Although an increase in GDP marks an increase in energy consumption, India’s carbon and energy intensities have declined in the past decade, below the world average
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Analysis of the current state, and forecasting the future state of the energy sector, are key components of forming a long-term policy of sustainable economic development in India. The link between energy consumption, economic growth and environmental protection is an important part of this. Based on a comparative analysis of existing econometric characteristics, studies have shown that the energy intensities of developing economies converge with the energy intensities of the most efficient economies in stages. In the first stage, when energy-saving programs are conducted and gradual changes in the structure of the economy take place (such as the growth of the services sector), energy intensity decreases exponentially. Then, even as energy-saving technologies are introduced, the total potential of saving fuel and energy diminishes as the underlying technologies do not change and energy intensity falls linearly. India’s end-use energy consuming sectors—industry, buildings, transport and others—have reduced energy intensity substantially on account of energy saving technologies in the last three decades. This has resulted in the decline of carbon intensity of the economy.
In 2022, industry accounted for over 40 percent of India’s energy consumption, followed by the residential sector, which accounted for about 25 percent of energy consumption. The transport sector accounted for roughly 17 percent of energy consumption, while agriculture and forestry accounted for about 5 percent. Commercial and public services accounted for around 3 percent consumption, and unspecified and non-energy use accounted for the remaining 9 percent. Industrial energy consumption exceeded residential energy consumption in 2009 and in 2022, industrial energy consumption was almost two and a half times that of the residential sector. Coal is the largest source of industrial energy with a share of 37 percent. Biofuels and waste are the second largest source at 29 percent. Electricity has a share of about 19 percent while oil has a share of 10 percent. The share of natural gas in industrial energy use is around 5 percent. Residential and other building energy use is dominated by biomass (fire word, animal dung and waste) which accounts for about 59 percent, followed by electricity and oil with a share of about 19 percent each. Coal accounts for less than 2 percent of residential energy use and natural gas accounts for less than 1 percent. Oil products account for about 92 percent of energy used by the transport sector, a clear majority. Natural gas accounts for more than 3 percent. Biofuels account for about 3 percent and electricity about 2 percent of transportation energy consumption.
Global energy intensity declined by only 1 percent in 2023, below the 2010-2019 average decline of 1.8 percent per year, and insufficient to meet the 2°C climate target pathway. The decline was also much slower than the 2.5 percent rate achieved in 2022. In 2023, global energy consumption increased at 2.2 percent while global GDP (gross domestic product) increased by 3 percent. Energy intensity levels and trends, however, differ widely across world regions, reflecting differences in economic structure and energy efficiency achievements.
There was a sharp reduction in the energy intensity in OECD (Organisation for Economic Co-operation and Development) countries with a decline of 3.1 percent in 2023, compared to the trend between 2010-2019 of a 2.1 percent decline per year. This was mainly due to higher renewable power generation and a weak industrial activity. Energy intensity dropped by 4.7 percent in the EU (European Union), as energy consumption decreased by 4 percent, while the GDP grew marginally by 0.5 percent. The EU’s energy intensity is now 42 percent lower than the global average. Energy intensity contracted by 2 percent in both the United States (US) and in Canada, and in Japan, it dropped by 5.3 percent. In South Korea, energy intensity declined by 4.1 percent, while in Australia, it remained stable.. Outside the OECD, there were almost no changes in energy intensity in 2023. It increased by 1.3 percent in China, to reach a level that is 32 percent above the global average, contrasting with its rapid fall of 3.9 percent per year over 2010-2020. Energy intensity declined by 3.2 percent per year in Russia, by 2.7 percent per year in Africa and by 1.2 percent per year in Latin America. On the other hand, it increased by 2.3 percent per year in the Middle East in the same period.
Energy intensity declined by 1.58 percent per year in India in 2010-20, compared to a decline of 1.32 percent per year in 2000-10 and 0.61 percent per year in 1990-2000. Carbon intensity of the economy fell at a much slower rate compared to the fall in energy intensity over the last three decades. In 1990-2000, the carbon intensity fell at 0.36 percent per year and in 2000-10 carbon intensity fell by 0.23 percent. In 2010-20 carbon intensity fell by 1.3 percent per year the fastest on record. Overall energy intensity of India fell by 57 percent in the last three decades while carbon intensity fell by 36 percent. India’s carbon intensity measured as energy consumed per unit of GDP, measured in purchasing power parity (PPP) terms, is below world average but way above that of the EU and Japan.
Energy consumption is governed by the fundamental laws of physics. This means that the economy's energy consumption follows the laws of thermodynamics. The energy consumed to produce GDP is not lost, it is transformed. One of the consequences of this is climate change. This also means that the production of GDP, as an economic process, has an impact on the environment, because in this process, there is a final consumption of energy that humans cannot replace with anything else. Therefore, the difficulties of replacing energy sources undermine the stability of economic cycles in India and elsewhere.
Analysis of the relationships between energy consumption and GDP, industrial production value and national income, can identify a point in economic output (if there is one) where economic growth no longer generates additional energy consumption. Another very important question is the direction of causality in the relationship between energy consumption and the gross value of production. Specifically, the question is whether an increase in energy consumption leads to an increase in GDP, or vice versa, does higher GDP production lead to more robust energy use? Increase in overall energy consumption along with declining trends in the energy intensity and carbon intensity in India suggest that both statements are true.
Source: For energy consumption & carbon emission, statistical review of world energy; for GDP, world bank database
Lydia Powell is a Distinguished Fellow at the Observer Research Foundation.
Akhilesh Sati is a Program Manager at the Observer Research Foundation.
Vinod Kumar Tomar is a Assistant Manager at the Observer Research Foundation.
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Ms Powell has been with the ORF Centre for Resources Management for over eight years working on policy issues in Energy and Climate Change. Her ...
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Akhilesh Sati is a Programme Manager working under ORFs Energy Initiative for more than fifteen years. With Statistics as academic background his core area of ...
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Vinod Kumar, Assistant Manager, Energy and Climate Change Content Development of the Energy News Monitor Energy and Climate Change. Member of the Energy News Monitor production ...
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