Energy Policy 43 (2012) 235–243

Contents lists available at SciVerse ScienceDirect

Energy Policy

0301-42

doi:10.1

n Corr

E-m

journal homepage: www.elsevier.com/locate/enpol

Coupling model of energy consumption with changesin 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

Article history:

Received 1 March 2011

Accepted 29 December 2011Available online 26 January 2012

Keywords:

Energy consumption

Environmental utility

Green building

15/$ - see front matter & 2012 Elsevier Ltd. A

016/j.enpol.2011.12.060

esponding author. Tel.: þ852 2859 7020; fax

ail address: hragjcy@hku.hk (C.Y. Jim).

a b s t r a c t

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: fixed-

technology, 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 (x1o22�109 kWh), rise in energy consumption improved both economic development

and environmental utility. After 1990 (x1422�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.

1. Introduction

Energy is vital for social and economic development, but itsuse 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 globallycritical issues such as pollution, energy supply and consumption,and resource shortage have caused acute urban problems indifferent parts of the world. Buildings account for more than30% of worldwide energy use, and generate globally the equiva-lent of 8.6 billion tons of CO2 a year. This emission is expected tonearly double in the next two decades (Cohen and Allsopp, 1988;Criqui et al., 2000; Fan et al., 2007; Halkos, 1995; Hoekstra andvan den Bergh, 2003; Nag and Parikh, 2000; Zhang and Ang,2001). The need to curtail the deleterious environmental impactsand global warming due to escalating energy use has been widelyrecognised.

ll rights reserved.

: þ852 2559 8994.

Besides social and economic factors, steadily rising energycosts in recent years have nurtured sustainable concepts andapplications to contain chronic environmental impacts. Publicgovernance and the construction industry are confronted by thestrong urge to embrace sustainability features. Buildings presentgreat potentials to reduce energy consumption and associatedgreenhouse gas emissions (Becken et al., 2001; Biesiot andNoorman, 1999; Deng and Burnett, 2000; Haas and Schipper,1998). Extensive studies have generated findings to optimisewasteful operations and improve energy efficiency in buildings.

The wide adoption of sustainable buildings could collectivelyenhance the sustainability of the built environment, and in turnimprove the quality of life. In the new century, this issue hasgradually assumed a prominent profile as buildings move awayfrom former domination by design and pragmatic paradigms to amore enlightened alliance with nature. A fresh and holisticapproach is called for to design, construct and manage the builtenvironment by addressing buildings fundamentally in theirintegral spatial context (Lam et al., 2010; Pearlmutter andRosenfeld, 2008; Williamson and Erell, 2001). New sets ofregulatory practices, indicators, measurements, and prioritiesare emerging with earnest applications at all scales, ranging fromindividual buildings to the district and city levels.

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243236

There are strong incentives to design green buildings forenergy efficiency and environmental sustainability, so that theirnotable energy consumption and contribution to climate changecould be ameliorated (Fung et al., 2006; Lam et al., 2010;Williamson and Erell, 2001). Green buildings, equipped withabiotic and biotic features to subdue energy use and foster energyefficiency, are both environmental- and resource-friendly. Theyconnote the practice of ecological or sustainable architecture,characterised by a high-level comfortable and healthy indoorambience achieved by low energy consumption and operatingcosts. Green buildings imply well-considered use of natural(green roof and green wall) and artificial energy systems, render-ing them more amenable to human use and minimising pollutantgeneration. Their design incorporates nature as an integral com-ponent of the building fabric, and ensures that their collectiveexpression in the built environment is not detrimental to humansand other life forms.

Some studies have investigated comprehensively the energyconsumption impacts on environmental quality. The multiplefactors of energy use have been extensively evaluated(Alcantara and Roca, 1995; Ayres, 2000; Boyd and Uri, 1991;Conrad and Schroder, 1993; Costanza, 2000; Ferng, 2001; Hazillaand Kopp, 1990; Nestor and Pasurka, 1995). Statistical models,such as linear and nonlinear regression, address the complexrelationships amongst energy consumption, climate change andenvironmental quality. The findings demonstrate that energyconsumption has contributed to the urban heat island effect,and that it is sensitive to indicators of urban environmentalquality (Akbari et al., 1992; Fung et al., 2006; Sailor and Munoz,1997; Santamouris et al., 1999). Urban energy saving, buildingenergy consumption, and associated urban environmentalimprovement 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 andSatman, 2003). The studies offer suggestions for efficient energyuse and ecological building design, and verify the intimateassociation amongst urban climate change, socio-economic activ-ities and energy consumption. The key literature listed abovesummarises the methodological and empirical developments inthis field, and provides insights on energy consumption impactson environmental quality.

