Activity Sectors and Energy Intensity: Decomposition Analysis and Policy Implications for European Countries (1991–2005)

Abstract

This paper studies the change in Energy Intensity (EI) of the main economic activities in the EU15 countries, which represents approximately 45% of their final energy consumption. The purpose is, first, to measure the different patterns between the countries by establishing differentiated typologies, and second, to investigate those reasons that explain the different trends by country. To attain our objective, the changes in EI are decomposed into their structural and efficiency components for EU15 countries for the period 1991–2005. Results reveal four different typologies for this set of countries, and show the importance of identifying those economic activities which, due to their special impact, are key to reducing energy consumption. The changes in the structural component are due mainly to a transformative process in which the importance of industry in the economy as a whole drops, while the opposite holds for services. However, the changes in the efficiency component do not seem to be linked to this same process. It does not appear as though the services sector resulted in a more efficient use of final energy. We have detected significant evidence of convergence for EI in the service sector that would help to understand the recent worsen evolution of EI in this sector (and in overall EI) of Southern European countries. It can also be concluded that an analysis of global EI change without distinguishing among its components can result in misleading conclusions and in improperly conceived Energy Policies.

Keywords

• energy intensity
• structural and efficiency components
• Divisia Index
• European Union