Does more energy use raise incomes?

In another article, I explored the relationship between per capita energy use and Gross Domestic Product (GDP) per capita, the latter being the most common metric of material well-being. Here I use another measure called Gross National Income (GNI) which calculates income instead of output. Gross national income is defined as GDP plus abroad compensation of employees who are residents, property income, and net taxes less subsidies on production. The major difference is that GNI calculates an economy’s total income, regardless of whether the income is earned by nationals within the country’s borders or derived from investments in foreign business.1 GDP and GNI are nearly identical in most countries, but the difference is quite significant in others.


<div class="flourish-embed" data-src="visualisation/11583744"><script src=""></script></div>

The World Bank classifies countries by their national income: low-income, lower-middle-income, upper-middle-income, and higher-income. When compared to energy use per capita, an overall pattern is evident: as you move up the income ladder, energy use per capita generally increases. The lowest levels of energy use per capita are in the low- and lower-middle- income countries that are concentrated in Africa and parts of Asia. The high-income countries of Europe, Asia, and North America use the most energy per capita.

But within this overall trend, there are important variations that are “exceptions to the rule.” Within the lower-middle-income group, energy use per capita varies by a factor of 40. All income groups exhibit the same type of variation. Similarly, if you trace a vertical line up from the x-axis you will see that countries that use about the same amount of energy fall into a variety of income classes. For example, Ukraine and Croatia use similar amounts of energy per capita, but the former country is in the low-income category while the latter country is in the high-income category period.

These observations are consistent with the GDP-energy connection: increases in energy use per capita are positively connected to higher incomes, but that is only part of the story. Other factors are also important. The structure of the economy, geography and climate, lifestyle, public policy, consumer attitudes, and other factors determine how effectively a given level of energy use per capita is converted into income.

1 OECD (2022), Gross national income (indicator). doi: 10.1787/8a36773a-en (Accessed on 16 October 2022)


Subscribe to our monthly newsletter!