ISEFIFlorian Fizaine has presented his paper called: “The energy-economic growth relationship: a new insight from the EROI perspective” at the 4th International Symposium on Energy and Finance Issues (ISEFI) held on 24-25 March.
In the present paper we relate the recent estimations of the historical (1800-2011) global EROI of fossil fuels production performed by Court and Fizaine (2015) to the tremendous increase in GrossWorld Production that the global economy has encountered during the same period. On the more restricted 1950-2011 time period on which we have continuous year-to-year data, we find a clear correlation between the EROI level of aggregated fossil energy and the growth rate of the Gross World Production (GWP). With the same data, we are also able to show that in order to have a positive growth rate, the global economy cannot afford to allocate more than 15% of its GWP to energy expenditures. In other words, this also means that considering the current energy intensity of the global economy, our primary energy system needs to have at least a minimal EROI min of approximately 6.5:1 (that conversely corresponds to a maximum tolerable average price of energy three times higher than current level) in order for the global economy to present a positive growth rate. From these different results, we then propose a business cycle model based on the EROI dynamics. Our study supports the idea that a coherent economic policy should first of all be based on an energy policy consisting in improving the net energy efficiency of the economy. Doing so would lead to a “triple dividend”: an increase of the global economy EROI (through a decrease of the energy intensity of capital investment), a decrease of the sensitiveness of the economy to energy price volatility, and a decrease of GHG emissions associated with fossil energy consumption.