National accounts with an extended energy sector

João A. Santos1, Tiago Domingos1, Tânia Sousa1 and André Serrenho2

1MARETEC
– Marine, Environment, and Technology Center.
2UK INDEMAND Centre, Cambridge University, Trumpington Street, Cambridge CB2 1PZ, UK.

Introduction Framework
Framework ––aatwo-sector
two- model for the economy
Mainstream economic theory contradicts intuition, by The two-sector model framework – inspired by
assuming that energy flows contribute little to production. In [3] – is composed of: Direct useful exergy
fact, energy has been a key driver of economic growth, and as 1 consumption
much a factor of production as capital or labour [1]. Also, it is • a Non-Energy (NE) Sector, which generates
not simply energy flows per se that should be regarded as economic output from capital ( ), labour ( ),
productive, but energy available to deliver useful work, via and useful exergy ( ) inputs;
efficiency improvements [2]. • an extended Energy (E) Sector, which
aggregates traditional energy industries
With this work we intend to: (primary-to-final exergy conversion) and any
• Develop a thermodynamically correct model for the end-use device performing final-to-useful E-Sector NE-Sector
economy as a multi-stage energy processing system; exergy conversion (e.g. automobiles, Primary Useful
domestic appliances). exergy exergy
• Extract implications for future economic growth, energy
and environmental policy.
Ne-Sector output comprises the sum – from an
income approach – of investment expenditure
( ), and consumption expenditure on
Energy, exergy, and useful exergy non-energy goods and services ( ).
Actually productive uses of energy in the economy are better
captured at the useful stage of energy flows. Useful exergy can either be used up in
production of NE-Sector goods and services ( ),
or directly consumed by households (1 ).
Up: Two-sector
The latter has an associated monetary value modelling
dependent on the price of useful exergy ( ): framework.
Primary Final Useful Energy End-use
Left: Extended
1 industries devices energy sector.

Exergy corresponds to Total output for the two-sector model is the

#$ "
energy that can, sum of all consumption and investment
theoretically, be converted ! " components:
into physical work (quality ! " Primary Final Useful
Due to the definition of an extended energy
of energy) [5].
sector, consumption and investment
exergy exergy exergy
expenditure in the two-sector model will differ
from national accounts (see Reclassification of
10
national accounts).
Useful exergy intensity
Energy/GDP (MJ / €)

8 Final exergy ( / ) for Portugal has

intensity been stable in the
6 long-run .
Preliminary results and conclusions
4
Useful exergy 7 The share of useful exergy directly consumed by firms and households has slightly increased throughout the 50-year in physical
Close relationship terms (1 ), but has decreased in monetary terms ( / ) – Fig. 2 a). Meanwhile, useful exergy intensity ( / ) is approximately
2 intensity ' between useful exergy constant (see Fig. 1). Hence, the price paid for useful exergy ( ) is decreasing over time – Fig. 2 b).
0 and economic output.
1960 1970 1980 1990 2000 2010 The declining price paid for useful exergy ( ) is an important driver of economic growth, through a positive feedback relationship
Fig. 1: Exergy intensities. Source: [4] [3]. The decline and stagnation of the price paid for useful exergy matches – respectively – periods of economic growth and
stagnation.

Reclassification of national accounts 100% 2,0 200

(Portugal 1960-2014) a) b)
GDP
Empirically, national accounts and energy balances are 80%
decomposed and reclassified to match the two-sector model’s 1,5 150
variables. Data is obtained from international databases.
60%
€ / MJ

Mrd €

1,0 100
National Two-sector %
accounts model 40%

(e.g. clothing) Consumption 0,5 50

Consumption 20%
(e.g. electricity, fuels) ( )
expenditure price of useful exergy 567 8
(e.g. vehicles) & /'
Investment 0% 0,0 0
Investment (e.g. machinery) ( ) 1960 1970 1980 1990 2000 2010 1960 1970 1980 1990 2000 2010
expenditure (e.g. construction) Fig. 2: a) Share of directly consumed, in physical (1 ) and monetary terms ( / ); b) Left axis: Evolution of the price of ( ).
Right axis: Economic output ( ), measured as gross domestic product (<= ).
(e.g. industry) Useful exergy
1 (e.g. residential) ( )
Work financially supported by FCT/MCTES (PIDDAC) through project UID/EEA/50009/2013, and by FCT through PhD Studentship
contract PD/BD/128054/2016 awarded to João Santos
Literature cited
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Energy Journal, 33(3). agriculture-industry-services transition: Portugal from 1856 to 2009. Structural Change and Economic Dynamics, 36, 1-
21.
[2] Ayres, R. U., Turton, H., & Casten, T. (2007). Energy efficiency, sustainability and economic growth. Energy, 32(5), 634-648.
[5] Brockway, P., Dewulf, J., Kielstrup, S., Siebentritt, S., Valero, A., Whelan, C. (2016). In a resource-constrained world: Think
[3] Warr, B., & Ayres, R. U. (2012). Useful work and information as drivers of economic growth. Ecological Economics, 73, 93-
exergy not energy. Report D/2016/13.324/5. Published by Science Europe, Brussels.
102.