5. History: Energy Revolution

Why was coal economically important?

Premodern economies were largely organic economies. Energy came from:

• Human and animal labour

• Wood and charcoal

• Wind and water

• Biomass produced from a limited amount of land

An expanding organic economy therefore competed for land: land was needed for food, animal feed, timber and fuel.

Coal allowed Britain to move towards a mineral-fuel economy. It provided access to accumulated underground energy rather than relying entirely on annual biological production.

Coal also produced important technological spin-offs:

• Steam engines

• Coal-based iron production

• Engineering and metalworking

• Railways

• Mechanized manufacturing

British coal output increased from approximately 227,000 tons in 1560 to 15 million tons in 1800—a roughly 66-fold increase.

The traditional explanation: natural resources

The older argument, associated with writers such as Jevons, Wrigley and Pomeranz, is:

Britain industrialized because it happened to possess accessible coal deposits.

Coal certainly mattered. Britain produced most of the world’s coal during the eighteenth century, while southern Belgium was the only other major coal-producing region.

But the presence of coal is not a sufficient explanation:

• Other countries also possessed coal.

• British coal deposits had existed long before production expanded.

• Coal had to be mined, transported and made usable.

• Medieval houses and many industries could not immediately substitute coal for wood.

Therefore, we must explain why Britain developed a large market for coal.

The ‘timber crisis’ hypothesis (Nef 1932)
– Until the 17th century, England had cut down its forests for heating fuel
and material for shipbuilding.
– Timber shortage ➔ wood and charcoal replaced by coal
– Evidence: coal mining increased 66-fold between 1560 and 1800

Allen’s correction: real prices
– Much of the increase reflected inflation
– Real wood prices rose mainly after 1650 following urban
growth
– Coal became much cheaper relative to wood only in late 17th
century
• Implication: price increase much more likely to be driven by
urban growth

16th century England experienced sustained inflation
• Nominal prices rose across many goods
• Real prices must therefore be used when studying scarcity

Why London was decisive?

Pre-modern growth turned London into the biggest city in Europe
• London’s Population (Wrigley 1985)
– Early 1300s: ~ 75-100,000
– 1520: ~ 55,000
– 1600: ~ 200,000
– 1700: ~ 500,000
– 1800: ~ 1 million (biggest city in Europe)
• Consequence
– Timber had to be transported over longer distances as fuel demand for London grew
- Transport costs drive up wood prices

Why didn’t coal become expensive too?

Properties of coal
– Coal is not a clean source of energy
– Both households and industry (e.g. chinaware) preferred charcoal
➢ Coal could only be sold as fuel with substantial discount – but coal
reserves were effectively unlimited
• Coal behaved like a backstop technology
– Energy source that provides virtually unlimited power at constant unit cost

Transition dynamics:

Wood price rose with London’s growth
• Coal price remained stable
• Once wood became sufficiently expensive, coal mining became profitable
• Coal demand expands rapidly – coal supply responds

The energy revolution

By 1700, half of British coal consumption used for heating
• By 1800, almost all thermal energy derived from coal
• Why wasn’t coal used earlier? A technological constraint!
– Medieval fireplaces burned wood efficiently
o Central open fireplace in smoke-filled kitchen for curing meat and
maximise warmth in the house
– Coal produced smoke and sulphur (inefficient and dangerous)
– Existing houses were unsuitable
• Solution: new heating technology made coal practical

The new house design

• Innovation
– Closed fireplace or metal chamber for high-temperature combustion
– Tall chimneys to keep smoke away
• Diffusion
– Common in London by late 17th century
– Great fire of 1666 accelerated adoption
– Coal trade took of in Southeast when new designs become common

Great Fire:

• Complete destruction
• Five sixths of the city, ~ 13.000 buildings destroyed
• ~ 80% of the population rendered homeless
• But reconstruction was quick, because London was a hub of global trade:
• Reconstruction spread modern coal-burning houses
• Increased timber demand, making coal even more attractive

Collective invention:

In premodern economies, innovation was not patentable, so gains
from innovation were non-excludable.
– Industry must internalize the cost of innovation/experimentation
– Rate of innovation depends on market size: larger markets ➔ more
experimentation
• London’s reconstruction accelerated learning
• Innovation became cheaper because many builders experimented
simultaneously

Coal in the periphery

Before 1660s:
• Firewood remained cheap
• Little incentive to adopt coal
After London fire:
• Coal-burning technology spread
• Prices of wood/charcoal rise
• Demand for coal increased across Britain
• Coal mining expanded

Britain around 1800
• Produced most of the world’s pig iron
• Installed ~ 2,000 steam engines
• Had the cheapest energy in the world
Cheap energy became Britain’s comparative advantage, inducing the Industrial Revolution.

Why not Belgium ?

Similarities with Britain:
• Global commerce (Antwerp, Amsterdam), high wages, proto-industrialisation,
urbanisation, coal deposits (Wallonia)
Wallonia: English story ‘in miniature’
• Growth on Antwerp (Flanders) increased fuel demand ➔ growth of coal mining
• Cheap coal around Liège ➔ early adoption of industrial technology from Britain
Differences:
• Antwerp was much smaller than London
• Smaller market limited coal demand
Britain experienced the same mechanism – but on a much larger scale!

Why not Holland?

Holland in the 17th century had:
• High wages
• Urbanisation
• Commerce
But Dutch cities did not need coal when running short of traditional fuel:
• Cheap peat (easier substitute for firewood)
• German coal reserves accessible through Rine
• Easy coal imports from Britain
No strong incentive to develop domestic coal mining.
Britain had ‘first-mover’ advantage in coal-based economy

How cheap energy supported high wages

High wages normally make production expensive. British firms remained internationally competitive partly because cheap coal compensated for expensive labour.

Cheap energy:

• Lowered industrial production costs.

• Encouraged substitution of machines and energy for labour.

• Made steam technology more profitable.

• Supported coal-based iron and glass production.

• Reinforced Britain’s comparative advantage.

Thus, the relationship ran in both directions:

• Commercial growth created a high-wage economy and demand for coal.

• Cheap coal then helped sustain high wages and encouraged labour-saving inventions.