The underestimated contribution of energy to economic growth

Robert U. Ayres, Jeroen C.J.M. van den Bergh, Dietmar Lindenberger, Benjamin Warr

Research output: Contribution to journalArticleResearchpeer-review

78 Citations (Scopus)

Abstract

Standard economic theory regards capital and labour as the main factors of production that satisfy the "cost-share theorem". This paper argues that when a third factor, namely energy, is added physical constraints on substitution among the factors arise. We show that energy is a much more important factor of production than its small cost share may indicate. This implies that continued economic growth along the historical trend cannot safely be assumed, notably in view of considerably higher energy prices in the future due to peak oil and climate policy. © 2013 Elsevier B.V.
Original languageEnglish
Pages (from-to)79-88
JournalStructural Change and Economic Dynamics
Volume27
DOIs
Publication statusPublished - 1 Dec 2013

Keywords

  • Climate policy
  • Economic growth
  • Energy cost share
  • Peak oil
  • Technological constraints

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