International Trade and Energy Intensity during European Industrialization, 1870-1935

Previous research suggests that there is an inverted U-shape curve for energy intensity in the long-run for Western Europewith a peak in the early 20th century. This paper tests the hypothesis that the increase of German and British energy intensity was an effect from the concentration of heavy industrial production to these countries, although the consumption of a significant share of these goods took place elsewhere. We use an entirely new database that we have constructed (TEG: Trade, Energy, Growth) to test whether these countries exported more energy-demanding goods than they imported, thus providing other countries with means to industrialize and to consume cheap-energy demanding goods. We find that the U-shape curve is greatly diminished but does not disappear. The pronounced inverted U-curve in German energy intensity without trade adjustments is reduced when we account for energy embodied in the traded commodities. For Britain the shape of the curve is also flattened during the second half of the 19th century, before falling from WWI onwards. These consumption-based accounts are strongly influenced by the trade in metal goods and fuels, facilitating industrialization elsewhere.