Report: Economic growth and energy

On the 12th of May in 2015, a group of roughly forty young energy specialists gathered to discuss everything related to the relation between energy and economic growth. After a short introduction to the subject by YES-DC’s very own Friso Huizinga, three experts took the floor.

The energy transition: a macroeconomic perspective

Sjak Smulders, professor at the University of Tilburg, started the evening off by giving an overview of the latest academic ideas on the energy transition. Specifically, mister Smulders discussed the long run growth-energy dynamics via innovation economics and resource theory. The rebound effect was discussed, which describes how it is possible that both energy efficiency and energy use can continue to grow: namely by decreasing costs caused by the increasing efficiency. This effect is supplemented by the green paradox, which states that due to decreasing alternative energy prices, and increasing dirty energy taxes, the incentive to extract fossil resources now rather than in the future increases. Mr Smulders further explained that there is no evidence that might lead us to believe that green growth is more difficult to achieve than ‘grey’ growth, and underlined the importance of timely policy.

Financial returns on oil projects in a volatile world

The second speaker was Maarten Biermans, partner at Spring Associates, who started his story by showing a picture of Ali Ibrahim Naili, the minister of oil in Saudi Arabia. Mister Biermans talked about the recent decline in oil prices, which have a profound effect on the feasibility of oil exploitation projects around the world. Mister Biermans attributed the low oil prices (partly) to the declining solidarity within OPEC, and explained that mr. Ali Ibrahim Naili was flooding the market with oil. Multiple possible motivations for the behavior of Saudi Arabia were given, including a rather unorthodox one: A narrative was described in which the Saudi’s are very well aware of the economic consequences of the carbon budget, and therefore keep on producing oil while there is still a demand for it.

Energy efficiency in the steel industry

The third talk was given by Gerard Jägers, manager of energy efficiency of Tata Steel Europe. In the Netherlands, Tata Steel consumes about 4% of all electricity. Mister Jägers talked about the past successes of the energy efficiency programme at Tata and gave benchmark data comparing Tata to other players in the steel industry. Additionally, potential for further gains in energy efficiency were discussed. Mister Jägers mentioned that a lot of energy efficiency projects with short payback periods do not get perused at Tata, because “electricity simply is too cheap”, which cause the projects to be of little importance when compared to other investment opportunities.

The lecture night was concluded with a central discussion, in which the audience and the three speakers discussed the energy transition, green growth and all sorts of related issues.

Presentations from the event can be found here.