The internet and the new energy economy

From 1996 through 2000, the US experienced an unprecedented 2.7% annual reduction in energy intensity. This is three times the rate of the previous 10 years and far higher than the rate projected by traditional energy forecasters. There is increasing data and analysis to support the view that there is a connection between the recent reductions in energy intensity and the astonishing growth in information technology (IT) and the internet economy. Growth in the Internet economy can cut energy intensity in two ways. First, the IT sector is less energy-intensive than traditional manufacturing, so growth in this sector engenders less incremental energy consumption. Second, the internet economy appears to be increasing efficiency in every sector of the economy, which is the primary focus of this paper. The impact of the Internet economy on manufacturing, buildings, and transportation are all explored. The paper also considers the implications for growth in energy consumption and greenhouse gas emissions during the next 10 years. Also, there has been a widely quoted argument put forward by two analysts, Mark Mills and Peter Huber, that the Internet is using a large and rapidly growing share of the nation's electricity, which in turn is supposedly driving an acceleration of overall US electricity demand. That analysis should be rejected as it is based on seriously faulty analysis and is inconsistent with recent data and analyses. Finally, the Bush administration put forward a new approach to US climate change strategy, based on reducing carbon intensity. This paper suggests that such an approach may not lead to reductions in carbon emissions beyond business as usual trends.