Energy Policy & Sustainability All Notes PDF

**Energy Policies & Sustainability** Course outline ============== [First part] - General analysis & theoretical issues regarding the relationship btw energy policy & sustainability - General analysis of policies supporting the transition towards economy decarbonization - Focus on...

**Energy Policies & Sustainability** Course outline ============== [First part] - General analysis & theoretical issues regarding the relationship btw energy policy & sustainability - General analysis of policies supporting the transition towards economy decarbonization - Focus on renewable sources of energy [Second part] - Focus on transportation sector - Sustainable mobility Lesson 1 -- Introduction ======================== **Renewable energy sources** - Wind (carbon **free**) - Solar (carbon **free**) - Hydropower - Biomass (not carbon **free** but carbon **neutral**) - Geothermal - Marine: Tydal & Wave **Control of production** varies btw energy sources: weak control for wind/solar, higher for biomass. **Energy** - What is energy? The ability of a physical system to have a useful effect (e.g. satisfy consumers' needs) - What is a useful effect (i.e. energy form)? It is movement (transportation), lighting, heat (space heating), mechanical motion (electronics) - Energy sources (sources providing energy forms): 2 kinds of classification - 1^st^ classification - **Non-renewable** (**exhaustible**) sources (stock sources): crude oil, coal, natural gas, uranium. - **Renewable** sources: wind, solar (5bn years), biomass, hydro, geothermal, marine. - 2^nd^ classification - **Primary** sources: natural energy sources (oil, coal, hydro, wind, natural gas) - **Secondary** sources (**energy carriers/vectors**): energy sources obtained by converting the primary sources (electricity, hydrogen, gasoline). - Over time **non-exhaustibility** vs. over **space scarcity** (even if non-exhaustible over time, renewable can be scarce over space). Specific renewable sources can be exhaustible over time (gradual depletion), when used beyond their **degree of regeneration**. - **Electricity** is the most important energy carrier. Why? - High upstream flexibility (electricity can be obtained from all primary energies) - High downstream flexibility (all useful effects can be provided by using electricity) - Low transportation cost (if necessary, even over very long distances via cable) - Low environmental impact close to the point of consumption (but potentially high in the point of production, if produced by using fossil fuels) - **Electricity production cycle** - Natural gas extraction - Transportation to power plant to convert into electricity - Transportation, distribution & consumption of electricity - The whole cycle of production has to be green, not just at end-consumption: we have to consider the conversion of primary energy into secondary energy. - Combustion of fossil fuels releases NO~x~, SO~x~ local & regional polluters limited impact in the area around the power station, the impact is concentrated in x hundred kilometers from the source of pollution. - CO~2~: global polluter, the impact is global, e.g. if we emit one molecule of CO~2~ in Milan, it has an impact in Australia. Which explains why countries need to come together to work on fighting climate change. - Electricity does not involve pollution in the point of consumption, but it may involve pollution in the point of production when the production of electricity is due to the combustion of fossil fuels. - **From primary energy to useful effects:** conversion process through converting technologies - Role of technological change equipment able to provide the same amount of useful effect by using less energy) **Policy** - [Economics]: discipline studying the efficient allocation of scarce resources. - [Market]: institution able to assure efficient allocation under specific conditions (microeconomics) - Prices (market) allow to allocate individuals' consumption in order to maximize individuals' utility. - Prices = marginal costs of production maximize total welfare (consumers' surplus plus producers' surplus): Pareto optimality. - Specific conditions for efficient allocation: - **Market completeness** (prices for all good & services): absence of externalities i.e. an effect that changes btw +2 individuals when exchanges are not regulated by a price no market from the exchange. - **Full/perfect competition** (prices = to marginal costs) - Sources of market failures - Externalities (market incompleteness): policies internalize the effect of externalities to rectify market failures. - Cost subadditivity (economies of scale & scope): no full competition - Need for public action (public policies) to correct market failures & imperfections. **Energy Policy** - **Energy industry**: extraction + transportation + (conversion) + distribution + commercialization + (conversion) + final consumption - **Market