Peter Zweifel Aaron Praktiknjo - Energy Economics

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Energy is life. Energy in the form of light is seen as the origin of the genesis (Genesis 1: 23). According to Greek mythology, history of human life starts with the stealing of fire by Prometheusan act for which he was condemned to eternal pain.

These citations may be sufficient to highlight the philosophical dimension of energy. According to the second theorem of thermodynamics (also known as the law of increasing entropy), all forms of life, i.e. the existence of complex structures, depend on the availability and utilization of employable energy., p. 191f). Thus, each living organism needs to acquire useful energy, which is associated with effort or cost. In spite of the abundant global availability of energy, in particular solar radiation, useful energy is always a scarce good.

A characteristic feature of biological evolution is the diversity of ways used by species to absorb energy. Individual species use a variety of food as energy source, and different methods of approaching these energy sources; moreover, they assimilate the energy contained in their food in manifold ways. The methods of acquiring, storing, and using energy belong to their distinguishing characteristics, which also determine their rank within the evolutionary hierarchy.

Securing a continuous energy supplycondition for the sustainable existence of speciesrequires the ability to shift to other energy sources (e.g. food) in case those used thus far are exhausted. In turn, such adaptations affect the existence and living conditions of other species. Therefore, biological evolution can be understood as a mutual development of energy systems used by species, which determine their population growth and living conditions. This co-evolution can occur fast or slowly; however, it is never stationary as long as life continues.

The suggested energy-related interpretation of evolutionary patterns in biology is also relevant for the evolution of social systems. In fact, historical development is characterized by phases of stability and phases of disruptive innovations:

This short overview indicates that stages in the development of energy systems have paralleled the evolution of societies. Therefore a comprehensive analysis of energy systems has to cover much more than its engineering and economic aspects. Contemporary critical writers decry the unsustainable development of present energy systems. Some claim that a transition to a sustainable, environmentally friendly energy system needs to go along with basic societal change modifying the way of life in modern industrial societiesnot to mention that in developing countries. Others reject the economic approach to solving energy problems, maintaining that a transformation designed to achieve sustainability should not be driven by economics but rather by social and ethical ideas.

While most energy economists accept the importance of ethical responsibility and social justice within and between generations, they also point to historical experience suggesting that societal guidelines and governance can have rather disastrous results if individual preferences and welfare are neglected. Transforming an energy system is not feasible if political decisions and interventions lack the majoritarian support of the society. Consideration of peoples preferences and constraints with regard to energy is key to energy economics. The remit of energy economics is to seek solutions that take into account the preferences of consumers, managers, and owners of companies as well as political leaders. Of course, individuals who are altruistic and take the welfare of others into account facilitate such solutions, yet a society consisting mostly of altruistic individuals is likely to be an idealistic assumption.