Net energy ratio, EROEI and the macroeconomy

• We analyse the macroeconomic implications of the quality of energy production.
• The net energy ratio is the part of produced energy available for final production.
• NER is related to the EROEI concept encountered in energy science.
• The NER value affects the capital requirements of the economy.
• A decreasing NER exerts a drag on capital accumulation and growth.

In an input–output model of a two-sector economy (energy and manufacturing), we analyse the macroeconomic implications of the quality of secondary energy production. We measure it by the net energy ratio (NER for short), i.e. the fraction of produced energy available for net final production. NER is shown to be related to the EROEI concept encountered in energy science and to affect (a) the energy intensiveness of final output, (b) the capital requirements of the two sectors of the economy and the aggregate capital–output ratio, and (c) the rate of capital accumulation and the growth rate of the economy at given saving rate. As a consequence, an energy transition characterized by a decreasing NER would exert a drag on economic growth.