What is exergy economics?

How a new approach may offer insights into decoupling energy use from economic output. Blog post from Paul Brockway of the University of Leeds.


Since 1971, each 1% increase in global GDP per capita has been associated with a 0.7% increase in per capita primary energy consumption. This conflicts with ambitious climate targets, which are likely to require ultimately the stabilisation in levels of energy consumption. Therefore the most significant challenge to meeting such climate targets may lie not in the decarbonisation of energy supply, but in the decoupling of energy consumption from economic activity. To help unpick this decoupling puzzle, it is important to gain a deeper understanding of the linkages between energy consumption, economic activity and human welfare, as well as the particular role of improved energy efficiency. The emerging field of exergy economics could offer some new insights into these challenges.

The challenge of decoupling energy use from economic output

Rapid reductions in greenhouse gas (GHG) emissions are anticipated to be met via two strategies:

  • Decarbonisation: substitution of fossil fuels by low or zero carbon energy sources, such as renewables and nuclear, or the capture and storage of carbon emissions.
  • Reducing energy demand: through structural change and the increased use of energy efficient technologies.

Reducing energy demand via improved energy efficiency is commonly seen as a win-win solution: reducing energy use (helping to meet climate goals) whilst boosting economic output. As a result energy efficiency programmes are central to emission abatement efforts and a small number of countries – most notably the UK – have begun to decouple energy consumption from economic output (GDP). But at the global level, despite continuing improvement in energy efficiency, energy use remains tightly linked to GDP (1). This sets a crucial question: how can we really achieve energy-GDP decoupling?

An alternative, exergy-based approach

Exergy economics is an emerging field of research that has the potential to yield new insights into our understanding of the apparently strong link between energy consumption and economic activity. In so doing, new ideas into how to decouple this linkage may be possible. The approach hinges upon the thermodynamic concept of exergy as ‘available energy’, and the use of second-law rather than first-law measures of thermodynamic efficiency. To illustrate how energy and exergy are different, consider the thermal energy content of the water molecules in a room full of air, and a 12V car battery (Figure 1).

exergy economics


Figure 1: Exergy versus energy (2)


Both ‘systems’ in this example (above) have the same (first law) thermal energy content (in Joules), but only the 12V battery has energy in concentrated, usable form (i.e. exergy) from which it is possible to obtain physical work. Unlike energy, which can be neither created nor destroyed, exergy is necessarily destroyed in all real-world energy conversion processes. As energy flows through a conversion chain, the usable (exergy) component reduces in size until it is lost (as dissipated heat) in exchange for energy services, such as illumination (Figure 2) and thermal comfort. The final stage in the chain is termed ‘useful exergy’.



Figure 2 Conversion of primary exergy to useful exergy: Primary-to-final-to-useful exergy conversion stages for illustrative lamp (courtesy of T. Domingos, Instituto Superior Tecnico, Lisbon)


The core claim of exergy economists is that it is useful exergy that drives economic activity, since it is closest to the energy services that we consume. This claim rests upon a small but growing body of research whose results contradict the assumptions of orthodox economics. The orthodox view is that energy consumption provides a relatively a small cost contribution to economic output, thus implying decoupling should be straightforward. In contrast, exergy economists claim that the improvements in economic productivity over the last century have largely been achieved by providing workers and capital equipment with increasing quantities of useful exergy. In this alternative view, energy contributes much more to economic output than is suggested by its small share of total costs: implying that decoupling will be more challenging.

This research area is novel and still at a relatively early stage of development. Its proponents are developing estimates of the consumption of useful exergy within different sectors of national economies, and employing those datasets with both new and existing economic models. The overriding aim is to gain deeper insights into the relationship between energy consumption, economic output and environmental sustainability.

To date, this exergy-based approach has largely been ignored by mainstream energy economics. However, given the critical importance of decoupling, it is important, that these ideas developed further, placed upon firmer foundations, subject to critical scrutiny and recognised more widely. To meet this need, the Centre on Innovation and Energy Demand (CIED), the Centre on Industrial Energy, Materials and Products (CIE-MAP) and the Institute Superior Technico, Lisbon organised a two-day International Workshop on Exergy Economics, held at the University of Sussex in July 2016. The interactive event explored key questions, including:

  1. What are the conflicts and synergies between exergy economics and mainstream energy economics?
  2. What are the contributions of exergy economics to climate change and sustainability analysis?
  3. What are the potential policy implications of this work?

Both Centres are conducting further research on exergy economics, as part of a broader network of activities across Europe and further afield – and more is being planned. If you would like more information, or would like to become involved in the Exergy Economics Network, please contact Paul Brockway


References / further reading

  1. Csereklyei Z, Stern DI. Global Energy Use: Decoupling or Convergence? Energy Economics. Elsevier B.V.; 2015;51(2015):633–41.
  2. Brockway PE, Dewulf J, Kjelstrup S, Siebentriit S, Valero A, Whelan C. In a resource-constrained world: Think exergy not energy. Report D/2016/13324/5 published by Science Europe, Brussels. 2016;