The Evolution of Energy Flows through the Economy: A Thermodynamic Perspective

Abstract

Over time, the U.S. economy has continued to reduce its energy and materials intensities while at the same time increasing its total energy throughput. Taking the perspective of the economy as a system of evolving thermodynamic processes, these trends appear to be natural consequences of the economy’s evolution. Connecting two distinct disciplines, this work takes the physical principles of minimum and maximum entropy production as a theoretical foundation for explaining the economic phenomena of dematerialization and efficiency rebound effects. Thermodynamic processes with freedom to morph (e.g. life forms) maximize the available energy flows through their system subject to the constraints of material requirements and inefficiencies in energy transformation. The natural evolution toward optimum is for systems to progressively relax these constraints through time, allowing a greater amount of energy throughput. As a result, increased energy and material efficiencies should not be expected to reduce energy consumption for our economies in the long run. The policy implications for this work are critical, as we should expect energy efficiency improvements designed to reduce energy consumption to “backfire.” The policy imperative with respect to climate change is to place primary emphasis on the carbon intensity of our available energy sources, as we cannot expect efficiency gains alone to yield carbon mitigation in the long run.