Structural decompositions of energy consumption between 1995 and 2009: Evidence from WIOD

Energy is key to achieving sustainable development. This paper explicitly distinguishes between the supply side of energy consumption and demand side of energy consumption, and investigates the factors that affect the energy consumption across economies. Using data from the World Input-Output Database (WIOD), this paper decomposes the relative changes of energy consumption into intensity effect, production structure, structural change in final demand, total final demand effect and household consumption. Then it further decomposes production structure into inter-industry structural effect, and trade effect in intermediate inputs. Overall, energy consumption growth is mainly driven by total final demand (55.04% increase at the world level), but can be significantly reduced by intensity effect due to technological change (21.02% decrease at the world level). There is heterogeneity of structure related effects across economies and within the same economy in both aspects of energy consumption. In addition, the trade effect and household effect are relatively small. This paper provides an empirical framework for analyzing energy consumption in a globalizing world, and suggests tailored and integrated energy policies.