Energy and economic develop - Toman


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Energy and economic develop - Toman

  1. 1. SUMMARY Energy and economic Development(Toman and Jemelkova, 2003)(Toman and Jemelkova) mentioned that the current way the relationship between energy andeconomic development are studied has mainly focused on the analysis of energy developmentas a result from economic development and not otherwise.The fact is that energy development and economic development are strongly correlated butthe causality between them is still matter of discussion. there are doubts about energy´sabsolute transcendence.Development depends on many factors from which energy can be proven as one of the mostimportant. There is always a trade-off between factors for development when allocatingresources for development. By knowing the role of energy as a causal factor and its impact oneconomic development, policy makers, project developers, governments and developmentorganizations can allocate resources to energy development in order to achieve the highestreturns on economic development. (“This is not just an academic question; energydevelopment competes with other development opportunities in the allocation of scarce capitaland in the allocation of scarce opportunities for policy and institutional reform.”)There are many potential synergies between energy provision features and development, ithas been found (e.g. by (Schurr))1 that changes towards less energy-intensive productiveactivities, increase in thermal conversion efficiency, the use of more flexible energy forms andenergy provision quality (rather than “physical availability per se” (Schurr) cited by (Toman andJemelkova)) generate positive effects on economic development.Nevertheless the main approach of economics with respect energy and economicdevelopment is energy development is driven by economic development and how to makeenergy available and improved for developing countries instead of defining how “how energy-1 This paper is difficult to get, this info is cited from Toman and Jemelkova
  2. 2. using societies develop” and how energy could boost development processes. By taking thesecond approach, the dynamics of the economic system should be analyzed to define thecharacteristics of energy provision input and the system response to that so to achieveincreasing returns to investment on energy (Z. Guevara). For this (Toman and Jemelkova)pointed out that in literature much has been said about the effects of energy in production atthe micro level but less about macro-level (economy-wide level).Energy and Development: conceptual Linkages“The linkages among energy, other inputs, and economic activity clearly change significantly asan economy moves through different stages of development”. The relationships between thetwo are always dependent in the so-called energy ladder (i.e. form primary biomass lessefficient energy provision to electricity-based provision). However the advantages of a knownladder imply the adaptability an early application of more advance energy provision to earlystages in the energy ladder.Demand and supply highly depend on the cost of energy. Energy provision is costly and thefinancing could be troublesome, many inputs are required and certain characteristics ofutilization must be met. However demand shows a “subtle optimizing behavior, given theconstraints faced by the economic actors (Barnes and Floor, OTA, 2003)”2. To increase theoutcome of transaction supply-demand barrier removal is the most used approach3. ( ) ( ) ( )This simple model helps highlight the way in which energy can be used to generate increasingreturns. However this model does not consider other intermediate goods, environmentalresiduals and the impact of specialization to classify human capital. Increased benefits of baseline consumption Full cost of infra CS for increased marginal lighting lighting use2 This paper is difficult to get, this info is cited from Toman and Jemelkova3 Not increasing benefits?
  3. 3. Provision of energy servicesIf increasing returns of energy provision (IREP), it follows that increased energy provision at theexpense of reducing investment in other development factor would induce a higher economicgrowth level. IREP is different at different scales, while in large scale they require as well largeinvestment in infrastructure for applying large provision. in small scale the most importantbenefit Is the reallocation efforts in other activities and economic structures (specialization,education, production) rather than in the getting energy provision (reducing the opportunitycost of energy provision).Utilization of energy servicesIncreasing returns of energy utilization (IREU) should be pursued by improving the marginalutility/productivity of energy over a wider specific range ( )The A’s are known as factor augmentation terms by which the contribution of H and K can beenhanced by other variables. In endogenous theory this factors are increased through R&Dactivities, education and provision of public goods. If IREP and IREU, energy provision have anaugmentation effect on the factors of production in the contrary to that none effect with thesole contribution of the energy availability per se.Additionally, higher and lower quality energy can be included in the models to recognize theneed of the trade-off between these two types of energy in order to get the maximum benefitswith scarce resources.Reliability: energy provision would pursue a reliable distribution in order to avoid disruption ofprovision and the cost associated to it that could be really high (blackouts and equipment tosupport generation)Increase of factor productivity by switching the energy paradigm into other which enhancesefficient use of resources and time. For example by improving education through lighting,health by better powered equipment for indoor conditionsSynergy with other infrastructure and services, for example transportation, large scale,telecommunication and efficient markets can be supported and boosted by energy availability.Channels for Increasing ReturnsNote: limitations to separate the effect of just energy in the analysis of results to determineIRP/U effects  reallocation of household time (especially by women) from energy provision to improved education and income generation and greater specialization of economic functions; • economies of scale in more industrial-type energy provision;
