Coupling model of energy consumption with changes in environmental utility

Energy Policy 43 (2012) 235–243

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Coupling model of energy consumption with changes in environmental utility Hongming He, C.Y. Jim n Department of Geography, The University of Hong Kong, Pokfulam Road, Hong Kong

a r t i c l e i n f o

abstract

Article history: Received 1 March 2011 Accepted 29 December 2011 Available online 26 January 2012

This study explores the relationships between metropolis energy consumption and environmental utility changes by a proposed Environmental Utility of Energy Consumption (EUEC) model. Based on the dynamic equilibrium of input–output economics theory, it considers three simulation scenarios: fixedtechnology, technological-innovation, and green-building effect. It is applied to analyse Hong Kong in 1980–2007. Continual increase in energy consumption with rapid economic growth degraded environmental utility. First, energy consumption at fixed-technology was determined by economic outcome. In 1990, it reached a critical balanced state when energy consumption was 22  109 kWh. Before 1990 (x1 o 22  109 kWh), rise in energy consumption improved both economic development and environmental utility. After 1990 (x1 4 22  109 kWh), expansion of energy consumption facilitated socio-economic development but suppressed environmental benefits. Second, technological-innovation strongly influenced energy demand and improved environmental benefits. The balanced state remained in 1999 when energy consumption reached 32.33  109 kWh. Technological-innovation dampened energy consumption by 12.99%, exceeding the fixed-technology condition. Finally, green buildings reduced energy consumption by an average of 17.5% in 1990–2007. They contributed significantly to energy saving, and buffered temperature fluctuations between external and internal environment. The case investigations verified the efficiency of the EUEC model, which can effectively evaluate the interplay of energy consumption and environmental quality. & 2012 Elsevier Ltd. All rights reserved.

Keywords: Energy consumption Environmental utility Green building

1. Introduction Energy is vital for social and economic development, but its use has imposed significant environmental impacts (Apergis et al., 2010; Apergis and Payne, 2010; Chontanawat et al., 2008; Coondoo and Dinda, 2002; DeCanio, 2009; De Vries et al., 2007; Dinda, 2004; Menyah and Wolde-Rufael, 2010; Ozturk, 2010; Payne, 2009). Increasing urbanisation coupled with globally critical issues such as pollution, energy supply and consumption, and resource shortage have caused acute urban problems in different parts of the world. Buildings account for more than 30% of worldwide energy use, and generate globally the equivalent of 8.6 billion tons of CO2 a year. This emission is expected to nearly double in the next two decades (Cohen and Allsopp, 1988; Criqui et al., 2000; Fan et al., 2007; Halkos, 1995; Hoekstra and van den Bergh, 2003; Nag and Parikh, 2000; Zhang and Ang, 2001). The need to curtail the deleterious environmental impacts and global warming due to escalating energy use has been widely recognised.

n

Corresponding author. Tel.: þ852 2859 7020; fax: þ 852 2559 8994. E-mail address: [email protected] (C.Y. Jim).

0301-4215/$ - see front matter & 2012 Elsevier Ltd. All rights reserved. doi:10.1016/j.enpol.2011.12.060

Besides social and economic factors, steadily rising energy costs in recent years have nurtured sustainable concepts and applications to contain chronic environmental impacts. Public governance and the construction industry are confronted by the strong urge to embrace sustainability features. Buildings present great potentials to reduce energy consumption and associated greenhouse gas emissions (Becken et al., 2001; Biesiot and Noorman, 1999; Deng and Burnett, 2000; Haas and Schipper, 1998). Extensive studies have generated findings to optimise wasteful operations and improve energy efficiency in buildings. The wide adoption of sustainable buildings could collectively enhance the sustainability of the built environment, and in turn improve the quality of life. In the new century, this issue has gradually assumed a prominent profile as buildings move away from former domination by design and pragmatic paradigms to a more enlightened alliance with nature. A fresh and holistic approach is called for to design, construct and manage the built environment by addressing buildings fundamentally in their integral spatial context (Lam et al., 2010; Pearlmutter and Rosenfeld, 2008; Williamson and Erell, 2001). New sets of regulatory practices, indicators, measurements, and priorities are emerging with earnest applications at all scales, ranging from individual buildings to the district and city levels.

