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Energy Challenges and Dilemmas

Economic and technological influences on energy demand

  • 3 things to know
  • Component 3 Section B

Overview

Energy intensity, what decoupling means for energy and growth and short-run price elasticity of demand for energy.

What you need to know

Answer each one before you reveal it.

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Key term

Define energy intensity.

Key term

Why does energy intensity usually fall once a country moves beyond industrialisation?

Numbers

Explain what decoupling means for energy and growth.

Questions from this subtopic

Each one with the model answer underneath.

  1. 1

    Define energy intensity.

    Model answer

    Energy intensity is the energy used per unit of economic output. A falling value means an economy is producing more with the same energy.

  2. 2

    Why does energy intensity usually fall once a country moves beyond industrialisation?

    Model answer

    Heavy industry gives way to services, which need far less energy per unit of output. Efficiency improvements in existing equipment reinforce the trend.

  3. 3

    Explain what decoupling means for energy and growth.

    Model answer

    Decoupling occurs where economic output grows while energy use stays flat or falls. Several European economies achieved this after 2000.

  4. 4

    How does industrialisation raise energy demand?

    Model answer

    Steel, cement, chemicals and aluminium production each consume very large amounts of energy. A country building infrastructure therefore sees demand rise faster than income.

  5. 5

    Describe the short-run price elasticity of demand for energy.

    Model answer

    Short-run demand for energy is inelastic because households cannot quickly change boiler or car. Consumption falls far less in percentage terms than the price rises.

  6. 6

    How do fossil fuel subsidies affect demand?

    Model answer

    Subsidised prices encourage consumption above the level the true cost would support. Global consumption subsidies exceeded $1 trillion in 2022 on IEA estimates.

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