Universitat Pompeu Fabra, Barcelona (Spain)

March 9-11, 2007

Abstract

This methodological workshop will be devoted to papers on various levels of analysis needed for research planning and methodological convergence, namely: modelling of economic growth where energy is included; sectoral division of energy consumption; relative energy prices and energy carrier choices. In addition, time will be allowed for the discussion of the common publication objectives and advances in on going coauthored and individual publications on the related topics.

Organizing Team

Mar Rubio (Universitat Pompeu Fabra)

Astrid Kander (University of Lund)

Scientific Summary:

This methodological workshop will be devoted to papers on various levels of analysis needed for research planning and methodological convergence, namely: modelling of economic growth where energy is included; sectoral division of energy consumption in different countries; relative energy prices and energy carrier choices. In addition, time will be allowed for the discussion of the common publication objectives and advances in on going co-authored and individual publications on the related topics.

On the first place the floor will be open to discuss about the different ways of approaching the modelling of economic growth where energy is included. The relations between energy, capital, labour and technology (total factor productivity) are poorly understood. We are to a large extent ignorant of the implications of structural change on energy and economic growth in the long run. To empirically investigate the relationships between energy consumption and economic growth and provide reliable forecasts of future energy consumption patterns within a growth model we must estimate important parameters that summarise the long-term trends, such as elasticities of substitution and factor productivities. This requires expertise in modern time series analysis methods such as cointegration modelling (e.g. Stern 2000) and sufficiently long historical time series (Kander 2002). Lack of comprehensive and comparable long-term historical data has meant that most studies consider only short-term trends and growth processes. Longer time series increase the power of these methods providing more clear-cut results.

Some recent developments in explaining long-run growth including the work of Hansen and Prescott (2002) and Ayres and Warr (2004) may be useful in developing a model that explicitly includes energy. Hansen’s model is similar to the theories developed by Wrigley, discussed below. The Ayres and Warr model replaces energy with exergy services as a factor of production (Warr and Ayres 2004). A promising model that explicitly includes both renewable and non-renewable energy resources is that developed by Tahvonen and Salo (2001). An integration of these models could be very productive in understanding long run growth. At this meeting we will explicitly discuss the complicated question of how to account for quality properties of different energy carriers. There are several competing methods to 'value' energy services; on the basis of marginal prices (Cleveland, Kaufmann and Stern 2000), by estimating use value using average prices that consumers would actually have been willing to pay (Kander 2002), or by using physical measures of value and quantifying the amount of useful energy (available work or exergy), the end-uses (for heat, transport, industry and services) and efficiency of energy end-use (Ayres et al 2003). These models and methods require more elaboration through discussion and comparison using quantitative tests.

The workshop will provide this necessary collaboration, by bringing together outstanding researchers for the purpose of analysing the role of energy in growth. For a long time the objective of this group of researchers has been to produce a consistent long-run dataset for energy, including traditional energy sources, in several European countries. Thus far series on quantities of the energy sources employed have been completed for a number of different countries (Britain, The Netherlands, France, Germany, Sweden, Denmark, Italy, Spain, Austria and the Czech Republic) for periods ranging from 150 to 200 years into the past.. Our aim however, as can be deduced from the first objective of this workshop, is not to be mere compilers of a uniform and comparable energy pan-European database. We aim at understanding the evolution of energy consumption in relation to economic advance over time and across countries. In order to achieve this aim our primary data set (mostly cons istent of time series of energy quantities) need to be complemented with price series for different energy carriers and price indices for energy.

Furthermore, we need to understand where the changes in energy consumption have occurred, was it at the domestic level? Were the changes more important in the economic sectors or within economic sectors? Now that most of the aggregated levels of energy consumption have been constructed, we can devote time to deepen our knowledge of the evolution and differences in sectoral energy consumption across countries. This will help us to better understand the evolution of the aggraded levels in the long run.

Last, but noy least different market structures (monopoly, oligopoly, fragmented competition, etc), intervention and regulation, and other price making variables must be taken into consideration for understanding the different energy choices of different sectors, countries and regions. This is easier to say than to do in a comparable framework, for constructing consistent and comparable price series under such different market settings face numerous methodological challenges that must be discussed. We further plan to write a book on the role of energy in the long run by 2008. This will be a two- volume book, with one interpretative and analytical volume, and one volume with the data series and methodological discussion. The analytical volume may be used as textbook at university courses. Discussion on the advances of this book, plus other works in progress, will also take some part of the time of the workshop.