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There are strong incentives to design green buildings for energy efficiency and environmental sustainability, so that their notable energy consumption and contribution to climate change could be ameliorated (Fung et al., 2006; Lam et al., 2010; Williamson and Erell, 2001). Green buildings, equipped with abiotic and biotic features to subdue energy use and foster energy efficiency, are both environmental- and resource-friendly. They connote the practice of ecological or sustainable architecture, characterised by a high-level comfortable and healthy indoor ambience achieved by low energy consumption and operating costs. Green buildings imply well-considered use of natural (green roof and green wall) and artificial energy systems, rendering them more amenable to human use and minimising pollutant generation. Their design incorporates nature as an integral component of the building fabric, and ensures that their collective expression in the built environment is not detrimental to humans and other life forms. Some studies have investigated comprehensively the energy consumption impacts on environmental quality. The multiple factors of energy use have been extensively evaluated (Alca´ntara and Roca, 1995; Ayres, 2000; Boyd and Uri, 1991; Conrad and Schroder, 1993; Costanza, 2000; Ferng, 2001; Hazilla and Kopp, 1990; Nestor and Pasurka, 1995). Statistical models, such as linear and nonlinear regression, address the complex relationships amongst energy consumption, climate change and environmental quality. The findings demonstrate that energy consumption has contributed to the urban heat island effect, and that it is sensitive to indicators of urban environmental quality (Akbari et al., 1992; Fung et al., 2006; Sailor and Munoz, 1997; Santamouris et al., 1999). Urban energy saving, building energy consumption, and associated urban environmental improvement have been investigated by heating, ventilating, and air conditioning (HVAC) based models (Badr and Nasr 2001; Bhartendu and Cohen, 1987; Parkpoom et al., 2004; Sarak and Satman, 2003). The studies offer suggestions for efficient energy use and ecological building design, and verify the intimate association amongst urban climate change, socio-economic activities and energy consumption. The key literature listed above summarises the methodological and empirical developments in this field, and provides insights on energy consumption impacts on environmental quality. As an exceptionally compact large city in the tropics with a high energy-consumption ecological footprint, Hong Kong demands an in-depth assessment of the relationships between energy consumption and environmental utility changes. In the last five decades, it has experienced intensive urbanisation in a transformation towards a highly developed metropolis. Large tracts of previous rural lands have been replaced by buildings and artificial-impermeable covers (Fung et al., 2006; Lam et al., 2010). The rapid and condensed urban development has been accompanied by a steep rise in energy consumption and collateral environmental burdens of gaseous and particulate pollutants, greenhouse gases, and waste heat (Ang and Zhang, 2000; Casler and Rose, 1998; Chang et al., 2008; Zhang et al., 2009). Extreme urban climate occurs more frequently under complex interactions of global climate change and local urban heat island effect. The purpose of this study is to develop a proposed Environmental Utility of Energy Consumption (EUEC) model to explain the relationships between energy consumption and environmental utility changes. The model is based on the dynamic equilibrium of input–output theory in economics, with the primary assumption that a metropolis that grows with expanding energy consumption is likely to challenge nature and environmental quality. Three scenarios of model simulation are evaluated: fixed technology, technological innovation and green building effect. The model is further applied to analyse environmental utility

change of energy consumption and environmental benefits of green buildings in Hong Kong (1980–2007).

2. Materials and methods 2.1. Data sources Data are collected to analyse the environmental utility of energy consumption by the proposed Environmental Utility of Energy Consumption (EUEC) model, and the relevant interactions of the two factors in Hong Kong. Energy use data are acquired from the Census and Statistics Department, and weather data from the Hong Kong Observatory. Environmental quality data are mined from government sources, including the Environmental Protection Department, Planning Department, Lands Department, research publications, reports, maps and satellite images. Data related to green building construction are projected according to economic status of the time. Some data, such as energy input and economic output, are pre-processed using the normalised index for model simulation purposes. 2.2. Environmental utility of energy consumption model To understand the relationships between urban energy consumption and green building environmental benefit, we design a EUEC model based on an economic production function model. In microeconomics and macroeconomics, a production function specifies the maximum output that can be produced from a given amount of input (which may be good or bad). Accordingly, the basic assumption of our EUEC model is that when a metropolis grows, it may consume more energy (e.g., electricity power, fossil fuel, etc.), which is likely to challenge environmental quality, and degrade environmental utility (or ecological and environmental benefits which can be translated into monetary value). However, green buildings are likely to improve environmental benefits, and thus increase environmental utility. From economics, the marginal utility theory stipulates that the balanced state can be achieved at the point where economic input equals economic output. Energy utility is the input of all individuals, and the marginal pollution cost is the increase in cost per unit increase in energy consumption. We define the balanced state as the point where the energy utility equals the marginal pollution cost, at which equilibrium is attained. We further discuss the EUEC model structure by considering three scenarios of technological development. 2.2.1. Environmental utility of fixed technology It is known that energy use produces double-sided effects: positively promote economic development and negatively degrade environmental quality. We assume that a certain level of energy consumption (input x1) may bring a certain economic outcome (output y1) and environmental pollution (output y2). The cost of energy consumption is decided by energy price (C1 of fixed cost, PEt of changing unit price) and supply amount (input x1). Thus, energy consumption (x1) is the variable of functions of economic outcome (y1) and environmental pollution (y2). Energy cost (y3) is function of energy price (C1 of fixed cost, PEt of changing unit price) and supply amount (input x1). Therefore, the Basic EUEC model can be expressed as: 8 Economicoutcome ¼ f ðEnergyconsumption Þ > < Environmentpollution ¼ gðEnergyconsumption Þ > : Cost energy ¼ mðEnergyfixedunitprice ,Energychangingunitprice ,Energyconsumption Þ

