Handbook of Environmental and Resource Economics
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Handbook of Environmental and Resource Economics

Edited by Jeroen C.J.M. van den Bergh

This major reference book comprises specially commissioned surveys in environmental and resource economics written by an international team of experts. Authoritative yet accessible, each entry provides a state-of-the-art summary of key areas that will be invaluable to researchers, practitioners and advanced students.
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Chapter 74: Decomposition Methodology in Energy Demand and Environmental Analysis

B.W. Ang


74 Decomposition methodology in energy demand and environmental analysis Beng Wah Ang 1. Introduction The world oil crisis that took place in 1973174has provided a major impetus to energy demand studies. A notable development has been the growing use of quantitative methodologies in economics, statistics, operations research, and industrial and systems engineering to analyse historical and forecast future energy demand. The concern about the effectiveness of energy use has also led to the development and application of various energy performance indicators, such as the energy-output ratio, energy intensity, energy coefficient and energy elasticity. The energy-output ratio, one of the most commonly used energy performance indicators, is defined as the total energy consumption in the economy divided by the national output. At the level of sectoral energy consumption, such as in the manufacturing industry, it is defined as manufacturing energy consumption divided by manufacturing output and is also referred to as the aggregate energy intensity. A change in the ratio, especially a rapid one, calls for the identification of the contributing factors so that appropriate actions can be taken if needed. Two factors that have often been examined are changes in the composition of activity (that is, structural effect) and changes in sectoral energy intensities (intensity effect). The sectoral energy intensity is the quantity of energy needed to achieve a given level of output for each specific activity/sector. The composition of activity is effectively beyond the control of energy policy makers, while changes in sectoral energy intensities can be influenced through...

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