As an exceptionally compact large city in the tropics with ahigh energy-consumption ecological footprint, Hong Kongdemands an in-depth assessment of the relationships betweenenergy consumption and environmental utility changes. In thelast five decades, it has experienced intensive urbanisation in atransformation towards a highly developed metropolis. Largetracts of previous rural lands have been replaced by buildingsand artificial-impermeable covers (Fung et al., 2006; Lam et al.,2010). The rapid and condensed urban development has beenaccompanied by a steep rise in energy consumption and collateralenvironmental burdens of gaseous and particulate pollutants,greenhouse gases, and waste heat (Ang and Zhang, 2000; Caslerand Rose, 1998; Chang et al., 2008; Zhang et al., 2009). Extremeurban climate occurs more frequently under complex interactionsof global climate change and local urban heat island effect.

The purpose of this study is to develop a proposed Environ-mental Utility of Energy Consumption (EUEC) model to explainthe relationships between energy consumption and environmen-tal utility changes. The model is based on the dynamic equili-brium of input–output theory in economics, with the primaryassumption that a metropolis that grows with expanding energyconsumption is likely to challenge nature and environmentalquality. Three scenarios of model simulation are evaluated: fixedtechnology, technological innovation and green building effect.The model is further applied to analyse environmental utility

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

2. Materials and methods

2.1. Data sources

Data are collected to analyse the environmental utility ofenergy consumption by the proposed Environmental Utility ofEnergy Consumption (EUEC) model, and the relevant interactionsof the two factors in Hong Kong. Energy use data are acquiredfrom the Census and Statistics Department, and weather datafrom the Hong Kong Observatory. Environmental quality data aremined from government sources, including the EnvironmentalProtection Department, Planning Department, Lands Department,research publications, reports, maps and satellite images. Datarelated to green building construction are projected according toeconomic status of the time. Some data, such as energy input andeconomic output, are pre-processed using the normalised indexfor model simulation purposes.

2.2. Environmental utility of energy consumption model

To understand the relationships between urban energy con-sumption and green building environmental benefit, we design aEUEC model based on an economic production function model. Inmicroeconomics and macroeconomics, a production functionspecifies the maximum output that can be produced from a givenamount of input (which may be good or bad). Accordingly, thebasic assumption of our EUEC model is that when a metropolisgrows, it may consume more energy (e.g., electricity power, fossilfuel, etc.), which is likely to challenge environmental quality, anddegrade environmental utility (or ecological and environmentalbenefits which can be translated into monetary value). However,green buildings are likely to improve environmental benefits, andthus increase environmental utility.

From economics, the marginal utility theory stipulates that thebalanced state can be achieved at the point where economic inputequals economic output. Energy utility is the input of all indivi-duals, and the marginal pollution cost is the increase in cost perunit increase in energy consumption. We define the balancedstate as the point where the energy utility equals the marginalpollution cost, at which equilibrium is attained. We furtherdiscuss the EUEC model structure by considering three scenariosof 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 negativelydegrade environmental quality. We assume that a certain levelof energy consumption (input x1) may bring a certain economicoutcome (output y1) and environmental pollution (output y2). Thecost of energy consumption is decided by energy price (C1 of fixedcost, PEt of changing unit price) and supply amount (input x1).Thus, energy consumption (x1) is the variable of functions ofeconomic outcome (y1) and environmental pollution (y2). Energycost (y3) is function of energy price (C1 of fixed cost, PEt ofchanging unit price) and supply amount (input x1). Therefore, theBasic EUEC model can be expressed as:

Economicoutcome ¼ f ðEnergyconsumptionÞ

Environmentpollution ¼ gðEnergyconsumptionÞ

Costenergy ¼mðEnergyfixedunitprice,Energychangingunitprice,EnergyconsumptionÞ

8><>:

ð1Þ

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243 237

y1 ¼ f ðx1Þ

y2 ¼ gðx1Þ

y3 ¼ C1þx1UPEt , ðt¼ 1,2,3,. . .18Þ

8><>: ð2Þ

According to marginal theory, the balance is achieved atthe point where marginal energy cost (y3

0) equals to maximaloutcome. Marginal values are calculated through derivative offunctions:

y01 ¼ f ðx1Þ0

y02 ¼ gðx1Þ0

y03 ¼ C1þx01UPEt , ðt¼ 1,2,3,. . .,18Þ

y03 ¼ y01�y02

-f ðx1Þ0�gðx1Þ

0¼ PEtUx01

8>>>><>>>>:

