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Selected Studies on Energy
economy and a fear that the future would be one of energy
scarcity, unlike a past of energy abundance.
This new
awareness of the importance of energy has led to a reevaluation of
both the role of energy in our economy and forecasts of the likely
future demand for energy. At one extreme, there is the view that
energy consumption is closely linked to the level of economic
activity and that any expansion of the economy requires a
proportional increase in energy supply. From this perspective,
which seems supported by U.S. data from the years prior to 1970,
economic growth determines energy demand, which must be treated as
a requirement to be met through the sacrifice of great resources,
the compromise of conflicting environmental goals, or both. At the
opposite extreme, there is the view that the increased use of
energy is only one of many ways to accomplish our real goals, and
energy demand can be reduced without great sacrifices in welfare,
preserving our limited energy supplies for the future and improving
the environment today. The truth probably lies somewhere between
these extreme views, but the evaluation of the potential
flexibility of energy use will have a great influence on the types
of policies recommended for our energy future. Those who see energy
demand as inflexible will favor dramatic programs to expand energy
supply, even to the point of subsidizing its production and use.
Those who see more flexibility in the way energy is used will
choose the energy conservation policies that could lead to sharp
changes in our energy use patterns.
DIVERSITY OF ENERGY USES
Energy use is
pervasive in our economy, and energy is used for many purposes.
Ultimately, energy demand stems from consumer demand for all goods
and services, either directly, as when we heat our homes or drive
our cars, or indirectly, through the energy used to grow the food
we eat or to make the clothes we wear. When we consider the
indirect effects as well as the direct effects, we find that the
total energy used by consumers in different income classes is
roughly proportional to their total expenditures. As shown in
Figure 1-2, an increase in income is associated with a decrease in
the proportion of expenditures spent directly on energy, but with
an increase in the proportion spent indirectly through the purchase
of other goods and services. It is true that higher income groups
spend a slightly smaller proportion on energy than lower income
groups, but the drop is less than many might believe: rich and poor
alike allocate nearly the same proportion of their expenditures to
energy. Comprehensive