  4. 4. • greater flexibility in time allocation through the day and evening; • enhanced productivity of education efforts;  with more flexible and reliable as well as plentiful energy, greater ability to use a more efficient capital stock and take advantage of new technologies;  lower transportation and communication costs: greater market size and access, more access to information (the combined result of energy and other infrastructure); and  health-related benefits: reduced smoke exposure, clean water, and refrigeration (yielding direct benefits and higher productivity).“This discussion of how increased energy availability may promote different stages ofdevelopment also underscores the need to think about more than energy development inisolation”. E,g by looking at the future of the labor services freed from energy provisionobtaining (e.g. directing them to education). However “Attempts to expand energy availabilitywill accomplish little if bottlenecks to such investments are not overcome.” for example theinstitutional transformation, that will help the effect of energy provision to flow smoothlywithout barriers and that enehance the effective use of IREP/U. Another constraint and flaw ofthis approach Is an stuborn attention to the supply side without considering deman sideeffects (e.g. rebound effects).Empirical illustration of energy-development linkagesThese linkages can be analyzed through input-output analysis in addition to the considerationof other development factors. “One could explore the questions addressed above usingmacroeconomic data on income or production, energy utilization, capital investment, humanknowledge acquisition, and other factors”. However the discussion of the processes betweenenergy provision and its consequences shows a complexity that cannot be dealt with simplemacroeconomic relationships. 1st method: make conclusion of the development process fromthe analysis of cross-section analysis (risky) 2nd method, developed a general equilibriummodel though is not suitable for the approach in this paper. 3rd method: microeconomicanalysis of consequences. (OTA) and the The World Bank (1994)4 showed experiences in whichenergy progress aimed economic progress though there is no economic value analysis ofenergy advances.Energy and industrial progressReview better (Schurr, 1982, Schurr, 1984) and for a more econometric approach (Jorgenson,1981, Jorgenson, 1984). “From the standpoint of the theme of this paper, we can likewiseconclude that patterns of energy use do seem to have some important broader productivityimplications, but more work is needed to determine their importance vis-à-vis other influencesand to understand the interactions between energy and non-energy influences”.4 This paper is difficult to get, this info is cited from Toman and Jemelkova
  5. 5. Rural Household Energy UseFor example (The World Bank) and (ESMAP) which prove that The availability of electricityappears to markedly accelerate the rate at which household income rises with years ofschooling. In addition, electricity appears to be the most important service among thoseconsidered for improving household welfare and access to two or more infrastructure servicesappears to have greater-than-proportional impacts on household income, so there appear tobe some economies of scope in infrastructure service provision.Concluding Remarks • The influence may be especially important at lower levels of development, where the overall opportunity cost of less efficient energy forms and the relative payoff from use of more efficient forms seem especially high. • econometric analysis along the lines of Jorgenson’s work also can be pursued, but with underlying models that make it possible to investigate a wider range of ways in which energy could drive economic progress • The ultimate practical importance of such work is not just in the documentation of benefits from improved energy availability: the analysis would also illuminate complicated choices among different strategies for improving energy availability • General equilibrium research on the energy-development linkage also would need to be undertaken. • The models need to be constructed in a way that reflects the structural and institutional realities of developing economies.BARNES, D. F. & FLOOR, W. M. 1996. Rural energy in developing countries: A challenge for economic development. Annual Review of Energy and the Environment, 21, 497-530.ESMAP.2002. Rural electrification and development in the Philippines: Measuring the social and economic benefits [Report]. Washington, DC: The World Bank, ENERGY SECTOR MANAGEMENT ASSISTANCE PROGRAMME.JORGENSON, D. W. 1981. Energy Prices and Productivity Growth. The Scandinavian Journal of Economics, 83, 165-179.JORGENSON, D. W. 1984. The Role of Energy in Productivity Growth. American Economic Review, 74, 26-30.OTA.2003. Fueling development: Energy technologies for developing countries. Office of Technology Assessment.SCHURR, S. H. 1982. Energy efficiency and productive efficiency: Some thoughts based on American experience. Energy Journal, 3, 3-14.SCHURR, S. H. 1984. Energy Use, Technological-Change, and Productive Efficiency - an Economic-Historical Interpretation. Annual Review of Energy, 9, 409-425.THE WORLD BANK 1994. World Development Report 1994: Infrastructure for development, New York, NY, Oxford University Press.THE WORLD BANK 1999. Poverty and social developments in Peru, 1994-1997, Washington, DC, The World Bank.TOMAN, M. A. & JEMELKOVA, B. 2003. Energy and economic development: An assessment of the state of knowledge. Energy Journal, 24, 93-112.