ð1Þ

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243

ð2Þ

According to marginal theory, the balance is achieved at the point where marginal energy cost (y30 ) equals to maximal outcome. Marginal values are calculated through derivative of functions: 8 0 y1 ¼ f ðx1 Þ0 > > > > 0 < y2 ¼ gðx1 Þ0 -f ðx1 Þ0 gðx1 Þ0 ¼ PEt Ux01 ð3Þ 0 0 y ¼ C þ x UPE , ðt ¼ 1,2,3,. . .,18Þ > t 1 3 1 > > > 0 0 0 : y3 ¼ y1 y2

2.2.2. Environmental utility of technology innovation Technological innovation plays important roles in energy consumption effects on socio-economic development and environmental quality. We consider technology as an internal variable based on the above Basic EUEC model. Therefore, economic outcome (y1) is a function of both energy consumption (x1) and energy use technological innovation and pollution treatment innovation (T); environmental pollution (y2) is function of energy consumption (x1) and T. We can assume T as the endogenous variable of economic outcome (y1) and environmental pollution (y2). Therefore, the Technology-induced EUEC model can be expressed as: 8 Economicoutcome ¼ f ðEnergyconsumption ,Technologyenergy Þ > < Environmentpollution ¼ gðEnergyconsumption ,Technologyenergy Þ > : Cost energy ¼ mðEnergyfixedunitprice ,Energychangingunitprice ,Energyconsumption Þ

4Þ 8 y ¼ f ðx1 ,TÞ > > > 1 > < y ¼ gðx1 ,TÞ 2

ð5Þ

y3 ¼ C 1 þ x1 UPEt , ðt ¼ 1,2,3,. . .18Þ > > > > : T ¼ kðtÞ,ðt ¼ 1,2,3,. . .8Þ

Therefore, the marginal values are determined by the EUEC model as: 8 0 y1 ¼ f ðx1 ,TÞ0 > > > > y0 ¼ gðx ,TÞ0 > 1 > < 2 y03 ¼ C 1 þ x01 UPEt , ðt ¼ 1,2,3,. . .,18Þ-f ðx1 ,T 1 Þ0 gðx1 ,T 1 Þ0 ¼ PEt Ux01

> > > y0 ¼ y01 y02 > > > 3 : T ¼ kðtÞ,ðt ¼ 1,2,3,. . .,18Þ

ð6Þ

2.2.3. Environmental utility of green building When the environmental improvement effect of green buildings is considered, environmental improvement (y4) is function of green building construction (x2). The cost of green building construction (y5) is determined by green building construction price (C2 of fixed cost, and PGt of changing unit price) and total construction amount (input x2). Thus Green-building EUEC model can be expressed as: 8 Economicoutcome ¼ f ðEnergyconsumption ,Technologyenergy Þ > > > > > Environmentpollution ¼ gðEnergyconsumption ,Technologyenergy Þ > < Costenergy ¼ mðEnergyfixedunitprice ,Energychangingunitprice ,Energyconsumption Þ > > > > Environmentimprovement ¼ hðGreenBldgconstrution ,Technologyenergy Þ > > : Cost ¼ nðGreenBldg ,GreenBldg ,GreenBldg green

fixedunitprice

changingunitprice

8 y1 ¼ f ðx1 ,TÞ > > > > > y2 ¼ gðx1 ,TÞ > > > > < y ¼ C 1 þx1 UPEt , ðt ¼ 1,2,3,. . .18Þ 3

ð8Þ

y4 ¼ hðx2 ,TÞ > > > > > > y5 ¼ C 2 þx2 UPGt , ðt ¼ 1,2,3,. . .18Þ > > > : T ¼ kðtÞ,ðt ¼ 1,2,3,. . .18Þ

The marginal values of green building are calculated by the following functions: 8 0 y1 ¼ f ðx1 ,TÞ0 > > > 0 > > y ¼ gðx1 ,TÞ0 > > > 20 > 0 > > < y3 ¼ C 1 þx1 UPEt , ðt ¼ 1,2,3,::::18Þ 0 y4 ¼ hðx2 ,TÞ0 ð9Þ > > > y05 ¼ C 2 þx02 UPGt , ðt ¼ 1,2,3,::::18Þ > > > > > y0 y0 þ y0 ¼ y0 þy0 > 5 1 2 4 3 > > : T ¼ kðtÞ,ðt ¼ 1,2,3,::::18Þ f ðx1 ,TÞ0 gðx1 ,TÞ0 þ hðx2 ,TÞ0 ¼ PEt Ux01 þPGt Ux02

ð10Þ

where, x1 (MJ) is the total amount of energy consumption; x2 (m2), the total amount of green building construction; T, changing technology of energy consumption and environmental pollution treatment; PEt (HK$), unit price of energy consumption; PGt (HK$), unit price of green building construction; C1 (HK$), fixed cost of energy input; and C2 (HK$), fixed cost of green building construction price. As marginal pollution cost is an increasing function, and energy utility is a decreasing function, energy utility should exceed marginal pollution cost before the two reach their intersection point, and environmental quality should remain healthy. Urban development could create increasingly negative values to degrade environmental quality after this critical point. We should stop urban expansion or improve technology to reduce the environmental burdens to an acceptable level before this critical point is reached (He et al. 2007, 2008). The EUEC model is defined as a partial equilibrium model which determines energy consumption and environmental utility at a certain stage of economic development and urban growth, and it functions to equalise the quantities between energy consumption and economic development, resulting in equilibrium of environmental pollution and protection.

