Sofia Henriques

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Energy Transitions, Economic Growth and Structural Change

THIS BOOK ANALYSES in an international comparative context, Portugal´s energy transition from organic sources to fossil fuels in the period 1856-2006. It investigates the role that energy played in the industrialization of the country and how the relationship between energy and economic growth changed with the transition from an industrial to a service society. A unique dataset of energy quantities and prices reveals that Portugal´s transition to fossil fuels and high-energy quantities was exceptionally late in comparison with early industrializers. Until the early 1950s, high energy costs played an important role in delaying industrialization, determining Portugal´s low historical energy intensity path. The lack of domestic coal, iron reserves and suitable alternative energy sources were important factors that prevented industrialization in the age of steam. During the Second Industrial Revolution, the incentives to turn to hydro-power did not arise with the same intensity as in other coal-poor countries. Neither capital nor demand was present to guarantee the viability of large-scale hydro-power. Thermo-power stations were more adaptable to the small size of demand, but this technical choice created a vicious circle of high energy prices and labor intensive industrialization. Institutional changes and the emergence of a high-quality and cheap energy carrier, oil, in the post war period, were essential factors that broke the vicious circle of energy prices and contributed to rapid economic convergence. The notion of a transition from industry to services leading to the decline of energy intensity is based on a misconception of what the service transition was really about. It was rather modest in real terms and the major drivers of the decline of energy intensities in industrialized countries rested within the manufacturing sector. Portugal was a country with larger structural changes towards the service sector, but the rise of personal transportation, increasing demand for comfort in the service sector and technological and structural changes within the manufacturing sector contributed to an overall energy intensity increase. The diverging patterns of industrial energy intensities across countries points to the possibility that Portugal, having failed to converge during the energy-intensive phases of industrialization, is at risk of losing the advantages of the knowledge economies of the Third Industrial Revolution.