failures** - Cost subadditivity in several stages (especially in transportation & distribution which are natural monopolies) - Externalities in almost all the stages (especially in the conversion stages) - **Market imperfections**: Supply concentration not justified by cost subadditivity (relatively low scale economies; legal monopolies) - **Sources of market failures** - Cost subadditivity (economies of scale & scope) - Externalities - Need of public action (i.e. **public policies**) to correct market failures & imperfections - Internalizing environmental costs - Regulating natural monopolies - Policies to support competition - **We focus on market failures due to environmental externalities** **Sustainability** - **[Welfare]**: 3 pillars: social development, eco development, environmental conservation - **[Sustainability]**: Situation in which eco development, social development & environmental conservation are mutually consistent in order to assure that future generations can have the same (at least) wellbeing of present generations (intergenerational solidarity) More than 80% of atmospheric pollution (mainly GHG emissions) is due to energy production & consumption (including mobility) Energy markets have a huge role in achieving sustainable goals. Energy & the environment are strongly correlated. Environmental sustainability strictly depends on energy transition towards "low carbon (carbon free, carbon neutral) energy supply." **Energy Policy & Sustainability** - **Focus on Environmental sustainability of eco development**: eco development consistent with the preservation of the natural environment. - **Energy & eco growth**: strong correlation through energy consumption per unit of GDP - **Energy consumption & GHG (Greenhouse Gases) emissions**: strong correlation through fossil fuel consumption - **Decoupling eco growth & GHG emissions**: through "carbon free" (zero carbon emissions) & "carbon-neutral" (zero balance of carbon emissions) sources of energy (RES: Renewable Energy Sources) - Possible need of public policy to promote the transition from fossil fuels to RES - **2 questions** - Public policy is really necessary? - If necessary, how to design energy policy? - **Technological change**: produce more amount of useful effect consuming less energy from 10% to 60% efficiency. Reducing energy consumption is possible regardless of what we consume (oil, coal, natural gas etc). We can reduce energy consumption & fueling eco development & growth thanks to technological change. - **How to reduce pollution**? - Reducing our consumption through behavior change e.g. reduce heating of houses rational use of energy. - Reducing energy consumption through production technological change related to energy efficiency. - Replacing fossil fuels with renewables & carbon-free sources. - **Energy Policy & Sustainability**: as long as this transition does not happen spontaneously, energy policy is needed. **The Greenhouse Effect** - Focus on climate change, due to global warming: solar radiation produces a lot of energy. - **In the sun**: coal, oil, natural gas hydrogen is the source of energy of the sun. Huge nuclear reactor, derives from **nuclear energy**, i.e. fusion (different then fission). Solar radiation passes through our atmosphere & is in part absorbed by the earth's surface, another part being reflected towards space. - **5% remains trapped into the atmosphere**: bc of the presence of ghg in the atmosphere there is a layer of ghg trapping the reflected solar radiation. - **Global warming** is fundamental for our life: without this 5%, the earth temperature would be -20°C on average global warming is a good effect for us, but if the concentration of ghg rises too much, the amount of reflected solar radiation will increase. We can face an increase in earth temperature, impacting our climate. - **What is the reason for the concentration of ghg?** Humanity, we are facing a period of increasing concentration of ghg in the atmosphere due to the emission of CO~2~ by humanity. We are responsible for global warming & thus climate change. - **95%** of the scientific community agrees with this: global warming is ongoing & humanity is responsible for it. - Main GHG: - CO~2~ - CH~4~: i.e. methane, with a Global Warming Potential (GWP) = 24 of CO~2~ - N~2~O: nitrogen protoxide, GWP = 298 of CO~2~ - 1 molecule of CO~2~ + 1 molecule of CH~4~ + 1 molecule of N~2~O = 323 CO~2~eq - Why do we focus on CO~2~? Emission of methane & nitrogen protoxide is much less than CO~2~. But be careful not to neglect the emissions of other gases.  **Atmospheric CO~2~ concentration** - **Mean temperature** (deviations from the average value for the period 1991-2000) - **+400** parts of CO~2~ per million of people - **Delta of +100** since 1960 - The increase of temperatures isn't avoidable anymore, but we can limit it. To limit global warming to 1.5°C, we have to reach net zero emissions around 2050-2070 (IPCC, 2018). - If we continue the way we are going, we will reach the 1.5°C threshold in a couple of years urgency of action. - What some scientifics question is: there is an increase in CO~2~ yes, but it is not due to humanity, it is not anthropogenic. Three terms mistakenly used interchangeably: - **Net zero emissions** (or carbon neutrality): Anthropogenic CO~2~ emissions balanced globally by anthropogenic CO~2~ removals. - **Decarbonization** (more stringent): associated with the reduction of CO~2~ emissions i.e. replace fossil fuels with carbon-free renewables. - **Carbon neutrality** (less stringent): carbon removal of emitted CO~2~, Carbon Capture Use & Storage (CCUS). - Store CO~2~ underground. - Use CO~2~ to make synthetic fuels produce gasoline, kerosene with the use of hydrogen. Combustion of these fuels emit CO~2,~ but the amount is the same amount captured from the atmosphere, so it balances out. H~2~ in water, separated through electrolysis, using electricity. - Green hydrogen is only possible by the use of renewables in electrolysis. **How to face climate change: mitigation & adaptation** **Adaptation**: consume less, produce less, slow down the increase in population adapt to the new context. Not enough, we also have to limit the increase with **mitigation**. Think about the past Covid-19 emergency: it was a sort of anticipation of what might happen under climate change. **Resuming**: contents - Focus on Environmental sustainability (consistency of environmental conservation & eco development) - Focus on mitigation - Focus on renewables (just a little info on CCUS) **Mitigation: Green Transition**  - Avoid CO~2~ emission in the conversion phase of fossil fuels. To avoid climate change, we need renewable energies, who do not produce CO~2~ when converted into electricity. - But renewables are more expensive on the market market failure. The environmental cost of fossil fuels is not taken into account by the market, thus comes the inaccuracy. - Renewables are not yet cost competitive, so the market alone is not able to push them forward. - Solar power: cost 200/300€/MWh a few years back, now 60€/MWh on average decrease - Depending on the size of the plant, the bigger the plan the less the cost /MWh. - Offshore wind: 100€/MWh differences btw technologies, some are already competitive compared to fossil fuels, others are not yet. - We can make renewables competitive: How? 1. Make fossil fuels more expensive, by internalizing the environmental cost related to the emission of CO~2~ use taxes. How to decide taxes? 2. Emission trading scheme (ETS) 3. Making renewables less expensive: subsidies from governments/incentives to promote the deployment of renewable energies. How to decide subsidies? **Green Revolution Rather Than Green Transition** - 1^st^ transition: from biomass to coal during the Industrial Revolution in the 19^th^ century. - 2^nd^ transition: from coal to oil starting early 20^th^ century due to crude oil use in the transportation sector mainly. - 3^rd^: From oil to Natural Gas & Nuclear. - Today, we are still fully in the age of fossil fuels. To move towards a renewable world, we need a revolution! - **Transition**: a new energy source appeared & began to increase sharply. But the old energy source did not disappear, it remained as an important resource. [Ex]: coal today is still very much used, still a very big source of energy especially in emerging countries like China or India. Transition means a new energy source appears without replacing other energies. Today, the energy mix is very diversified & still relying on energies from past transitions. - **By 20250**, we need to completely replace old energy sources i.e. oil, gas & coal. They should disappear in 2/3 decades; it is a true revolution of energy supply!  **Typologies of renewable energies** - **Hydro** power: reservoir, run of river - Resource already largely exploited: the future potential is thus marginal. We would have to exploit new hydro resources. - **Wind** power: onshore & offshore - Yes, but only in specific regions, only sea costs (e.g. Spain), north of France. - Not so much in Italy - Offshore (at sea) is more promising, but it is very expensive & needs high subsidies. - **Biomass** energy: biogas, solid biomass, solid water, biofuels - Contribution to energy supply is likely to be marginal. Biomass can derive from cultivation of specific crops, & this implies a problem in soil availability. Problem with food availability. - **Solar** energy: thermal concentrated solar power, photovoltaic - Most promising source, amount of solar radiation reaching the earth is huge. - Pb: the amount is huge but the amount of solar radiation per square meter of energy produced is low. - **Geothermal** - **Emerging** **technologies**: tidal stream, wave energy experimental phase. **2 fundamental questions** - Are energy policies strictly necessary? Are renewables competitive? - How to define policies to make them competitive? - Is it sufficient to correct market failures & imperfections? Or do we need other typologies of public action? - Decision to invest in renewable projects depends highly on policies & incentives from the private sector point of view. Lesson 2 -- Sustainability: Ecological Footprint ================================================ **Why do we use economics in environment policy?