3. Results and discussion 3.1. Energy consumption impacts on socio-economic and environmental quality There is a growing concern about energy consumption and its impacts on the environment. Energy is one of the crucial elements 2000 1800 1600 GDP (109 HK$)

8 > < y1 ¼ f ðx1 Þ y2 ¼ gðx1 Þ > : y ¼ C þ x UPE , ðt ¼ 1,2,3,. . .18Þ t 1 1 3

237

1400 1200 1000 800 600 400 200

y = 137Ln(x ) - 321

0 0

10

20

30

40

50

Energy consumption (electricity, 109 kWh)

construction Þ

ð7Þ

Fig. 1. Correlation between energy consumption and GDP in Hong Kong (1980–2007).

238

Table 1 Data sources for model simulation of environmental utility of energy consumption model. x1 (Electricity amount, 109 kWh)

X2 (green building construction area,106 m2, projected)

y1 (GDP,109 HK$)

y2 (CO2 emissions of petroleum, 106 t)

y3 (Total cost of electricity, 109 HK$)

y4 (Energy saving, 109 kW h)

y5 (Total cost of green building construction, projected, 109 HK$)

PEt (unit price of electricity consumption, HK$)

PGt (unit price of green building construction, HK$, projected)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

10.130 10.724 11.526 13.055 13.971 14.774 16.382 20.033 21.387 20.746 22.099 23.409 24.053 25.469 23.079 26.510 29.750 30.508 32.224 32.329 34.422 35.362 36.030 36.327 36.997 37.740 38.018 38.518

18.365 18.595 18.925 19.145 19.195 19.220 19.365 19.470 19.580 19.685 19.840 20.017 20.222 20.298 20.438 20.514 20.654 20.787 20.992 21.222 21.596 21.799 21.872 21.960 22.000 22.034 22.062 22.092 22.178

230.400 247.200 257.600 238.400 267.200 284.000 327.200 404.000 476.800 550.400 615.200 710.400 832.000 960.000 1088.000 1152.000 1272.000 1408.000 1336.000 1304.000 1352.000 1336.000 1312.000 1272.000 1328.000 1424.000 1520.000 1656.000 1720.000

18.099 18.648 18.079 17.157 16.487 15.796 17.641 18.005 18.944 18.976 19.164 20.008 23.116 24.112 27.656 28.457 27.983 26.668 29.515 40.692 36.125 35.953 40.365 41.039 47.889 49.055 47.458 48.429 45.598

4.052 5.898 6.339 7.833 8.383 8.864 9.502 11.419 11.763 12.033 13.701 15.918 16.837 18.847 18.463 22.268 25.585 27.457 29.002 29.096 30.980 33.948 39.633 39.960 40.697 41.514 41.820 42.370

0.076 0.080 0.086 0.098 0.105 0.111 0.123 0.150 0.160 0.156 0.166 0.176 0.180 0.191 0.173 0.199 0.223 0.229 0.242 0.242 0.258 0.265 0.270 0.272 0.277 0.283 0.285 0.289

19,045.423 21,099.747 23,832.253 26,508.167 28,854.884 29,921.696 31,225.094 33,196.350 35,991.956 39,870.983 44,302.720 49,728.233 55,036.195 60,116.587 65,853.280 72,071.836 77,161.279 82,161.657 85,323.034 82,807.565 81,317.559 80,604.461 78,448.155 76,952.217 76,861.108 76,979.894 77,077.717 77,182.527 80,814.753

0.40 0.55 0.55 0.60 0.60 0.60 0.58 0.57 0.55 0.58 0.62 0.68 0.70 0.74 0.80 0.84 0.86 0.90 0.90 0.90 0.90 0.96 1.10 1.10 1.10 1.10 1.10 1.10

1,037.050 1,134.700 1,259.300 1,384.600 1,503.250 1,556.800 1,612.450 1,705.000 1,838.200 2,025.450 2233.000 2484.300 2721.600 2961.700 3222.100 3513.300 3735.900 3952.550 4064.550 3901.968 3765.399 3697.622 3586.693 3504.199 3493.687 3493.687 3493.687 3493.687 3643.915 3662.135