ð3Þ

2.2.2. Environmental utility of technology innovation

Technological innovation plays important roles in energyconsumption effects on socio-economic development and envir-onmental quality. We consider technology as an internal variablebased on the above Basic EUEC model. Therefore, economicoutcome (y1) is a function of both energy consumption (x1) andenergy use technological innovation and pollution treatmentinnovation (T); environmental pollution (y2) is function of energyconsumption (x1) and T. We can assume T as the endogenousvariable of economic outcome (y1) and environmental pollution(y2). Therefore, the Technology-induced EUEC model can beexpressed as:

Economicoutcome ¼ f ðEnergyconsumption,TechnologyenergyÞ

Environmentpollution ¼ gðEnergyconsumption,TechnologyenergyÞ

Costenergy ¼mðEnergyfixedunitprice,Energychangingunitprice,EnergyconsumptionÞ

8><>:

4Þ

y1 ¼ f ðx1,TÞ

y2 ¼ gðx1,TÞ

y3 ¼ C1þx1UPEt , ðt¼ 1,2,3,. . .18Þ

T ¼ kðtÞ,ðt¼ 1,2,3,. . .8Þ

8>>>><>>>>:

ð5Þ

Therefore, the marginal values are determined by the EUECmodel as:

y01 ¼ f ðx1,TÞ0

y02 ¼ gðx1,TÞ0

y03 ¼ C1þx01UPEt , ðt¼ 1,2,3,. . .,18Þ-f ðx1,T1Þ0�gðx1,T1Þ

0¼ PEtUx01

y03 ¼ y01�y02T ¼ kðtÞ,ðt¼ 1,2,3,. . .,18Þ

8>>>>>><>>>>>>:

ð6Þ

y = 137Ln(x ) - 321

0200400600800

100012001400160018002000

0 10 20 30 40 50

Energy consumption (electricity, 109 kWh)

GD

P (1

09 HK

$)

Fig. 1. Correlation between energy consumption and GDP in Hong Kong

(1980–2007).

2.2.3. Environmental utility of green building

When the environmental improvement effect of green build-ings is considered, environmental improvement (y4) is function ofgreen building construction (x2). The cost of green buildingconstruction (y5) is determined by green building constructionprice (C2 of fixed cost, and PGt of changing unit price) and totalconstruction amount (input x2). Thus Green-building EUEC modelcan be expressed as:

Economicoutcome ¼ f ðEnergyconsumption,TechnologyenergyÞ

Environmentpollution ¼ gðEnergyconsumption,TechnologyenergyÞ

Costenergy ¼mðEnergyfixedunitprice,Energychangingunitprice,EnergyconsumptionÞ

Environmentimprovement ¼ hðGreenBldgconstrution,TechnologyenergyÞ

Costgreen ¼ nðGreenBldgfixedunitprice,GreenBldgchangingunitprice,GreenBldgconstructionÞ

8>>>>>><>>>>>>:

ð7Þ

y1 ¼ f ðx1,TÞ

y2 ¼ gðx1,TÞ

y3 ¼ C1þx1UPEt , ðt¼ 1,2,3,. . .18Þ

y4 ¼ hðx2,TÞ

y5 ¼ C2þx2UPGt , ðt¼ 1,2,3,. . .18Þ

T ¼ kðtÞ,ðt¼ 1,2,3,. . .18Þ

8>>>>>>>>><>>>>>>>>>:

ð8Þ

The marginal values of green building are calculated by thefollowing functions:

y01 ¼ f ðx1,TÞ0

y02 ¼ gðx1,TÞ0

y03 ¼ C1þx01UPEt , ðt¼ 1,2,3,::::18Þ

y04 ¼ hðx2,TÞ0

y05 ¼ C2þx02UPGt , ðt¼ 1,2,3,::::18Þ

y01�y02þy04 ¼ y03þy05T ¼ kðtÞ,ðt¼ 1,2,3,::::18Þ

8>>>>>>>>>>><>>>>>>>>>>>:

ð9Þ

f ðx1,TÞ0�gðx1,TÞ0 þhðx2,TÞ0 ¼ PEtUx01þPGtUx02 ð10Þ

where, x1 (MJ) is the total amount of energy consumption; x2 (m2),the total amount of green building construction; T, changingtechnology of energy consumption and environmental pollutiontreatment; PEt (HK$), unit price of energy consumption; PGt (HK$),unit price of green building construction; C1 (HK$), fixed cost ofenergy input; and C2 (HK$), fixed cost of green buildingconstruction price.