** - EU response to this question - Economics is a field of studies to allocate efficiently resources available to society & individuals. Thus, since environmental services are scarce, it is legitimate to tackle environmental problems using economics. - [European Commission]: One way of using economics is to ensure that the cost & benefits of environmental measures are well balanced. Although it is difficult to estimate costs & benefits, there is an increasing demand that this is done before environmental policy is decided on a European level. With the use of **market-based instruments**, environmental goals can sometimes be reached more efficiently than with traditional **command & control regulations**. - There are 2 groups of instruments: - **Market tools**: give eco incentives to pollute less, but it is not an obligation. The decision comes from the polluting firm. They take this decision anyways bc it is more profitable. - **Command & control tools**: regulate obligations for polluters by law. - There is no contradiction btw eco development & environmental goals: the EU states that policies/actions aiming at protecting the environment can help the economy grow. - Countries more advanced in terms of eco dev have a greater sensibility to environmental issues. Thus, to solve environmental issues, we have to promote eco development of developing countries (China, India). No separation btw eco growth & environmental conservation. They both help & reinforce each other. **Economy, Natural Environment & Artificial Environment** A diagram of a waste recycling process Description automatically generated - Artificial environment: elements created by us to allow production & consumption. On the other hand, we need resources from the natural environment. - Some of the waste from the production cycle must be absorbed e.g. CO~2~ must be absorbed by the atmosphere. However, it cannot be bone indefinitely. - Economy faces 2 kinds of scarcity regarding its relationship with natural environment: - **Upstream scarcity**: related to the depletion of natural resources, mainly energy resources. - **Downstream scarcity:** related to the gradual reduction of the environment's capacity to absorb the wastes of anthropogenic activity. - [Productive base]: TOTAL CAPITAL = ARTIFICIAL CAPITAL + NATURAL CAPITAL - Sustainability requires that the productive base is **at least constant over time**. - Offset the loss of natural capital: the goal is to keep total capital constant, so we can compensate for the decline by increasing artificial capital. This compensation allows us to keep well-being the same overtime. Possible to substitute natural with artificial? How? - Assume that natural capital consists of forests. The function of forests is absorbing Carbon Dioxide, thus slowing down climate change. We could build CCUS plant/equipment that does the same work of the forest. Way to substitute a natural device with an artificial device. - Approach of environmental economists. - Approach of ecological economists: natural resources cannot be substituted! In their views, natural resources are a constant. This approach is more stringent. **Two Approaches: Environmental Economics Vs. Ecological Economics**  - **Environmental economics**: the natural environment is the **provider** of **inputs** to the economy (natural environment is a part of the economy). Natural capital is part of the economy in this approach. - The economy can grow, but the natural capital can decrease at the same time, provided that artificial capital can compensate for the loss. - Single unit of accounting: pricing artificial capital, which is easy enough. Calculating the value of natural resources is harder. E.g. of the forest. - How much the forest can absorb CO~2~? - Or, calculating the damage cost related to the CO~2~ emissions i.e. the value of the forest is the value of the avoided cost of CO~2~ emissions, but this is harder to calculate. - **Ecological economics**: Economy is a part of the natural environment whose **integrity** is a **constraint** to eco growth. **Weak Sustainability (Environmental Economics)** The reduction of natural capital can be offset by the increase in artificial capital indefinitely. \ [*K*~*T*~ = *K*~*a*~ + *K*~*n*~]{.math.display}\ Change of total capital: Conditions of sustainability  Substitution of artificial vs natural: A black text on a white background Description automatically generated Substitution between natural & artificial capital requires that the natural environment could be priced. **Strong