The energy-capital relation—Sweden 1870–2000

Abstract

This paper explores short and long-run changes in the energy to capital relation. The K/ E ratio is calculated for Sweden 1870–2000, at the national, industrial and branch levels. A basic result is a substantial long-run increase in the K/ E ratio which is positively correlated with the relative price p E/p K. The price response is stronger in energy intensive industries than in labour intensive industries. By considering the useful work (energy services) provided by energy sources, estimated using an aggregate measure of thermodynamic efficiencies, we can conclude, however, that energy services and capital have developed fairly evenly over the 20th century and thus that the long run increase in the K/ E ratio depends on embodied biased technical change. From a natural resource and environmental perspective it is clear that the economy has managed to cope with relatively less energy over time, but with a stationary (near constant) capital to energy services ratio. From a growth perspective our results indicate high complementarity between energy services and capital.