The consumption of energy services—heating, lighting, transportation, and the like—is essential to the functioning of modern economies. At the same time, since most energy for these services is supplied by fossil fuels, our high energy dependence triggers a multitude of environmental externalities, with climate change being the “greatest and widest-ranging market failure the world has ever seen” (Stern 2006, i). To curb carbon emissions, the world must reduce its consumption of fossil fuels. This could in principle result from an early saturation of total global energy consumption and/or acceleration of the ongoing energy transition toward low-carbon energy sources, such as nuclear, wind, and solar.
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A full analysis spanning the period 1850–2017 will appear in a forthcoming IMF working paper.