Sustainability (Mixed Environmental & Ecological Economics)** Cannot reduce natural capital below a given threshold [\$\\overline{K\_{n}}\$]{.math.inline} **compromise** btw the 2 approaches. The reduction of natural capital can be offset by the increase in artificial capital but up to a specific threshold of natural capital. **Very Strong Sustainability (Ecological Economics)** There is no threshold, you cannot decrease at all the natural resources. No substitution btw natural capital & artificial capital is possible. Natural capital cannot be priced (ethical dimension). If we adopt the strong sustainability rationale, i.e. limited substitution, the next task is determining the critical threshold of substitution. One way to do this is estimating the ecological footprint. **How To Identify the Natural Capital Threshold: Ecological Footprint** - **Carrying capacity** (**CC**): "maximum population of a given species that can be supported indefinitely in a defined habitat without permanently impairing the productivity of that habitat". - **Ecological Footprint** (**EF**): "how much biologically productive land & water area (Biocapacity) an individual, a city, a country, a region, or humanity uses to produce the resources it consumes & to absorb the waste it generates, using prevailing technology & resource management schemes" (Wackernagel, 2007) & without undermining the degree of regeneration of this area. How much biocapacity do we need for our consumption to be sustainable. - **Biocapacity** (**BC**): the threshold "bulk of the biosphere's regenerative capacity. It is an aggregate of the production of various ecosystems in a certain area (e.g. of arable land, pasture, forest, productive sea)" (EC, WWF). - **Measuring BC & EF** (standardized unit of biologically productive area): This unit is the global hectare (Gha) through which all kinds of environmental resources must be accounted. - **Global hectare** (Gha): the biologically productive area (land &/or water) necessary to support individual activity (consumption & related waste) without this activity could undermine the biocapacity of ecosystem. - **Estimating EF & comparing to BC**: - Once the consumption of the different resources are identified, this consumption must be converted into global hectares. Specific conversion factors are used for this aim each for specific resource (specific exercise in the end of this part of the course). The Ecological Footprint tracks the use of six categories of productive surface areas: cropland, grazing land, fishing grounds, built-up land, forest area, & carbon demand on land. - Thus the consumption of crops is converted in Gha of cropland, that of fishes into Gha of fishing ground, that of meat into Gha of grazing land, that of wood into Gha of forest area & finally that of carbon emissions (fossil fuel consumption) into Gha of carbon demand on land (the amount of carbon dioxide a Gha of land is able to absorb). Once each footprint has been calculated the total footprint is the sum of the specific footprints. **From Sustainability To Unsustainability**  **Example** - Ecosystem (biocapacity): - 1 lake of 250 ha - 1.000.000 fishes with a 10% regeneration rate - 400 fishes per ha - 275 ha of forest: absorbing 5 tCO~2~/ha/year - Sustainable consumption: - 100.000 fishes/year (250 ha) - 1375 tCO~2~/year (275 ha) - If 1 habitant consumes 365 fishes/year & emits 5 tCO~2~/year. Then, the sustainable population (carrying capacity) is 275 people: - 100.000 fishes = 365 fishes/habitant/year \* 275 habitants - 1375 tCO~2~/year = 5 tCO~2~/habitant/year \* 275 habitants - Ecological footprint = 525 ha = 275 ha of lake + 250 ha of forest - Biocapacity (ha): 250 ha of lake + 275 ha of forest = 525 ha - Then, EF=BC (sustainability) - Now, if consumption of fishes per habitant/year doubles = 365 x 2 = 730 fishes/ habitant per year - CO~2~ emissions per habitant/year doubles = 10 tCO~2~/habitant per year - Ecological footprint (gha) = 250 ha x 2 (lakes) +275 ha x 2 (forests) = 1050 ha (3,8 ha per habitant) - Ecological footprint = 2 times the biocapacity - The impact on the population is not sustainable. The fish population will gradually decrease over time up to complete depletion. Emitted CO~2~ accumulates over time in the atmosphere causing global warming. **Beyond the example: how to shift to the world as a whole (from ha to gha)** - Ecosystem (biocapacity): all fishing areas & forests worldwide - Normal yield (fishing ground): 200 fishes per ha (around half than the specific lake before) - Normal yield (forests): 2,5 tCO~2~ per ha (around half than the specific forest before) - EF with around double consumption - EF (fishing ground) in global hectares (Gha) = 730/200 = 3,7 Gha - EF (forest) in global hectares (Gha) = 10/2,5 = 4 gha - Total EF per habitant of the village = 3,7 + 4 = 7,7 gha/habitant - This means that in order to be sustainable we would need 7,7 gha (per habitant) of productive