T (GHG emission per GDP,106 kg/ HK$)

t

881 842 774 641 513 465 362 302 305 275 264 248 241 278 257 224 197 175

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243

Year

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243

that literally fuels economic development. Continual expansion of energy consumption has promoted rapid economic growth of Hong Kong especially in recent decades. Meanwhile, the cognate issues of environmental quality and energy efficiency have drawn attention. Energy consumption has continuously risen with rapid GDP growth in Hong Kong (Fig. 1; Table 1). Statistical analysis shows a strong correlation (R2 ¼0.92) between GDP and energy consumption between 1980 and 2008. The GDP improved from HK$ 230.4  109 in 1980 to HK$ 1720  109 in 2008, signifying a 7.7% average annual growth. The officially pegged exchange rate is US$ 1.00¼ HK$ 7.80. Electricity and petroleum consumption increased from 10.13  109 kWh in 1980 to 38.518  109 kWh in 2007, and 12.4  104 bbl/day (bbl refers to oil barrel, with 1 bbl ¼158.984 L or 42 US gallon) in 1980 to 35.9  104 bbl/day in 2009, respectively. An average annual increase of electricity and petroleum consumption reached, respectively 5.2% and 3.6% from 1980 to 2007. Energy use per capita increases from 925 kg (energy weight equivalent to denote total energy use in the form of solid, liquid and gas fuels) in 1980 to 1985 kg in 2007. Energy consumption varies by sectors. The commercial sector accounts for 64% of the total energy consumption in 2007, denoting a sharp increase of 15.4% over the previous year. Energy consumption for air-conditioning of building space accounts for a significant proportion of the total primary energy requirement in Hong Kong. It took up 12% of the total energy use in 1982, and increased to 15% in 2007. The unit cost of energy increased notably in the study period (Table 1). The average tariffs for electricity and gas increased notably from HK$ 0.36/kWh and HK$ 2.61/L in 1980 to HK$ 1.1/kWh and HK$ 14.0/L in 2007. In 2004, Hong Kong’s total energy consumption was valued at HK$ 90  109, which was about 7% of the GDP at HK$ 1269  109. However, a decoupling analysis of energy consumption and economic growth indicates a rather stable aggregate energy use in 1997–2004. The period witnessed notable economic expansion, with constant price GDP registering an average annual growth rate of 5.6%. The steady energy consumption could be attributed to the rising electrification of the fuel mix, improvements in enduse energy efficiency, and fundamental changes in the economic structure with shift away from manufacturing to service sector. In tandem with rapid socio-economic development, the community has become increasingly concerned about environmental quality and energy efficiency. The negative environmental externalities associated with a high level of energy use include billions of tons of greenhouse gas emission into the atmosphere, bringing degradation of urban and natural ecosystems (Fig. 2; Table 1). The substantial amount of combustion pollutants emitted from fossil fuel burning has threatened air quality and human health in the region. The total CO2 emission of petroleum increased notably 60

6

CO2 emission (10 t)

50

from 18.099  106 t in 1980 to 45.598  106 t in 2008. However, the emission of greenhouse gas per GDP decreased from 881 kg/ HK$ in 1980 to 175 kg/HK$ in 2007. The use of coal as the main fuel for power generation in Hong Kong has substantially increased CO2 emission in the territory. The relationships between energy consumption and urban air temperature change in Hong Kong are evaluated. Although energy consumption per capita has increased by more than 110% in 1980–2009, annual mean temperature remained at about 23 1C with an average rise of 0.28 1C per decade in 1980–2009 (HK Observatory data). Thus there is no significant correlation between annual total energy consumption and annual mean temperature. However, when monthly data are investigated, a strong correlation is detected (R2 ¼ 0.90) between monthly average electricity consumption and monthly mean temperature (Fung et al., 2006). Even though we cannot determine the specific interactions between energy consumption effect and urban climate change, the urban heat island effect could be linked to anthropogenic impacts of energy consumption. Modelling environmental utility of energy consumption is important. It helps understanding the importance of energy use efficiency, technological innovation, and ecological and sustainable design of cities. 3.2. Modelling environmental utility of energy consumption Energy use brings dual effects, namely positive promotion of economic development and negative degradation of environmental quality. In this section, we initially conducted model simulation through the proposed EUEC model to explore the relationships between urban energy consumption and environmental benefits of green buildings. We then further analysed the environmental utility of green buildings by considering three scenarios: pollution induced by energy consumption, technological innovation, and environmental improvement by green buildings on the basis of the marginal utility theory in economics. The results are elaborated below.

