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Energy and Economic Development: An Assessment of the State of Knowledge
Michael Toman with Barbora Jemelkova

Working Paper #9
November 2002
This paper was first presented at the Rural Energy Transitions conference, jointly convened by PESD and The Energy and Resources Institute in New Delhi, India, 5-7 November 2002. It is also being published as part of Resources for the Future'sDiscussion Paper Series, DP 03-13.

The Program on Energy and Sustainable Development (PESD) at Stanford University is an interdisciplinary research program focused on the economic and environmental consequences of global energy consumption. Its studies examine the development of global natural gas markets, reform of electric power markets, and how the availability of modern energy services, such aselectricity, can affect the process of economic growth in the world’s poorest regions. The Program, established in September 2001, includes a global network of scholars—based at centers of excellence on four continents—in law, political science, economics and engineering. It is based at the Center for Environmental Science and Policy, at the Institute for International Studies.

Program onEnergy and Sustainable Development At the Center for Environmental Science and Policy Encina Hall East, Room 415 Stanford University Stanford, CA 94305-6055

About the Author
Michael Toman is a senior fellow at Resources for the Future and former director of its Energy and Natural Resources Division. Dr. Toman’s research interests include: climate change policy;emission-permit trading; environmental strategies for sustainable development; Central and Eastern Europe; and energy security. He served as a senior economist on the staff of President Clinton’s Council of Economic Advisers (1994-95), advising the staff of the Council on policy issues concerning natural resources and the environment. He has also served as a visiting economist at the Federal EnergyRegulatory Commission (1987) and on the faculties of the University of Maryland and Johns Hopkins University. Dr. Toman received his doctorate degree in economics from the University of Rochester. Barbora Jemelkova is the Research Assistant to Dr. Michael Toman at Resources for the Future. She holds a Bachelor’s degree in economics from Barnard College, Columbia University and will be attendingthe Woodrow Wilson School of Public Policy at Princeton University beginning in the fall of 2003.

Energy and Economic Development: An Assessment of the State of Knowledge
Michael Toman with Barbora Jemelkova1

I. Introduction
Energy development, interpreted broadly to mean increased provision and use of energy services, is an integral part of enhanced economic development. Advancedindustrialized societies use more energy per unit of economic output and far more energy per capita than poorer societies, especially those still in a preindustrial state. Energy use per unit of output does seem to decline over time in the more advanced stages of industrialization, reflecting the adoption of increasingly more efficient technologies for energy production and utilization as well aschanges in the composition of economic activity (see, e.g., Nakicenovic 1996). And energy intensity in today’s developing countries probably peaks sooner and at a lower level along the development path than was the case during the industrialization of the developed world. But even with trends toward greater energy efficiency and other dampening factors, total energy use and energy use per capitacontinue to grow in the advanced industrialized countries, and even more rapid growth can be expected in the developing countries as their incomes advance. The fact that expanded provision and use of energy services is strongly associated with economic development leaves open how important energy is as a causal factor in economic development. Development involves a number of other steps besides those...
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