Using Combined Approach of Logarithmic Mean Divisia Index and Decoupling Index for Decomposition of Energy Consumption in Agricultural Sector of Iran

Abstract

This study has decomposed affecting factors on energy consumption in the agriculture sector (MBOE) by using Logarithmic Mean Divisia Index (LMDI) to three structural effects, activity effects, and energy intensity effects during 2006-2014. Also, it's investigated the relationship between GDP growth and energy consumption of the agriculture sector by combining Mean Logarithmic Divisia Index with the decoupling index. The results show that energy consumption of the agriculture sector has increased during that period. Activity effect and structural effect respectively, have the most share in explaining the changes in energy consumption among the mentioned effects, and the intensity effect has a smaller role in explaining the changes in energy consumption. Additionally, the results of applying the decoupling index indicated that the agriculture sector experienced three conditions, including strong negative decoupling, weak decoupling, and expansive negative decoupling during the period of study. In the agriculture sector, after activity effect, i.e., the change of total energy consumption of each sector due to increase of production, the structural effect, i.e., utilize of the energy-intensive industries, not only has more explanatory power than efficient use of energy in the changes in energy consumption but also has the most share in the trend of changes in GDP and changes in energy consumption of aforementioned sector. But the share of effective energy consumption expressed in terms of the intensity effect is less. This conclusion suggests that the use of energy-intensive industries has a greater role in total energy consumption changes and decoupling index changes than an inefficient use of energy.

Keywords

• activity effect
• structural effect
• energy intensity effect
• logarithmic mean divisia index
• decoupling index