Manufacturing energy use in OECD countries: Decomposition of long term trends

In this paper we examine manufacturing energy use in thirteen OECD countries over the period 1971 to 1995. We describe changes in aggregate energy intensity using the Adaptive Weighting Divisia index. This index enables us to decompose energy use over the past 25 years into changes in the overall volume or output of manufacturing, the structure or sub-sectoral shares of output, and the energy intensity of each sub-sector and compare the results across countries. We contrast the development in the periods after the oil price shocks of 1973 and 1979 with the period of relatively stable energy prices after the oil price crash of 1986. The results show that manufacturing output grew in most countries, pushing UP energy use. The share of electricity increased in almost every sector, while there was a clear trend away from oil and coal towards natural gas. Changes in the structure of output drove up energy use between 1973 and 1994 in some countries and down in others. Changes in energy intensities had a profound and downward effect on manufacturing energy use in all countries, with reductions in energy intensity (holding the mix of output constant) ranging fi om 20 to 57% between 1973 and 1994, corresponding to 0.7-3.5% reductions per year. However, contrasting the period after oh prices fell in 1986 with earlier years we see that for most countries the rate of energy intensity decline slowed slightly but did not reverse with falling prices. In a few countries efficiency improvements continued to have a strong effect. This suggests that even without higher prices improvements of energy efficiency seems to take place.