Climbing the energy ladder: the role of economic growth in determining energy demand

The ‘energy ladder’ concept captures the idea that there is a systematic, nonlinear relationship between energy use and economic activity, illustrated in Figure 1 for the period 1960 – 2003. It exhibits a S-shaped relationship and provides evidence that countries across the world follow similar patterns as they climb the ladder (Galli, 1998; Judson et al, 1999; Medlock and Soligo, 2001). Despite these common patterns, there are important regional differences.

This paper presents an econometric panel data analysis to shed light on both the common elements of the energy to economic growth relationship, and the reasons for the discrepancies between countries.

By disaggregating the analysis to a regional and sector level this paper finds that, underneath some common patterns, countries and sectors have behaved in substantially different ways. This analysis provides for some important insights on future developments in emerging countries that have embarked on patterns of substantial economic growth.




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