Saturday, May 29, 2010

Recent Energy Trends: Hope or Despair for Climate Change?

A pair of recent reports from the Energy Information Administration show both good news and bad news regarding energy trends and CO2 emissions.

In the short run, the news from the US economy is good. Carbon emissions from energy use fell sharply in the United States during both 2008 and 2009. Falling GDP during the recession explains part of the decrease in CO2 emissions, but not all; total emissions fell faster than GDP. There was a decrease both in the energy intensity of GDP and in the carbon intensity of energy. (The decrease in the carbon intensity of energy was due, in part, to the increasing role of natural gas. See the post on this blog for February 27, 2010 for additional details.)

On a global scale, the outlook is not so good. Although total energy-related carbon emissions from wealthy OECD countries are expected to stabilize over the next 25 years, the EIA projects that without major policy changes, total carbon emissions will rise steadily. Although energy intensity of GDP and carbon intensity of energy will decrease in both developed and emerging market countries, rapid growth of GDP in the latter will swamp all other effects.

The policy changes needed to slow the growth of energy-related carbon emissions would have to include either a much stronger price signal, through higher energy taxes or a cap-and-trade system, or greater support for technological changes speeding development of low-carbon energy, or both.

Follow this link to download a free set of PowerPoint slides containing graphs and text related to energy and carbon trends. The slide set includes discussion questions to use in your economics class. If you like this teaching resource, please post a comment to tell others how you use it in your classes.

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