3.2.1. Energy consumption of fixed technology effects on environmental effects As energy consumption continues to increase with socioeconomic advancements, it is unlikely that Hong Kong can expand its socio-economic domain indefinitely. It is worthwhile to evaluate the sustainability of this energy consumption process. Data in Table 1 are used. A quadratic model for economic outcome as a function of energy consumption (y1 ¼ f(x1)) and pollution as a function of energy consumption (y2 ¼g(x1)) are proposed below: 8 8 0 y ¼ 137=x1 > > < y1 ¼ 137lnðx1 Þ321 < 1 2 y2 ¼ 0:07x1 2:7x1 þ44 - y02 ¼ 0:14x1 2:7 ð11Þ > > : y ¼ C þPE Ux : y0 ¼ PE ,ðt ¼ 1,2,3,. . .,18Þ t t 1 1 3 3 The balance point is achieved at: 8 0 < y1 y02 y03 pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi 2 : x1 ¼ ðPEt þ 2:7Þ 87:68ðPEt þ 2:7Þ 0:28

40 30 20 10

y = 0.07x

- 2.7x + 44

0 0

10

20

30

40

50

9

Energy comsumption (Electricity, 10 kWh)

Fig. 2. Correlation between energy consumption and environmental pollution (CO2 emission) in Hong Kong (1980–2007).

239

ð12Þ

On this basis, the critical value is attained when x1 ¼22 (in 1990; Fig. 3; Table 2). It means that energy consumption and economic outcome reach a balanced state for a fixed ratio. Energy consumption increases with economic production; it also increases greenhouse gases emission. The curves show similar trends, but their rates of convergence to total values are different. The effect of energy consumption occurs when it decreases

240

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243

economic output in response to increase of energy price and economic output effect. If input cost is lagging behind output values: 8 0 < y1 y02 4 y03 pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi ð13Þ 2 : x1 o ððPEt þ 2:7Þ 87:68ÞðPEt þ 2:7Þ 0:28 That is, when x1 o22 (before 1990), energy consumption might increase with improvements in economic development and environmental utility. In this case, energy consumption will continue to act positively to bring socio-economic and environmental benefits. However, when input cost exceeds output values: 8 0 < y1 y02 o y03 pffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi ð14Þ 2 : x1 4 ððPEt þ 2:7Þ 87:68ÞðPEt þ 2:7Þ 0:28

1.5

9

x1 (Statistical, 10 kWh)

40

x1 (Simulated, fixed technology, 10 kWh)

35

PEt (Unit price of electricity, HK$)

9

1.2

30 0.9

25 20

0.6

15 10

Unit price (PEt.HK$)

Energy consumption (x , electricity, 10 kWh)

45

0.3

5

3.2.2. Technology innovation effects on environmental utility of energy consumption Technological innovation is important for environmental benefits. Lacking technological improvements could increase pollution in tandem with energy consumption (Fig. 4; Table 2). Under such stifling conditions, environmental benefits would remain low because the economy could grow only in response to rise in energy consumption. In contrast, technological improvements could lift environmental utility to a higher level. However, the situation for pollution is different. With static pollution treatment technology, pollution continues to increase, whereas improving technology could lower pollution generation. The relationship between energy consumption and pollution is further analysed on basis of the technology-induced EUEC model. Technology is defined as an endogenous variable in our model: 8 2 2 > > < y1 ¼ f ðx1 ,TÞ ¼ 4909 þ 319x1 þ 9:3T3:68x1 0:28x1 T0:003T 2 y2 ¼ gðx1 ,TÞ ¼ 232:713:4x1 0:11T þ 0:22x1 þ 0:004x1 T þ 0:0003T 2 > > : y ¼ C þ PEt Ux 1 1 3 ð15Þ

2006

2004

2002

2000

1998

1996

1994

1992

1990

1988

1986

1984

1982

0.0 1980

0

That is, when x1 422 (after 1990), increase of energy consumption might bring reduction of socio-economic development and environmental benefits. In order to reverse the trend, it is more important to raise energy-use efficiency than to increase the capacity of the environment to serve as a sink to dampen the harmful effect of effluents.

Year Fig. 3. Simulated environmental utility of fixed technology in Hong Kong (1980–2007).

8 1 ,TÞ ¼ 7:36x1 0:28T þ 319 y0 ¼ @f ðx > > @x1 < 1 @gðx1 ,TÞ 0 y2 ¼ @x1 ¼ 0:44x1 þ 0:004T13:4 > > : y0 ¼ PE 3

ð16Þ

t

Table 2 Simulation results of environmental utility from environmental utility of energy consumption model. Year

PEt (unit price of electricity consumption, HK$)

PGt (unit price of green building construction, HK$, estimated)

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

0.40 0.55 0.55 0.60 0.60 0.60 0.58 0.57 0.55 0.58 0.62 0.68 0.70 0.74 0.80 0.84 0.86 0.90 0.90 0.90 0.90 0.96 1.10 1.10 1.10 1.10 1.10 1.10

1037.050 1134.700 1259.300 1384.600 1503.250 1556.800 1612.450 1705.000 1838.200 2025.450 2233.000 2484.300 2721.600 2961.700 3222.100 3513.300 3735.900 3952.550 4064.550 3901.968 3765.399 3697.622 3586.693 3504.199 3493.687 3493.687 3493.687 3493.687

T (GHG emission per GDP, 106 kg/HK$)

881 842 774 641 513 465 362 302 305 275 264 248 241 278 257 224 197 175

x1 (Electricity amount, 109 kWh)

X1 (simulated, fixed technology, 109 kWh)

