Germany's Energy Intensity

Monday Chart | 6 November 2023

Germany’s energy policy has come in for some well deserved criticism, but the big picture remains quite healthy. Importantly, GDP growth remains on a solid upward trend as total energy consumption falls. This is precisely what one would expect as efficiency gains enter the system, and the enormous waste associated with fossil fuel combustion exits the system. In the chart below, Germany’s GDP (right-hand scale) has grown from $1.95 trillion in the year 2000 to $4.07 trillion last year. But look at energy consumption (left-hand scale). Measured in exajoules, consumption fell from 14.3 EJ in 2000 to 12.3 EJ last year, a decline of 14%. The real action took place after 2010, however, as consumption fell from a still very high 13.9 EJ.

The newest attack on Germany’s energy policy warns that the country is at risk of deindustrialization. This meme emerges, however, from a war-related energy shock that claims Germany’s entire business model—importing cheap natural gas from Russia to run its manufacturing base—was unmasked as a charade, last year. This hardly qualifies as an insight. The entire global economy has been energy vulnerable since forever. But that hasn’t stopped the harping on Germany.

Indeed, some are even saying that Germany’s declining energy consumption is proof that deindustrialization is underway. Oh really? Because total oil consumption for example, half of which is used in transportation, also fell in the period, from 5.65 EJ in 2000 to 4.26 EJ in 2022. That’s a big decline of nearly 25%, and is greater than the total energy decline of 14%. If we are going to start recharacterizing oil-driven energy decline as “deindustrializtion” during the high adoption phase of electric vehicles, well, that will be comical. Oil remains Germany’s largest source of energy consumption by the way, still taking a 35% share, and well outpacing coal and natural gas. As important, renewables now account for 20% of total energy use. Put those two together, and yes, you will see declining energy consumption.

As highly inefficient combustion is removed from economies we will see continued growth in GDP, combined with lower energy consumption. To the uninitiated, this will seem like black magic. Well, that’s all part of the fun.

—Gregor Macdonald

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