Economic Growth, Energy and Climate Change

Abstract

Fossil fuels account for more than three-quarters of global energy consumption with another 10 % or more coming from renewable and waste sources that emit carbon dioxide. Energy consumption is projected to grow by some 50 % in the next quarter century, with the majority of this coming from sources that emit CO2. While renewable sources of energy will play a greater role in the future, economic development will necessarily continue to rely on abundant and cheap fossil fuels, particularly coal and natural gas. In an era where climate change dominates the energy agenda, the prospects for expanding the use of CO2-emitting sources of energy (oil, coal, natural gas) and relying more on hydroelectric, solar, wind, geothermal, biomass and nuclear sources are examined. Economic policies in many jurisdictions use a combination of mandates and subsidies to reduce overall reliance on fossil fuels and/or promote generation of electricity from renewable sources. Lessons from biofuel programs, and an economic analysis of feed-in tariffs for electricity, indicate that they are not only expensive but generally ineffective. Despite the setback caused by the near meltdown of the Fukushima nuclear power plant, it is argued that nuclear energy is a safe alternative to many other forms of energy, and that, given the rebound effect associated with conservation and physical limits to the use of renewable energy, a natural gas-to-nuclear scenario might not be unrealistic future course of action.