X1 (simulated, technology innovation, 109 kWh)

X1 (simulated, green building effects, 109 kWh)

10.130 10.724 11.526 13.055 13.971 14.774 16.382 20.033 21.387 20.746 22.099 23.409 24.053 25.469 23.079 26.510 29.750 30.508 32.224 32.329 34.422 35.362 36.030 36.327 36.997 37.740 38.018 38.518

22.198 21.782 21.799 21.750 21.750 21.731 21.757 21.757 21.766 21.740 21.715 21.699 21.666 21.648 21.507 21.302 21.189 21.035 21.020 20.964 20.964 20.832 20.528 20.528 20.528 20.528 20.528 20.528

9.688 13.273 16.589 19.628 22.389 24.879 27.096 29.036 30.707 32.103 33.224 34.063 34.618 34.915 34.938 34.686 34.160 33.358

9.413 12.977 16.274 19.293 22.033 24.496 26.696 28.620 30.288 31.716 32.866 33.725 34.305 34.624 34.659 34.419 33.904 33.114

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243

demand. It can increase the economic productivity of energy inputs and raise marginal economic values. If input cost is lagging behind output values: ( 0 y1 y02 4y03 2 ð18Þ 110:31t þ 1008:4Þ x1 o 332:4PEt 0:284ð3:7715t , ðt ¼ 1,2,3,:::18Þ 7:8

1000 900 800 T = 3.7715 t - 110.31t + 1008

600 500

That is, when x1 o32.329 (before 1999), energy consumption might increase with increase of environmental benefits. However, when input cost exceeds output values, the following relationship holds: ( 0 y1 y02 oy03 2 ð19Þ 110:31t þ 1008:4Þ x1 4 332:4PEt 0:284ð3:7715t , ðt ¼ 1,2,3,:::18Þ 7:8

20

0.6

15 10

0.3

5 2006

2004

2000

2002

1998

1996

1994

1992

1990

1988

1986

1984

1982

0.0 1980

0

Year

Fig. 5. Simulated environmental utility of technological innovation in Hong Kong (1980–2007).

The balance state is achieved at the point: 8 0 0 0 y > 1 y2 ¼ y3 > > > x ¼ 332:40:284TPEt < 1 7:8 > T ¼ 3:7715t 2 110:31t þ1008:4 > > > : x ¼ 332:4PEt 0:284ð3:7715t2 110:31t þ 1008:4Þ , 1

7:8

ð17Þ

ðt ¼ 1,2,3,. . .18Þ

On this basis, the critical point is attained when x1 ¼32.329 (in 1999). It means that energy consumption and economic outcome have reached a balanced state for a constant technological level (Fig. 5; Table 2). Technological innovation can promote environmental benefits, and permit rise in energy consumption and drop in pollution. In turn, it can enhance the environmental carrying capacity and postpone the critical point at which a rise in energy consumption should stop. However, at a low technological level, energy consumption should only rise slowly so as to maintain a healthy environment. In a rapidly innovating society, energy consumption is difficult to control, but an increase in energy consumption should still be arrested before the critical point to allow environmental balance and sustainable development. The critical point x1 ¼32.329 (in 1999) shows that improved technology of energy consumption and pollution treatment will suppress pollution and enhance maximum environmental benefits for a given GDP level. Therefore, the crucial task for Hong Kong is to improve technology during rapid economic development rather than just expanding energy consumption. These results suggest that energy consumption in Hong Kong theoretically could have expanded after 1999 rather than in 1990. Technological change has exerted strong influence on energy

3.2.3. Green building effects on environmental utility of energy consumption The environmental improvement effect of green buildings contributes to environmental improvement through energy saving. A coupling analysis of energy consumption and energy saving is conducted on the green building environmental effects based on the EUEC model. The model is comprehensively integrated with technology and green building. The environmental improvement effect of green building is simulated by Eqs. 20–23. A coupling analysis of energy price and green building construction price shows that the existing price could only support the simulated energy input. The results show that the environmental capacity of energy consumption can improve under the energy-saving effect of green buildings (Fig. 6; Table 2). Comparison with energy consumption data from the statistical yearbooks, the average green building energy consumption might be reduced by 17.5%. According to the input–output theory in economics, the derived energy demand is dependent on the demand for economic output, and energy input should change with energy price changes. It indicates that green buildings might suppress energy consumption (1.34%) more than that under technological innovation condition. The marginal value of energy consumption is the 45

x1 (Statistical)

40

x1 (Simulated, fixed technology)

35

x1 (Simulated, technology innovation) x1 (Simulated, green building)

30 25 20 15 10 5 0

2006

0.9

25

2004

30

2000

1.2

2002

PEt (Unit price of electricity, HK$)

1998

35

1.5

1996

x1 (Statistical, 109 kWh) x1 (Simulated, technology innovation, 109 kWh)

1994

40

Unit price (HK$)

Energy consumption (x , electricity, 10 kWh)

45

Analysing changes in the cost of energy consumption shows that when x1 432.329 (after 1999), the existing price could only support the simulated energy input. It indicates that technological innovation might dampen energy demand by 12.99%, which is more than the constant technology scenario. Energy consumption might increase with rise in environmental benefits. In this way, it is possible to consider energy saving. The energy saving afforded by green buildings offers a rather optimistic option to increase environmental capacity, and to improve socio-economic development and environmental benefits.

