This report, first published in 1977, explores several different approaches to the same question; namely, how severe will be the impact on key U.S. macro-economic variables of the transition from main reliance on oil and natural gas to other sources of energy? This book will be of interest to students of economics and environmental studies.

This publication is concerned with two major current debates in public policy in all affluent societies. One is the widespread concern with the quality of the natural environment-the quality of air, water, land, and wilderness areas-which has expressed itself in the passage and implementation in recent years of a variety of environmental laws and regulations. A second debate concerns the adequacy of energy resources to meet the requirements of a growing economy. The requirement that industries must abate environmental pollution leads to increased costs of production and, in turn, to higher prices, falling output in those industries, and reduced employment and income in the region where such industries are located. There may be, at the same time, growth in indus tries that supply pollution abatement equipment and services in those or other regions. Over time, the health and economic benefits of higher envi ronmental quality express themselves in changing patterns of consumption.

In the policy arena, as well as in the academic world, a new challenge is having to deal with the global community. We are increasingly aware that the world is linked through economy–energy–environment interactions. We are increasingly aware, at the same time, that the emergence of the global community does not imply an integrated harmonious world; rather, it is a community where co- tries/regions of different interests and values face each other directly. Global governance has to be achieved through actions of national governments under different motives and constraints. We need to have an analytical tool that is capable of producing a global picture, yet with detailed country resolution. If the world is a better place now compared to 100 years ago in terms of p- capita income, this is due to the industrialization that continued throughout the 20th century. We entered the 21st century knowing that the human aspiration that translates into ever-increasing production may not be tenable in the long run. Sustainability of the global community is at stake. In contrast to inc- mental decision making through the market mechanism that should lead to some optimal state under some assumptions such as perfect knowledge, smooth movement of resources, no externalities, and so forth, we need to have an a- lytical tool to provide us with details of the future state of the world.

An energy economic assessment model for application to energy assessments in developing countries is described. A simple comprehensive treatment of the energy sector is emphasized. The input output model is directly incorporated in the Energy system LP. The major supply sectors, as well as the major energy using industries, are modelled as capacity expansion problems, in which explicit distinction is made between capital stock and energy flows. For most developing countries the notion of energy supply curves is far fetched, since energy prices are set by planning authority, not established by market clearing equilibrium.