As marginal pollution cost is an increasing function, and energyutility is a decreasing function, energy utility should exceed mar-ginal pollution cost before the two reach their intersection point,and environmental quality should remain healthy. Urban develop-ment could create increasingly negative values to degrade environ-mental quality after this critical point. We should stop urbanexpansion or improve technology to reduce the environmentalburdens to an acceptable level before this critical point is reached(He et al. 2007, 2008). The EUEC model is defined as a partialequilibrium model which determines energy consumption andenvironmental utility at a certain stage of economic developmentand urban growth, and it functions to equalise the quantitiesbetween energy consumption and economic development, resultingin 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 itsimpacts on the environment. Energy is one of the crucial elements

Table 1Data sources for model simulation of environmental utility of energy consumption model.

Year 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)

T (GHG emission

per GDP,106 kg/

HK$)

t

1980 10.130 18.365 230.400 18.099 4.052 0.076 19,045.423 0.40 1,037.050

1981 10.724 18.595 247.200 18.648 5.898 0.080 21,099.747 0.55 1,134.700

1982 11.526 18.925 257.600 18.079 6.339 0.086 23,832.253 0.55 1,259.300

1983 13.055 19.145 238.400 17.157 7.833 0.098 26,508.167 0.60 1,384.600

1984 13.971 19.195 267.200 16.487 8.383 0.105 28,854.884 0.60 1,503.250

1985 14.774 19.220 284.000 15.796 8.864 0.111 29,921.696 0.60 1,556.800

1986 16.382 19.365 327.200 17.641 9.502 0.123 31,225.094 0.58 1,612.450

1987 20.033 19.470 404.000 18.005 11.419 0.150 33,196.350 0.57 1,705.000

1988 21.387 19.580 476.800 18.944 11.763 0.160 35,991.956 0.55 1,838.200

1989 20.746 19.685 550.400 18.976 12.033 0.156 39,870.983 0.58 2,025.450

1990 22.099 19.840 615.200 19.164 13.701 0.166 44,302.720 0.62 2233.000 881 1

1991 23.409 20.017 710.400 20.008 15.918 0.176 49,728.233 0.68 2484.300 842 2

1992 24.053 20.222 832.000 23.116 16.837 0.180 55,036.195 0.70 2721.600 774 3

1993 25.469 20.298 960.000 24.112 18.847 0.191 60,116.587 0.74 2961.700 641 4

1994 23.079 20.438 1088.000 27.656 18.463 0.173 65,853.280 0.80 3222.100 513 5

1995 26.510 20.514 1152.000 28.457 22.268 0.199 72,071.836 0.84 3513.300 465 6

1996 29.750 20.654 1272.000 27.983 25.585 0.223 77,161.279 0.86 3735.900 362 7

1997 30.508 20.787 1408.000 26.668 27.457 0.229 82,161.657 0.90 3952.550 302 8

1998 32.224 20.992 1336.000 29.515 29.002 0.242 85,323.034 0.90 4064.550 305 9

1999 32.329 21.222 1304.000 40.692 29.096 0.242 82,807.565 0.90 3901.968 275 10

2000 34.422 21.596 1352.000 36.125 30.980 0.258 81,317.559 0.90 3765.399 264 11

2001 35.362 21.799 1336.000 35.953 33.948 0.265 80,604.461 0.96 3697.622 248 12

2002 36.030 21.872 1312.000 40.365 39.633 0.270 78,448.155 1.10 3586.693 241 13

2003 36.327 21.960 1272.000 41.039 39.960 0.272 76,952.217 1.10 3504.199 278 14

2004 36.997 22.000 1328.000 47.889 40.697 0.277 76,861.108 1.10 3493.687 257 15

2005 37.740 22.034 1424.000 49.055 41.514 0.283 76,979.894 1.10 3493.687 224 16

2006 38.018 22.062 1520.000 47.458 41.820 0.285 77,077.717 1.10 3493.687 197 17

2007 38.518 22.092 1656.000 48.429 42.370 0.289 77,182.527 1.10 3493.687 175 18

2008 22.178 1720.000 45.598 80,814.753 3643.915

2009 3662.135

H.

He,

C.Y

.Jim

/E

nerg

yP

olicy

43

(20

12

)2

35

–2

43

23

8

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243 239

that literally fuels economic development. Continual expansion ofenergy consumption has promoted rapid economic growth ofHong Kong especially in recent decades. Meanwhile, the cognateissues of environmental quality and energy efficiency have drawnattention.

