Reconciling energy efficiency and energy intensity metrics: an integrated decomposition analysis

We develop and illustrate a method for reconciling index decomposition analysis of energy intensity with physically based, sector-specific energy efficiency indicators. Decomposition analysis of individual sector intensity contributions to total energy intensity is nested within the higher-order decomposition analysis of E/GDP such that the contribution of energy efficiency gains to changes in total energy intensity can be determined. Energy, economic and physical activity data for Canada for the period 1995–2010 are used to illustrate the method. Intrasector structural factors were found to be both positive and negative and to be significant contributors to energy intensities in both the business and household sectors. In aggregate, intrasectoral structural change offset energy efficiency gains and put upward pressure on (E/GDP) between 1995 and 2010 but was three times smaller than the offsetting decline in E/GDP due to intersectoral structural change. The method can be used for assessing the contribution of energy efficiency to sector energy intensities; for placing energy efficiency policies in the larger context of the other factors that determine an economy’s energy intensity and greenhouse gas emissions; for identifying non-efficiency policy targets for improving energy productivity; and for increasing the sophistication of forecasting and scenario analysis of future levels and patterns of fuel and electricity consumption and related greenhouse gas emissions.