Energy productivity – the ratio of economic output per unit of energy use – is a metric that can inform nations about their relative performance of interrelated (and sometimes competing) economic, energy, and environmental issues. For a number of years, productivity’s reciprocal – intensity – has been recognised as a potentially valuable metric of performance and has informed energy and climate policies.
Focus on energy productivity has grown in recent years as organisations and countries began developing targets. The United States’ adopted goal of doubling energy productivity by 2030, and Germany’s goal of doubling energy productivity by 2020 relative to 1990, are two such examples. If the metric continues to expand its role in policy globally, understanding its determinants will only become more important in the future.
Energy productivity changes at an aggregate, economy-wide level occur through two basic effects. The first is a change in sectoral energy productivity, which can arise from technological improvements, behavioural changes, changes in product mix not evident because of sectoral aggregation, and other factors. We refer to this as the sectoral energy productivity effect (although it is also referred to as the energy efficiency effect). The second fundamental effect is a shift in the mix of economic activity. For example, if an economy’s structure moves towards energy productive sectors like financial services, the aggregate energy productivity improves, even if the energy productivity of each sector remains the same. We refer to this determinant as the structural effect (although it can also be referred to as the activity effect).
This project investigates the effects driving economy-wide energy productivity changes in 39 countries between 1995 and 2009, using a decomposition analysis.