land with a productivity equivalent to the world average. - To really check this we have to compare the total EF to the global biocapacity. - BC = 365 fishes per habitant/200 fishes per ha + 5 tCO~2~ per habitant/ 2,5 tCO~2~ per ha = 3,8 gha/habitant - Biocapacity (gha): world productive fishing ground per habitant + world productive forest ground per habitant. A black text with a plus and a black symbol Description automatically generated with medium confidence  [*P*~*N*, *i*~]{.math.inline}: Consumption/Production of product i (i=fishes (fs), CO~2~ by forest (fo)) [*Y*~*N*, *i*~]{.math.inline}: Yield per ha (world average) under nominal conditions \ [\$\$\\text{YF}\_{N,i} = \\frac{Y\_{N,i}}{Y\_{W,i}}\$\$]{.math.display}\ [*Y*~*N*, *i*~]{.math.inline}: National yield of product i [*Y*~*W*, *i*~]{.math.inline}: World (nominal average) yield of product i [EQF~*i*~]{.math.inline}: Equivalent factor of product i (importance given to the specific product, from 0.1 to 1) [*A*~*N*, *i*~]{.math.inline}: Available area (ha), i=fishing ground or forest In the previous example, the world includes: - 1 lake: 250ha with 400 fishes/ha - 1 forest: 275 ha capturing 5 t/CO~2~/ha - Consumption: 200,000 fishes - Emissions: 2750 tCO~2~  Replacing with the numerical values: A math equations with numbers and symbols Description automatically generated with medium confidence **Ecological Footprint & Biocapacity: Global Vision**  Today, humanity's EF is 1,7 twice the world biocapacity (our standard of living is not sustainable on average) EF overcame BC already in 70s. This effect is due to the fast increase in carbon footprint. Carbon footprint is today more than 60% of total humanity ecological footprint. **HDI: Human Development Index (Mahbub Ul Haq)** A long & healthy life is represented by the Life Expectancy at birth (LE) & whose indicator is the Life Expextancy Index (LEI). [\$LEI = \\frac{LE - 20}{85 - 20}\$]{.math.inline} so if LE = 85, then LEI = 1 The degree of knowledge is represented by the mean years of schooling (MYS) & the expected years of schooling (EYS) & whose indicator is the Education Index (EI). [\$LEI = \\frac{\\frac{\\text{MYS}}{15} - \\frac{\\text{EYS}}{18}}{2}\$]{.math.inline} so if MYS = 15 years & EYS = 18 years, then EI = 1 A decent standard of living represented by the Gross Net Income per capita (GNI~pc~ in PPP, US\$) & whose indicator is the Income Index (II). [\$II = \\frac{\\ln\\left( \\text{GNIpc} \\right) - ln(100)}{\\ln\\left( 75,000 \\right) - ln(100)}\$]{.math.inline} so if GNI = \$75,000 PPP then II = 1 Finally, the HDI is obtained as the geometric mean of the previous three indicators. [\$HDI = \\sqrt\[3\]{LEI\*EI\*II}\$]{.math.inline} and [*HDI* ≤ 1]{.math.inline} **Human Development Index (HDI) & Ecological Footprint** The Ecological Footprint seems to be positively correlated to the HDI. There is no country within the virtuous area (EF\0.9). Development would not seem consistent with environmental conservation. **EF versus GDP/capita**  The increase in the EF would seem to slow as the income per capita grows. Lesson 3 -- Energy, Pollution & Economic Growth (Kuznets curve) =============================================================== 3 main indicators to analyze the Energy sector: - **Energy Demand** - **GDP** - **Energy Prices** GDP elasticity of energy demand \ [\$\$\\varepsilon\_{\\text{GDP}} = \\frac{\\mathrm{\\Delta}E/E}{\\mathrm{\\Delta}GDP/GDP}\$\$]{.math.display}\ Energy intensity \ [\$\$I = \\frac{E}{\\text{GDP}}\$\$]{.math.display}\ Price elasticity of energy demand \ [\$\$\\varepsilon\_{p} = \\frac{\\mathrm{\\Delta}E/E}{\\mathrm{\\Delta}p/p}\$\$]{.math.display}\ - The main determinants of energy demand are the level of eco development & consequently eco growth. - Energy consumption is highly sensitive to the change in GDP so measuring the change in energy consumption allows us to guess the pattern of eco activity. - Indicator: energy intensity, i.e. the energy consumption divided by the GDP. - Demand elasticity for energy prices is relatively low (our energy consumption has a relatively low sensitivity to change in energy prices). - Technological progress affects energy demand mainly by means of the penetration of new appliances & technologies. - These 3 indicators are interrelated. In particular, energy intensity depends on both the GDP elasticity & price elasticity. **The Relationship Btw Energy Demand & GDP** GDP elasticity \ [\$\$\\varepsilon\_{Y} = \\frac{\\mathrm{\\Delta}E/E}{\\mathrm{\\Delta}Y/Y}\$\$]{.math.display}\ Energy intensity \ [\$\$I = \\frac{E}{Y}\$\$]{.math.display}\ Link btw energy intensity, GDP elasticity & GDP \ [\$\$\\frac{\\mathrm{\\Delta}I}{I} = \\left( \\varepsilon\_{Y} - 1 \\right)\*\\frac{\\mathrm{\\Delta}Y}{Y}\$\$]{.math.display}\ Link btw energy demand, GDP elasticity & GDP \ [*E* = *k* \* *Y*^εY^]{.math.display}\ The starting point for sustainability is economic growth consistent with an elasticity to GDP\