Energy consumption has continuously risen with rapid GDPgrowth in Hong Kong (Fig. 1; Table 1). Statistical analysis shows astrong correlation (R2

¼0.92) between GDP and energy consump-tion 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$1.00¼HK$ 7.80. Electricity and petroleum consumption increasedfrom 10.13�109 kWh in 1980 to 38.518�109 kWh in 2007, and12.4�104 bbl/day (bbl refers to oil barrel, with 1 bbl¼158.984 Lor 42 US gallon) in 1980 to 35.9�104 bbl/day in 2009, respec-tively. An average annual increase of electricity and petroleumconsumption reached, respectively 5.2% and 3.6% from 1980 to2007. Energy use per capita increases from 925 kg (energy weightequivalent to denote total energy use in the form of solid, liquidand gas fuels) in 1980 to 1985 kg in 2007. Energy consumptionvaries by sectors. The commercial sector accounts for 64% of thetotal energy consumption in 2007, denoting a sharp increase of15.4% over the previous year. Energy consumption for air-con-ditioning of building space accounts for a significant proportion ofthe total primary energy requirement in Hong Kong. It took up12% 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 increasednotably 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 totalenergy consumption was valued at HK$ 90�109, which wasabout 7% of the GDP at HK$ 1269 �109.

However, a decoupling analysis of energy consumption andeconomic growth indicates a rather stable aggregate energy use in1997–2004. The period witnessed notable economic expansion,with constant price GDP registering an average annual growthrate of 5.6%. The steady energy consumption could be attributedto the rising electrification of the fuel mix, improvements in end-use energy efficiency, and fundamental changes in the economicstructure with shift away from manufacturing to service sector.

In tandem with rapid socio-economic development, the com-munity has become increasingly concerned about environmentalquality and energy efficiency. The negative environmental extern-alities associated with a high level of energy use include billionsof tons of greenhouse gas emission into the atmosphere, bringingdegradation of urban and natural ecosystems (Fig. 2; Table 1). Thesubstantial amount of combustion pollutants emitted from fossilfuel burning has threatened air quality and human health in theregion. The total CO2 emission of petroleum increased notably

y = 0.07x - 2.7x + 44

0

10

20

30

40

50

60

0 10 20 30 40 50Energy comsumption (Electricity, 109 kWh)

CO

2 em

issi

on (1

06 t)

Fig. 2. Correlation between energy consumption and environmental pollution

(CO2 emission) in Hong Kong (1980–2007).

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 mainfuel for power generation in Hong Kong has substantiallyincreased CO2 emission in the territory.

The relationships between energy consumption and urban airtemperature change in Hong Kong are evaluated. Although energyconsumption per capita has increased by more than 110% in1980–2009, annual mean temperature remained at about 23 1Cwith an average rise of 0.28 1C per decade in 1980–2009(HK Observatory data). Thus there is no significant correlationbetween annual total energy consumption and annual meantemperature. However, when monthly data are investigated, astrong correlation is detected (R2

¼0.90) between monthly aver-age electricity consumption and monthly mean temperature(Fung et al., 2006). Even though we cannot determine the specificinteractions between energy consumption effect and urban cli-mate change, the urban heat island effect could be linked toanthropogenic impacts of energy consumption.

Modelling environmental utility of energy consumption isimportant. It helps understanding the importance of energy useefficiency, technological innovation, and ecological and sustain-able design of cities.

3.2. Modelling environmental utility of energy consumption

Energy use brings dual effects, namely positive promotion ofeconomic development and negative degradation of environmen-tal quality. In this section, we initially conducted model simula-tion through the proposed EUEC model to explore therelationships between urban energy consumption and environ-mental benefits of green buildings. We then further analysed theenvironmental utility of green buildings by considering threescenarios: pollution induced by energy consumption, technologi-cal innovation, and environmental improvement by green build-ings on the basis of the marginal utility theory in economics. Theresults are elaborated below.

3.2.1. Energy consumption of fixed technology effects on

environmental effects

As energy consumption continues to increase with socio-economic advancements, it is unlikely that Hong Kong canexpand its socio-economic domain indefinitely. It is worthwhileto evaluate the sustainability of this energy consumption process.Data in Table 1 are used. A quadratic model for economicoutcome as a function of energy consumption (y1¼ f(x1)) andpollution as a function of energy consumption (y2¼g(x1)) areproposed below:

y1 ¼ 137lnðx1Þ�321

y2 ¼ 0:07x21�2:7x1þ44

y3 ¼ C1þPEtUx1

-

y01 ¼ 137=x1

y02 ¼ 0:14x1�2:7

y03 ¼ PEt ,ðt¼ 1,2,3,. . .,18Þ

8><>:

8><>: ð11Þ

The balance point is achieved at:

y01�y02y03

x1 ¼

ffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiðPEt þ2:7Þ2�87:68p

�ðPEt þ2:7Þ0:28

8<: ð12Þ

On this basis, the critical value is attained when x1¼22 (in1990; Fig. 3; Table 2). It means that energy consumption andeconomic outcome reach a balanced state for a fixed ratio. Energyconsumption increases with economic production; it alsoincreases greenhouse gases emission. The curves show similartrends, but their rates of convergence to total values are different.The effect of energy consumption occurs when it decreases

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243240

economic output in response to increase of energy price andeconomic output effect.

