Education and Energy Intensity: Simple Economic Modelling and Preliminary Empirical Results

Tiago Sequeira,Marcelo Santos

doi:10.3390/su10082625

Abstract

The ratio of energy use to Gross Domestic Product (defined as energy intensity) is a major determinant of environmental hazard and an indicator of eco-efficiency. This paper explains why education can have an effect in reducing the energy intensity thus affecting eco-efficiency. We devise a stylized economic model with simple and widely accepted assumptions that highlights the role of education in decreasing energy intensity worldwide. In an empirical application that is robust to the features of the data, we show that primary schooling contributes to a decrease in energy intensity which has a very significant effect, even accounting for the other well-known determinants of energy intensity. Additionally, when schooling is taken into account, income is no longer a negative determinant of energy intensity.

Highlights

The evolution of energy intensity (the ratio of energy consumption to Gross Domestic Product (GDP)—as an indicator of eco-efficiency)—across the world has been established as one of the facts that is related to energy and economics
While human capital includes both education and in-work experience and both can have effects in decreasing energy intensity, we really focus on the concept of education in the model, as the families choose between consumption and education
The large time-series that we incorporated into our empirical application allowed us to implement the error-correction model (ECM) which offered the following advantages when compared to other approaches: (i) it distinguishes between the short and long run effects of explanatory variables on energy intensity; (ii) the error-correction term can be investigated to determine the speed of energy use adjustment; and (iii) cointegration can be tested in the ECM by closer investigation of the statistical significance of the error-correction term

Summary

Introduction

The evolution of energy intensity (the ratio of energy consumption to Gross Domestic Product (GDP)—as an indicator of eco-efficiency)—across the world has been established as one of the facts that is related to energy and economics (see [1]). The energy intensity has been found to be declining in time and negatively correlated with per capita output. This seems to indicate that as countries get richer, energy intensity decreases. One possible explanation for this relationship is that the gains in efficiency associated with economic growth improve the way the humankind uses energy, i.e., using it more efficiently. If this interpretation is accepted, the decline in energy intensity should occur simultaneous with economic growth, both as result of technological progress. The author noted that energy consumption increases generally with income per capita, except for highly advanced economies with highly developed financial markets

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