* My column in BusinessWorld, January 22, 2020.
See also:
Recently it was reported
that the growth rate of Germany, Europe’s largest economy and the world’s
fourth largest, fell to only 0.6% in 2019. This caught my attention because it
is a significant drop from 1.5% in 2018 and 2.2% average for 2014-2017. The UK
and France managed to grow 1.4% in Q1-Q3 2019 so far, while Italy has crawled
to only 0.1% growth (see Table 1).
From 1998 to 2018, or two
decades, China, India, and South Korea have managed to expand their GDP size
from four to 13 times while others have expanded only by 2.3 times at most. So
we may ask, what are the “secrets” of China, India, and South Korea for the big
expansion of their GDP sizes?
There are a dozen plus
factors, but for this paper, I want to test the hypothesis that “stable,
cheaper energy is stable growth.” Thus, I will leave out other factors (rule of
law, property rights protection, global openness, lower taxes, etc.) for now.
First I checked the
consumption of fossil fuels coal and natural gas — stable, predictable,
dispatchable on demand — in power generation, units in million tonnes oil
equivalent (mtoe).
China, India, and South
Korea have indeed expanded their coal capacity by 2.4 times to 2.9 times while
the four Europeans and the US have decreased their coal consumption. But the US
has increased its already high consumption of natural gas while China and South
Korea have also expanded their gas use but not at the level of the US (see
Table 2).
Then I checked their
consumption of intermittent, unstable, and non-dispatchable energy sources like
wind and solar. China, the US, and Germany are the world leaders, with India,
Japan, and the UK trying to catch up (see Table 3).
The total consumption of
wind and solar, despite their rapid expansion in recent years, remain very
small compared to use of coal and gas for many countries. For instance, the
wind and solar of China (123 mtoe), India (20.6 mtoe), and South Korea (2.6
mtoe) in 2018 were only 6.4%, 2.8%, and 2.9% respectively of their coal
consumption. The US’ wind and solar (84.8 mtoe) in 2018 was only 12.1% of its
natgas consumption.
It is safe to say that the
reason why China, India, and South Korea have expanded their economies faster
than the other seven large economies is partly (or largely) because they relied
more on stable and cheaper fossil fuels especially coal, and never relied on
intermittent, unstable wind and solar in their continuing march towards
modernization and industrialization.
The US has escaped the
anemic growth pattern of the Europeans because it increased its reliance on
natgas, also a fossil fuel, even though its coal use has declined.
US President Donald Trump
is correct in his opening speech at the ongoing 50th World Economic Forum (WEF)
in Davos, Switzerland, that US will pursue its energy independence (and
dominance) in fossil fuels and not be swayed by climate scare and doom stories,
and embrace the energy of low and anemic growth — wind and solar and other
variable renewables.
----------------See also:
No comments:
Post a Comment