If input cost is lagging behind output values:

y01�y024y03

x1offiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiððPEt þ2:7Þ2�87:68Þp

�ðPEt þ2:7Þ0:28

8<: ð13Þ

That is, when x1o22 (before 1990), energy consumptionmight increase with improvements in economic developmentand environmental utility. In this case, energy consumption willcontinue to act positively to bring socio-economic and environ-mental benefits.

However, when input cost exceeds output values:

y01�y02oy03

x14ffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiððPEt þ2:7Þ2�87:68Þp

�ðPEt þ2:7Þ0:28

8<: ð14Þ

Table 2Simulation results of environmental utility from environmental utility of energy consu

Year PEt (unit price of

electricity

consumption,

HK$)

PGt (unit price of green

building construction,

HK$, estimated)

T (GHG

emission

per GDP,

106 kg/HK$)

1980 0.40 1037.050

1981 0.55 1134.700

1982 0.55 1259.300

1983 0.60 1384.600

1984 0.60 1503.250

1985 0.60 1556.800

1986 0.58 1612.450

1987 0.57 1705.000

1988 0.55 1838.200

1989 0.58 2025.450

1990 0.62 2233.000 881

1991 0.68 2484.300 842

1992 0.70 2721.600 774

1993 0.74 2961.700 641

1994 0.80 3222.100 513

1995 0.84 3513.300 465

1996 0.86 3735.900 362

1997 0.90 3952.550 302

1998 0.90 4064.550 305

1999 0.90 3901.968 275

2000 0.90 3765.399 264

2001 0.96 3697.622 248

2002 1.10 3586.693 241

2003 1.10 3504.199 278

2004 1.10 3493.687 257

2005 1.10 3493.687 224

2006 1.10 3493.687 197

2007 1.10 3493.687 175

0

5

10

15

20

25

30

35

40

45

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Ene

rgy

cons

umpt

ion

(x, e

lect

ricity

, 10

kW

h)

0.0

0.3

0.6

0.9

1.2

1.5

Year

Uni

t pric

e (P

Et.H

K$)

x1 (Statistical, 109 kWh)

x1 (Simulated, fixed technology, 109 kWh)

PEt (Unit price of electricity, HK$)

Fig. 3. Simulated environmental utility of fixed technology in Hong Kong

(1980–2007).

That is, when x1422 (after 1990), increase of energy con-sumption might bring reduction of socio-economic developmentand environmental benefits. In order to reverse the trend, it ismore important to raise energy-use efficiency than to increase thecapacity of the environment to serve as a sink to dampen theharmful effect of effluents.

3.2.2. Technology innovation effects on environmental utility of

energy consumption

Technological innovation is important for environmental ben-efits. Lacking technological improvements could increase pollu-tion in tandem with energy consumption (Fig. 4; Table 2). Undersuch stifling conditions, environmental benefits would remainlow because the economy could grow only in response to rise inenergy consumption. In contrast, technological improvementscould lift environmental utility to a higher level. However, thesituation for pollution is different. With static pollution treatmenttechnology, pollution continues to increase, whereas improvingtechnology could lower pollution generation. The relationshipbetween energy consumption and pollution is further analysed onbasis of the technology-induced EUEC model. Technology isdefined as an endogenous variable in our model:

y1 ¼ f ðx1,TÞ ¼�4909þ319x1þ9:3T�3:68x21�0:28x1T�0:003T2

y2 ¼ gðx1,TÞ ¼ 232:7�13:4x1�0:11Tþ0:22x21þ0:004x1Tþ0:0003T2

y3 ¼ C1þPEtUx1

8>><>>:

ð15Þ

y01 ¼@f ðx1 ,TÞ@x1¼�7:36x1�0:28Tþ319

y02 ¼@gðx1 ,TÞ@x1¼ 0:44x1þ0:004T�13:4

y03 ¼ PEt

8>><>>: ð16Þ

mption model.

