Energy efficiency and economic growth

Many Russian and foreign economists are not sure, why it is essential to take efforts to improve energy efficiency in general and in Russia in particular. Unlike labour productivity improvement, energy efficiency improvements are viewed as desirable for the economic growth, yet not at all sine qua non, as economic growth is taken as mostly driven by labour and capital, with an inconspicuous shadow of energy vaguely swaying in the background. This paper aims to show the actual importance of improving energy efficiency to achieve economic growth. It highlights the contribution of energy efficiency in addressing five problems related to economic growth: removal of growth constraints by improving the affordability of energy; improvement of competitiveness; enhancement of multifactor productivity through a better 'quality of energy'; mitigation of the natural resources scarcity; ensuring growth despite tough environmental limitations. Historically, 1 percent GDP per capita growth requires 0.5-0.8% reduction in GDP energy intensity. This latter value grows as the level of economic development increases.