Introduction

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.

Methodology

National Energy Budgets

Energy Intensity

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.

Raw Data

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

National Results

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.

The Richest

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

United States: Hanging On

Oil

Gas

Coal, Hydro and Nuclear

Renewables

The Changing Energy Mix

 

Energy Intensity and GDP

Population and per capita GDP

China: Rocketing Ahead

Oil

Gas