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 22.198

10.724 21.782

11.526 21.799

13.055 21.750

13.971 21.750

14.774 21.731

16.382 21.757

20.033 21.757

21.387 21.766

20.746 21.740

22.099 21.715 9.688 9.413

23.409 21.699 13.273 12.977

24.053 21.666 16.589 16.274

25.469 21.648 19.628 19.293

23.079 21.507 22.389 22.033

26.510 21.302 24.879 24.496

29.750 21.189 27.096 26.696

30.508 21.035 29.036 28.620

32.224 21.020 30.707 30.288

32.329 20.964 32.103 31.716

34.422 20.964 33.224 32.866

35.362 20.832 34.063 33.725

36.030 20.528 34.618 34.305

36.327 20.528 34.915 34.624

36.997 20.528 34.938 34.659

37.740 20.528 34.686 34.419

38.018 20.528 34.160 33.904

38.518 20.528 33.358 33.114

0

5

10

15

20

25

30

35

40

45

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Year

Ene

rgy

cons

umpt

ion

(ele

ctric

ity, 1

0 k

Wh)

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

Fig. 6. Comparison between simulated environmental utility under fixed technology,

technological innovation and green building in Hong Kong (1980–2007).

T = 3.7715 t - 110.31t + 1008

0

100

200

300

400

500

600

700

800

900

1000

1990

1992

1994

1996

1998

2000

2002

2004

2006

Year

T (T

echn

olog

y)

Fig. 4. Energy consumption from technological innovation based on greenhouse

gas emission (1990–2007).

0

5

10

15

20

25

30

35

40

45

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

Ener

gy c

onsu

mpt

ion

(x, e

lect

ricity

, 10

kW

h)

0.0

0.3

0.6

0.9

1.2

1.5

Year

Unit

pric

e (H

K$)

x1 (Statistical, 109 kWh)x1 (Simulated, technology innovation, 109 kWh)PEt (Unit price of electricity, HK$)

Fig. 5. Simulated environmental utility of technological innovation in Hong Kong

(1980–2007).

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243 241

The balance state is achieved at the point:

y01�y02 ¼ y03

x1 ¼332:4�0:284T�PEt

7:8

T ¼ 3:7715t2�110:31tþ1008:4

x1 ¼332:4�PEt�0:284ð3:7715t2�110:31tþ1008:4Þ

7:8 , ðt¼ 1,2,3,. . .18Þ

8>>>><>>>>:

ð17Þ

On this basis, the critical point is attained when x1¼32.329 (in1999). It means that energy consumption and economic outcomehave reached a balanced state for a constant technological level(Fig. 5; Table 2). Technological innovation can promote environ-mental benefits, and permit rise in energy consumption and dropin pollution. In turn, it can enhance the environmental carryingcapacity and postpone the critical point at which a rise in energyconsumption should stop. However, at a low technological level,energy consumption should only rise slowly so as to maintain ahealthy environment. In a rapidly innovating society, energyconsumption is difficult to control, but an increase in energyconsumption should still be arrested before the critical point toallow environmental balance and sustainable development.

The critical point x1¼32.329 (in 1999) shows that improvedtechnology of energy consumption and pollution treatment willsuppress pollution and enhance maximum environmental bene-fits for a given GDP level. Therefore, the crucial task for HongKong is to improve technology during rapid economic develop-ment rather than just expanding energy consumption. Theseresults suggest that energy consumption in Hong Kong theoreti-cally could have expanded after 1999 rather than in 1990.Technological change has exerted strong influence on energy

demand. It can increase the economic productivity of energyinputs and raise marginal economic values.

If input cost is lagging behind output values:

y01�y024y03

x1o332:4�PEt�0:284ð3:7715t2�110:31tþ1008:4Þ

7:8 , ðt¼ 1,2,3,:::18Þ

(ð18Þ

That is, when x1o32.329 (before 1999), energy consumptionmight increase with increase of environmental benefits. However,when input cost exceeds output values, the following relationshipholds:

y01�y02oy03

x14332:4�PEt�0:284ð3:7715t2�110:31tþ1008:4Þ

7:8 , ðt¼ 1,2,3,:::18Þ

(ð19Þ

Analysing changes in the cost of energy consumption showsthat when x1432.329 (after 1999), the existing price could onlysupport the simulated energy input. It indicates that technologi-cal innovation might dampen energy demand by 12.99%, which ismore than the constant technology scenario.

Energy consumption might increase with rise in environmen-tal benefits. In this way, it is possible to consider energy saving.The energy saving afforded by green buildings offers a ratheroptimistic option to increase environmental capacity, and toimprove socio-economic development and environmentalbenefits.

3.2.3. Green building effects on environmental utility of energy

consumption

The environmental improvement effect of green buildingscontributes to environmental improvement through energy sav-ing. A coupling analysis of energy consumption and energy savingis conducted on the green building environmental effects basedon the EUEC model. The model is comprehensively integratedwith technology and green building. The environmental improve-ment effect of green building is simulated by Eqs. 20–23.