1990

Fig. 4. Energy consumption from technological innovation based on greenhouse gas emission (1990–2007).

1992

Year

1988

2006

2004

2002

2000

1998

1996

1994

1990

1992

0

1986

100

1984

200

1982

300

1980

400

Energy consumption (electricity, 10 kWh)

T (Technology)

700

241

Year Fig. 6. Comparison between simulated environmental utility under fixed technology, technological innovation and green building in Hong Kong (1980–2007).

242

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243

additional revenue by employing one additional unit of input energy, and the value of economic output reflects the output price vis-a-vis the value of input reflected in the marginal cost. In this case, the marginal value decreases when it approaches the balanced point: 8 > y1 ¼ f ðx1 ,TÞ ¼ 4909 þ 319x1 þ 9:3T3:68x21 0:28x1 T0:003T 2 > > > > 2 2 > > < y2 ¼ gðx1 ,TÞ ¼ 232:713:4x1 0:11T þ 0:22x1 þ 0:004x1 T þ 0:0003T y3 ¼ C 1 þ PEt Ux1 > > > > y4 ¼ 39:218x2 673:32 > > > : y ¼ C þ PG Ux t 2 2 5 ð20Þ 8 1 ,TÞ > ¼ 7:36x1 0:28T þ319 y0 ¼ @f ðx > @x1 > 1 > > > @gðx ,TÞ 0 > y2 @x11 ¼ 0:44x1 þ 0:004T13:4 > > > < 0 y3 ¼ PEt > y0 ¼ 0:0392 > 4 > > > > y0 ¼ PGt > 5 > > > : y0 y0 þ y0 ¼ y0 þ y0 1

2

4

3

ð21Þ

5

8 0 y y0 þ y04 ¼ y03 þy05 > < 1 2 t 0:284T x1 ¼ 332:4PEt PG 7:8 > : 2 T ¼ 3:7715t 110:31t þ 1008:4 332:4PEt PGt 0:284ð3:7715t 2 110:31t þ 1008:4Þ , 7:8 ðt ¼ 1,2,3,:::18Þ

(x1 o22  109 kWh), expansion of energy consumption improved both economic development and environmental utility. After 1990 (x1 422  109 kWh), expansion of energy consumption increased socio-economic development but degraded environmental benefits. Technological change strongly influenced energy demand, and contributed notably to improving environmental benefits. The balanced state stays at the critical point in 1999, when energy consumption reached 32.329  109 kWh. Technological innovation decreased the demand of energy consumption by 12.99%, more than the fixed technology scenario. Finally, green buildings contribute significantly to energy saving, buffering the temperature fluctuations in external and internal environment. In comparison with energy consumption statistical data, the reduction of energy consumption by green buildings reached an average of 17.5% (1990–2007). Energy use efficiency can be achieved through vegetation shading and passive cooling, which can prevent a building from over-heating and therefore reduce its cooling load.

Acknowledgements

ð22Þ

x1 ¼

We acknowledge with gratitude the research grants kindly provided by the Midland Charitable Foundation and the Dr. Stanley Ho Alumni Challenge Fund. References

ð23Þ

Green roofs and green walls can make a significant contribution to energy saving, buffering temperature fluctuations in external and internal environment. Vegetated envelopes of buildings provide pronounced cooling effects on temperature at the surface and reducing the daytime maximum. Energy efficiency can be achieved through the combination of evapotranspirational cooling, vegetation shading, and thermal substrate insulation which collectively prevent a building from over-heating to reduce its cooling load.

4. Conclusion The relationship between energy consumption and environmental quality has been and will continue to be a complex interaction of site, technology, climate, other natural forces and human activities. This study assessed the relationships between metropolis energy consumption and environmental utility changes through a proposed Environmental Utility of Energy Consumption (EUEC) model. The model is applied to analyse environmental utility changes of energy consumption and environmental benefits of green buildings in Hong Kong (1980–2007). Several key findings have been established. First, the model is based on the dynamic equilibrium of input– output theory in economics, considering three scenarios for model simulation: fixed technology, technological innovation and green building effect. The case study investigations proved the efficiency of the EUEC model, which could address the critical issues of energy consumption and environmental quality. Second, technological innovation plays an important role in mitigating energy consumption impacts on environmental quality. The results show that energy consumption continually increased with rapid economic growth (indicated by GDP) in Hong Kong, exerting negative impacts on environmental utility. Energy consumption at the fixed technology scenario is decided by economic outcome. In 1990, it attained a balanced state at the critical point when energy consumption reached 22  109 kWh. Before 1990

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