Working Paper

: Industrialization and Energy Demand: Implications for Climate Change Mitigation

Industrialization is key for economic development but how it interacts with climate change mitigation is insufficiently understood. However, this relationship is important for scenarios of climate change mitigation, such as reviewed by the International Panel for Climate Change (IPCC), that seek to show pathways for simultaneous economic development and mitigation in the coming decades. This paper examines the hypothesis that industrialization tends to go hand in hand with a rising energy intensity of GDP (energy/GDP). Analysis of 16 development successes in the 19th, 20th and 21st century shows that all relied on structural change toward manufacturing almost universally accompanied by a growing energy intensity of GDP for decades. In contrast, all scenarios in the most recent assessment report by the IPCC project historically unprecedented, fast GDP growth for the (least industrialized and affluent) Africa region out to 2050, but with a fast-falling energy intensity, at odds with any historical development experience. The underlying models arrive at these implausible growth trajectories by relying on an assumption of automatic income convergence of low-income to high-income countries, without explaining how it is achieved or conditioning energy demand. If economic growth is indeed going to be as successful as projected, climate models may be underestimating the future demand for energy in developing countries and the effort it takes to decarbonize. Or conversely, if the projected reduction in energy use is in fact materializing, then much lower GDP growth rates are likely.

Keywords: industrialization, structural change, climate change mitigation, energy intensity, decoupling, integrated assessment models