A coupling analysis of energy price and green building con-struction price shows that the existing price could only supportthe simulated energy input. The results show that the environ-mental capacity of energy consumption can improve under theenergy-saving effect of green buildings (Fig. 6; Table 2). Compar-ison with energy consumption data from the statistical yearbooks,the average green building energy consumption might be reducedby 17.5%. According to the input–output theory in economics, thederived energy demand is dependent on the demand for eco-nomic output, and energy input should change with energy pricechanges. It indicates that green buildings might suppress energyconsumption (1.34%) more than that under technological innova-tion condition. The marginal value of energy consumption is the

H. He, C.Y. Jim / Energy Policy 43 (2012) 235–243242

additional revenue by employing one additional unit of inputenergy, and the value of economic output reflects the output pricevis-a-vis the value of input reflected in the marginal cost. In thiscase, the marginal value decreases when it approaches thebalanced point:

y1 ¼ f ðx1,TÞ ¼�4909þ319x1þ9:3T�3:68x21�0:28x1T�0:003T2

y2 ¼ gðx1,TÞ ¼ 232:7�13:4x1�0:11Tþ0:22x21þ0:004x1Tþ0:0003T2

y3 ¼ C1þPEtUx1

y4 ¼ 39:218x2�673:32

y5 ¼ C2þPGtUx2

8>>>>>>><>>>>>>>:

ð20Þ

y01 ¼@f ðx1 ,TÞ@x1¼�7:36x1�0:28Tþ319

y02@gðx1 ,TÞ@x1¼ 0:44x1þ0:004T�13:4

y03 ¼ PEt

y04 ¼ 0:0392

y05 ¼ PGt

y01�y02þy04 ¼ y03þy05

8>>>>>>>>>><>>>>>>>>>>:

ð21Þ

y01�y02þy04 ¼ y03þy05

x1 ¼332:4�PEt�PGt�0:284T

7:8

T ¼ 3:7715t2�110:31tþ1008:4

8><>: ð22Þ

x1 ¼332:4�PEt�PGt�0:284ð3:7715t2�110:31tþ1008:4Þ

7:8,

ðt¼ 1,2,3,:::18Þ ð23Þ

Green roofs and green walls can make a significant contribu-tion to energy saving, buffering temperature fluctuations inexternal and internal environment. Vegetated envelopes of build-ings provide pronounced cooling effects on temperature at thesurface and reducing the daytime maximum. Energy efficiencycan be achieved through the combination of evapotranspirationalcooling, vegetation shading, and thermal substrate insulationwhich collectively prevent a building from over-heating to reduceits cooling load.

4. Conclusion

The relationship between energy consumption and environ-mental quality has been and will continue to be a complexinteraction of site, technology, climate, other natural forces andhuman activities. This study assessed the relationships betweenmetropolis energy consumption and environmental utilitychanges through a proposed Environmental Utility of EnergyConsumption (EUEC) model. The model is applied to analyseenvironmental utility changes of energy consumption and envir-onmental 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 formodel simulation: fixed technology, technological innovationand green building effect. The case study investigations provedthe efficiency of the EUEC model, which could address the criticalissues of energy consumption and environmental quality.

Second, technological innovation plays an important role inmitigating energy consumption impacts on environmental qual-ity. The results show that energy consumption continuallyincreased with rapid economic growth (indicated by GDP) in HongKong, exerting negative impacts on environmental utility. Energyconsumption at the fixed technology scenario is decided by eco-nomic outcome. In 1990, it attained a balanced state at the criticalpoint when energy consumption reached 22�109 kWh. Before 1990

(x1o22�109 kWh), expansion of energy consumption improvedboth economic development and environmental utility. After 1990(x1422�109 kWh), expansion of energy consumption increasedsocio-economic development but degraded environmental benefits.Technological change strongly influenced energy demand, and con-tributed notably to improving environmental benefits. The balancedstate stays at the critical point in 1999, when energy consumptionreached 32.329�109 kWh. Technological innovation decreased thedemand of energy consumption by 12.99%, more than the fixedtechnology scenario.

Finally, green buildings contribute significantly to energysaving, buffering the temperature fluctuations in external andinternal environment. In comparison with energy consumptionstatistical data, the reduction of energy consumption by greenbuildings reached an average of 17.5% (1990–2007). Energy useefficiency can be achieved through vegetation shading and pas-sive cooling, which can prevent a building from over-heating andtherefore reduce its cooling load.

Acknowledgements

We acknowledge with gratitude the research grants kindlyprovided by the Midland Charitable Foundation and the Dr. StanleyHo Alumni Challenge Fund.

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