Finance, energy and the decoupling: an empirical study

Abstract

This paper investigates the empirical and theoretical basis of the decoupling between energy throughput and economic growth, with a critical view of the use of the decoupling concept as a policy priority. We provide an analysis of the historical trends of the metabolic pattern of European economies over a period of 18 years focusing on the changes in energy throughput and financial assets. The results show that energy consumption per hour of labor has remained constant, suggesting that no significant changes in production processes or technology have taken place in the productive sectors of the economy. The contribution of this paper is to establish a bridge between the economic analysis of financialization and the societal metabolism analysis of the economic process from a biophysical point of view. We argue that this bridge is crucial to draw attention to the biophysical consequences of financialization (a relative decoupling) and critically assess the pertinence of policies aimed at encouraging the decoupling in the context of increasing inequality.

Appendix

A:

Financial assets (non-consolidated, €)

EI:

Energy Intensity (MJ_EC ⋅ €⁻¹)

El:

Amount of the energy carrier Electricity (MJ_EC)

EMR:

Energy Metabolic Rate (MJ_EC ⋅ h⁻¹)

FI:

Financial Intensity (€ ⋅ €_P ⁻¹)

FMR:

Financial Metabolic Rate (€ ⋅ h⁻¹)

Fu:

Amount of the energy carrier Fuel (MJ_EC)

GVA:

Gross Value Added (€)

HA:

Human activity (h)

He:

Amount of the energy carrier Process Heat (MJ_EC)

HICP:

Harmonized Index of Consumer Prices (relative scale, reference year 2005)

L:

Financial liabilities (non-consolidated, €)

TEC:

Total amount of energy carriers (MJ_EC)

TGER:

Total amount of gross energy requirement (MJ_GER)

The HICP index has been applied to the market values in the following way:

A = A^xxx ⋅ (100/HICP^xxx)

GVA = GVA^xxx ⋅ (100/HICP^xxx)

L = L^xxx ⋅ (100/HICP^xxx)

Where XXX represents a generic year included in the inquired range (1995–2013).

EI = TEC GVA⁻¹

FI = A (L) GVA⁻¹

EMR = TEC HA⁻¹

FMR = A (L) HA⁻¹

Practical examples:

$$ {{\mathrm{HA}}_{\mathrm{FS}}}^{\mathrm{BE},2010}=156.7 k\mathrm{employees}\cdot 37.{7\ \mathrm{h}\ \mathrm{weeks}}^{-1}{46\ \mathrm{weeks}\ \mathrm{y}}^{-1}=2.7\cdot 1{0}^8{\mathrm{h}\ \mathrm{y}}^{-1} $$

$$ {{\mathrm{GVA}}_{\mathrm{FS}}}^{\mathrm{FI},2002}=3,566.0\ \mathrm{M}{\textsf{C}\hspace{-1.7ex}{=}} \cdot 100/97.82=3,645\ \mathrm{M}{\textsf{C}\hspace{-1.7ex}{=}} $$

$$ \mathrm{TEC}\left[\mathrm{El},\mathrm{FuHe}\right] $$

TEC can be represented as a vector, whereby each item identifies the share of the related energy carrier.

$$ {{\mathrm{TEC}}_{\mathrm{DE}}}^{\mathrm{ES},2012}\left[\mathrm{El},\mathrm{Fu},\mathrm{He}\right]=3,600{\ \mathrm{MJ}}_{\mathrm{EC}}\left[0.25;0.30;0.45\right] $$