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Useful Exergy as an Intermediate Input in a Two-Sector Model of the United States Economy

Author

Listed:
  • João Gonçalves

    (MARETEC—Marine, Environment and Technology Center, Instituto Superior Técnico (IST), University of Lisbon, Avenida Rovisco Pais 1, 1049-001 Lisbon, Portugal)

  • João Santos

    (MARETEC—Marine, Environment and Technology Center, Instituto Superior Técnico (IST), University of Lisbon, Avenida Rovisco Pais 1, 1049-001 Lisbon, Portugal)

  • Matthew Heun

    (Engineering Department, Calvin University, 3201 Burton St. SE, Grand Rapids, MI 49546, USA
    Sustainability Research Institute, School of Earth and Environment, University of Leeds, Leeds LS2 9JT, UK
    School for Public Leadership, Faculty of Economic and Management Science, Stellenbosch University, Matieland 7602, South Africa)

  • Paul E. Brockway

    (Sustainability Research Institute, School of Earth and Environment, University of Leeds, Leeds LS2 9JT, UK)

  • Tiago Domingos

    (MARETEC—Marine, Environment and Technology Center, Instituto Superior Técnico (IST), University of Lisbon, Avenida Rovisco Pais 1, 1049-001 Lisbon, Portugal)

Abstract

Conventional economic growth models treat production/consumption as abstractions linked only by money flows, disregarding their connection to the physical world. Nevertheless, the existing literature suggests that energy flows can influence production and links useful exergy prices with economic growth. Useful exergy is energy measured at the stage where it produces an end-use (and is a measurement of energy quality). Not all approaches in the literature use this metric and they often consider energy as a primary input (despite it being an intermediate input). We explore the relationship between energy flows and economic growth for the US through a framework where useful exergy, the output of an “extended energy sector” (where all effects of increasing primary-to-final-to-useful exergy efficiency are located), is an intermediate input for a “non-energy sector”. Together, they encompass the entire economy. We conclude that the share of investment in the extended energy sector grew with the overall economic growth throughout 1960–2020, while the labour share decreased. The non-energy sector contributed the largest share of consumption, exports, imports and labour. In recent years, the energy sector has overtaken it in terms of investment. Our two-sector model has important implications for current climate policy, namely regarding the Integrated Assessment Models on which it is based.

Suggested Citation

  • João Gonçalves & João Santos & Matthew Heun & Paul E. Brockway & Tiago Domingos, 2024. "Useful Exergy as an Intermediate Input in a Two-Sector Model of the United States Economy," Energies, MDPI, vol. 17(6), pages 1-32, March.
    • Handle: RePEc:gam:jeners:v:17:y:2024:i:6:p:1481-:d:1360070
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    References listed on IDEAS

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