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Connecting net energy with the price of energy and other goods and services

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  • Herendeen, Robert A.

Abstract

Net energy is intuitively compelling and useful in calculating total impacts (e.g., primary energy, greenhouse gases, land use, and water requirements.) of delivering useful energy to the larger economy. However, it has little policy impact unless connected quantitatively to the price of energy and other goods and services. I present an input–output (IO)-based method to do this. The method is illustrated by a two-sector model fitted to U.S. IO economic data. In an IO-characterized system, the energy returned on energy invested (EROI) and the energy intensity of energy are directly related. However, EROI and prices are not uniquely related because they depend differently on four independent IO coefficients representing internal structure of, and the relationship between, the energy sector and the rest of the economy. If only one of these coefficients varies, then EROI does uniquely determine prices. Uncertainties in the IO coefficients, as well as persistent issues of choosing system boundary and aggregating diverse energy types, further complicate the EROI-price connection. In this context I review two recent empirical comparisons of U.S. oil and gas prices and EROI for 1954–2007.

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  • Herendeen, Robert A., 2015. "Connecting net energy with the price of energy and other goods and services," Ecological Economics, Elsevier, vol. 109(C), pages 142-149.
    • Handle: RePEc:eee:ecolec:v:109:y:2015:i:c:p:142-149
    DOI: 10.1016/j.ecolecon.2014.10.011
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    Cited by:

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    2. Chen, Yingchao & Feng, Lianyong & Wang, Jianliang & Höök, Mikael, 2017. "Emergy-based energy return on investment method for evaluating energy exploitation," Energy, Elsevier, vol. 128(C), pages 540-549.
    3. Carey W. King, 2021. "Interdependence of Growth, Structure, Size and Resource Consumption During an Economic Growth Cycle," Papers 2106.02512, arXiv.org.
    4. Ji, Xi & Han, Mengyao & Ulgiati, Sergio, 2020. "Optimal allocation of direct and embodied arable land associated to urban economy: Understanding the options deriving from economic globalization," Land Use Policy, Elsevier, vol. 91(C).
    5. Buus, Tomáš, 2017. "Energy efficiency and energy prices: A general mathematical framework," Energy, Elsevier, vol. 139(C), pages 743-754.
    6. Carey W. King & John P. Maxwell & Alyssa Donovan, 2015. "Comparing World Economic and Net Energy Metrics, Part 2: Total Economy Expenditure Perspective," Energies, MDPI, vol. 8(11), pages 1-22, November.
    7. Jarvis, Andrew, 2018. "Energy Returns and The Long-run Growth of Global Industrial Society," Ecological Economics, Elsevier, vol. 146(C), pages 722-729.
    8. Lina I. Brand-Correa & Paul E. Brockway & Claire L. Copeland & Timothy J. Foxon & Anne Owen & Peter G. Taylor, 2017. "Developing an Input-Output Based Method to Estimate a National-Level Energy Return on Investment (EROI)," Energies, MDPI, vol. 10(4), pages 1-21, April.
    9. Adrien Fabre, 2018. "Evolution of EROIs of Electricity Until 2050: Estimation Using the Input-Output Model THEMIS," Policy Papers 2018.09, FAERE - French Association of Environmental and Resource Economists.

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