Without energy, the economy stalls. As the world shifts from non-renewable to renewable sources, there is a constant drive for greater energy efficiency. Yet, technological change often favors non-renewable inputs. Zheng Hou’s (MACGROW) research explores this dynamic, focusing on the relationship between directed technological change and energy as a production factor.
In collaboration with Catarina Roseta-Palma and Joaquim Ramalho (ISCTE-IUL), Zheng examines technological change across 32 economic subsectors in Portugal. Using stochastic frontier analysis, his findings reveal that technological advances have largely favored fuel over electricity, with inefficiencies varying across sectors. These results suggest the need for targeted, sector-specific policies that shift technological change towards cleaner energy sources, reducing inefficiencies and promoting sustainability.
In another article with the same co-authors, Zheng´s research extends to the global stage, examining whether technological progress prioritizes energy over other inputs, such as labor and capital. The findings reveal a clear macro-level bias toward energy, which is particularly significant since labor is a renewable input, while energy remains largely non-renewable. This bias highlights the ongoing challenges of the global energy transition and stresses the importance of policies encouraging innovation in renewable technologies.
In a third contribution with co-authors from three institutions, Zheng focuses on energy inputs’ quality rather than just quantity. The study employs the useful exergy metric, which measures the exact amount of energy effectively used in the final stage of economic production, a rather small proportion comparative to gross energy consumption. It shows that energy’s contribution to economic growth has increased over time, sometimes even surpassing labor. The research reveals that energy quality and efficiency play a vital role in driving economic output, suggesting that policies should focus on maximizing energy efficiency and reducing waste for sustained growth.
Zheng’s research underscores the pivotal role of energy in shaping technological change. It provides a compelling argument for the need for comprehensive policies that promote renewable energy and incentivize greater efficiency in energy use. His findings call for targeted innovations prioritizing energy inputs’ quality and sustainability, ensuring long-term economic growth in an increasingly resource-conscious world. Currently, Zheng is also developing studies on efficiency in the Portuguese electricity factor and wildfire management.
