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A Structural Decomposition Analysis of Global and National Energy Intensity Trends

Abstract:
This paper analyses recent energy intensity trends for 40 major economies using a structural decomposition analysis. Our focus lies on the question whether improvements in energy intensity were caused by structural change towards a greener economy or by technological improvements. We account for intersectoral trade by using the World Input-Output database and adjust sectoral energy use via the environmentally extended input-output analysis. We find strong differences between consumption and production-based energy consumption across sectors, particularly in the construction and electricity industry. Using the three factor Logarithmic Mean Divisia Index method, our decomposition analysis shows that recent energy intensity reductions were mostly driven by technological advances. Structural changes within countries played only a minor role, whereas international trade by itself even increased global energy intensity. Compared to a previous study only using production-based sectoral energy data, we find structural effects on energy intensity reductions to be systematically weaker under consumption-based data.

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Energy Specializations: Energy Modeling – Other; Energy Modeling – Energy Data, Modeling, and Policy Analysis

JEL Codes:
C59 - Econometric Modeling: Other
E61 - Policy Objectives; Policy Designs and Consistency; Policy Coordination

Keywords: Energy Intensity, Logarithmic mean Divisia Index Decomposition, WIOD Database, Leontief Inverse

DOI: 10.5547/01956574.39.2.dcro

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Published in Volume 39, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.