Explaining the declining energy intensity of the U.S. economy

This paper reconciles conflicting explanations for the decline in U.S. energy intensity over the last 40 years of the 20th century. Decomposing changes in the energy–GDP ratio into shifts in the structure of sectoral composition and adjustments in the efficiency of energy use within individual industries reveals that while inter-industry structural change was the principal driver of the observed decline in aggregate energy intensity, intra-industry efficiency improvements played a more important role in the post-1980 period. Econometric results attribute this phenomenon to adjustments in quasi-fixed inputs—particularly vehicle stocks, and disembodied autonomous technological progress, and show that price-induced substitution of variable inputs generated transitory energy savings, while innovation induced by energy prices had only a minor impact.