New Report Finds Climate Models Discount Low- and Middle-Income Countries’ Reliance on Industrialization and their Required Energy Use

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AMHERST, Mass. – Reducing energy demand has become a key mechanism for limiting climate change, but a new report co-authored by University of Massachusetts Amherst economist Gregor Semieniuk finds practical limitations associated with large energy savings in a growing global economy, especially its lower-income parts.

In a paper published online by the journal Nature Climate Change, Semieniuk and his co-authors use new data on energy and GDP to show that adopting the same near-term, low-energy growth trajectory in all regions to limit global warming to 1.5°C per Intergovernmental Panel on Climate Change (IPCC) scenarios presents an unresolved policy challenge: decoupling, or reducing energy consumption while still growing GDP. Specifically, the researchers examine how to resolve the necessary energy demand reductions with the desired robust income growth for the 6.4 billion people in middle- and low-income countries in light of such growth being conditioned on industrialization.

“Due to policy action lagging behind, models that sketch scenarios of successful global climate change mitigation must make more and more extreme assumptions about behavior, technology and institutions to arrive at the requisite emissions reductions,” says Semieniuk, an assistant research professor at the UMass Amherst Political Economy Research Institute (PERI).“My co-authors and I show that this can result in models arriving at extremely low energy demand in developing countries. Since the scenarios also depict very successful economic development by historical standards, this raises the question just how such development is supposed to be ‘fueled.’ Successful development involves industrialization, which is relatively energy intensive, and our analysis points to an unresolved policy and modeling challenge for how to mitigate climate change while sustaining robust economic development.”

Joining Semieniuk in drafting the report were Lance Taylor and Duncan K. Foley, of New York’s New School for Social Research, and Armon Rezai, of Vienna University of Economics and Business. Using a new global dataset on national output-energy relationships from 1950-present, Semieniuk and his colleagues discuss why the decoupling trends contained in the current IPCC scenarios are hard to justify for robustly growing developing countries, and explore how the underlying models’ explanatory power could be improved.

Focusing on the extreme case of the relatively low-income Middle East and Africa (MAF) region, the researchers illustrate that IPCC assumptions about decoupling, economic convergence and energy demand imply a near-term mitigation capacity qualitatively similar to that of rich countries, and with a development path at odds with historical data and insights from development economics.

“To realize the robust growth rates projected for the less affluent regions and the world as a whole, some form of industrialization has to take place,” they write. Simultaneously maximizing energy conversion efficiency, they argue, poses an unresolved policy challenge.

Semieniuk and his co-authors write that the IPCC scenarios reveal the difficulties for a concerted policy effort to simultaneously sustain economic growth, redirect investments towards low-carbon alternatives, improve policy cooperation and prevent rebound effects with price policies that must nonetheless not be regressive. Detailing the process by which this happens would make these scenarios even more helpful tools in the design and analysis of climate change mitigation, they say.

“On the one hand our research reminds us that the world is interdependent: rich, de-industrializing countries can reduce energy demand in their territories,” Semieniuk says. “But part of that is possible because the industrial production takes place elsewhere. Making the same assumptions about saving energy for all regions of the world begs the question of where all those goods that increasingly affluent societies consume are produced. On the other, it points to an opportunity for renewable energy: there is no inherent need to reduce total energy demand, only fossil energy demand. If that can be done more successfully by substituting low-carbon renewables for fossil sources, the dilemma of saving overall energy is lessened. Favorable price and policy developments in renewable energy in recent years inspire some hope for this route.”

The complete report, “Plausible energy demand patterns in a growing global economy with climate policy,” is available online from Nature Climate Change.