ladder in 2050, their average per capita GDP has dropped by 75% in 2050. The average income has fallen from $13.50 per day now to $3.28 per day (in today's dollars) in 2050. Because their average income is so low, well over two billion people in this group will be trying to live on less than a dollar a day, compared to one billion today.
On a national level, three factors seem to determine how well or poorly a country will fare economically. These factors are their current wealth, their population change (falling is good, rising is bad) and their changing energy intensity (falling energy per dollar is good, rising energy per dollar is bad).
Developed nations have hit the trifecta: they are rich, they tend to have stable or declining populations and they tend to have constantly improving energy intensities. The result of set of advantages is that even in the face of energy shortfalls their per-capita GDP will not fall by much. Their population and energy intensity changes both move in positive directions that help insulate them from the worst effects of energy declines. In a few cases, such as Norway and Sweden, their income levels may actually improve.
Underdeveloped nations are another story altogether. Rather than a trifecta they face a triple threat: they are poor to begin with, and have few energy options beyond fossil fuels; they have exploding populations because underdeveloped nations tend to have high Total Fertility Rates; finally, their economies tend to show worsening energy intensities over time.
This combination of factors leads to a massive increase in the global disparity of national incomes reflected in per-capita GDP.
Figure 2: Global income distribution in 2006 and 2050
The most telling number is what happens to the world's mean (average) and median income between now and 2050. The median income means that half the people in the group make more than that amount, and half make less.
Today the world's mean income is about $10,000 per person, while the median income is about $8,000. In 2050 the global mean income declines 25% to $7,500. The median income, however, plummets a full 70%, to a meager $2,500.
The end result is that the number of "poor" as I have defined them (those in countries with an average per-capita GDP less than $3,000) goes up almost five times, while the mean income within the group drops from $2,000 to $1,200.
Three Case Studies
To clarify the picture we will now take a closer look at three nations that dominate the economic and energy news these days. We will examine the specifics of their energy use and how that use will evolve until 2050. By translating their energy use into an estimate of their future GDP and then factoring in the changes in their energy intensity and population, we will derive an estimate of their per capita GDP in 2050.
United States: Hanging On
||Per Capita GDP
The energy picture of the USA is dominated by oil and natural gas, and the decline of those sources will strongly affect the nation's future.
Multiplying current US oil consumption by the expected 82% global decline in supply gives us the American consumption in 2050.
America currently consumes over 900 million tonnes of oil a year. Of that total, 300 million tonnes are produced domestically and over 600 million tonnes are imported. American domestic oil production has been in decline since 1970, at a constant rate of around 2% per year. If that rate holds for the future, the USA will be producing about 130 million tonnes per year in 2050. In order to meet the calculated figure of 169 million tonnes in 2050, America will have to import about 40 million tonnes of oil compared to 600 million today. I believe that this is a reasonable expectation because of the imminent effect of the "Net Oil Export Problem". Under that scenario it is possible for global oil exports to go to zero quite rapidly, and according to the linked paper by Jeffrey Brown is it possible that this may happen by 2040. Accordingly, projecting American imports of 40 million tonnes per year in 2050 may even be optimistic. It is possible, however, that such a level of imports could be secured by long term contracts or even military force.
Natural gas production in the USA has been relatively constant for the last 30 years, though this has required drilling ever more holes at an ever-rising cost to maintain the level of supply. Gas imports have risen to about 15% of overall consumption. These indicators point to a coming peak (in my opinion within the next decade), followed by a sharp decline for reasons outlined in my earlier article. The projected drop of 75% would be generated by a loss of imports and a decline in domestic production of 5% per year from 2020. This is in fact less than the average 6% decline rate I used in my earlier article.
Coal, Hydro and Nuclear
These sources follow the global patterns determined in the earlier article. Coal use will be up marginally world-wide in 2050, nuclear power will be down marginally, and hydro use will see a general increase of about 40% over today's values. These changes seem reasonable given the current energy development patterns in the USA.
As I said above, I assigned an arbitrary percentage of renewable power to each country based on its industrial capacity and its current level of involvement with renewable energy. That meant that I allotted the USA an additional 15% of their total energy in 2050 to account for wind and solar development.
The Changing Energy Mix
The energy mix of the USA stays quite diverse, though the growing role of coal is clear. Because of their original heavy reliance on oil and gas, the total US energy supply in 2050 declines to about 60% of its present level.
Energy Intensity and GDP
I project the United States' energy intensity to improve by about 50% from now until 2050. This means it will take the USA only half the energy to produce a dollar of GDP then as it does now. Due to the 40% decline in total energy, and the 50% rise in energy intensity, the American GDP will rise by about 15%.
Population and per capita GDP
According to the UN figures, the American population will have grown by about 30% in 2050. This offsets the rise in total GDP given above, resulting in a 10% drop in average per capita GDP. This would still leave the USA as the third wealthiest country in the world in per capita terms.
China: Rocketing Ahead
||Per Capita GDP
China's energy picture is dominated by coal.
Unlike the USA, Chinese oil production is rising, though slowly (about 1.5% per year). However, their largest oil field, Daqing, has peaked. This makes it quite probable that overall Chinese oil production will go into decline in the next decade. In addition, China became a net importer of oil in 1993 and currently imports about half their requirements. If they, like the USA, lose access to most of their imports over the next 40 years, a decline in domestic production of only 3% per year would bring them to the projected level of oil consumption. As in the case of the USA is is entirely possible that China will try to secure oil supplies outside of normal market channels, so they may end up with a bit more oil than I have projected.
Natural gas production in China has been rising rapidly in recent years, averaging 15% annual growth since 2000 as China pursues an aggressive program of industrialization. So far their production has kept pace with their usage, but a decline parallel to that of oil is inevitable over the next four decades, especially if they attempt to increase their extraction in concert with their economic growth. The derived global mathematical ratio of 25% by 2050 seems reasonable, though