The effect of industry delocalization on global energy use: A global sectoral perspective

Sectoral production technologies differ largely across countries, so do sectoral energy intensities. Hence, shifts in production locations within global sectors, possibly caused by environmental regulations, are likely to have an impact on aggregated energy usage and emissions. Applying a Logarithmic Mean Divisia Index decomposition we decompose changes of sectoral energy use from 2001-2011 into three effects: (sectoral) value added, energy efficiency and delocalization, which in this paper is conceived as a structural effect within sectors, between regions. Our results show that although economic activity and technological progress dominate global energy use developments, for most sectors a delocalization towards less efficient production places is ongoing. It contributes to annual increases in energy use in the range of 1-6%. Especially, manufacturing sectors, which are among the most energy consuming sectors, reveal significant increases in energy usage due to delocalization since 2004. This development is accompanied by declining energy intensity improvement rates, indicating that delocalization induces second order effects.