How to study decoupling?

3 3
Index Decomposition Analysis (IDA)

Change in energy demand -three

common sources:

Change in the level of activity: If the

level of activity increases then energy
demand increases (Activity Effect- AE)

Change in structure: If there is a shift

towards less energy consuming
activities then energy demand decreases
(Structural Effect SE)

4
Index Decomposition Analysis (IDA)

Change in energy demand -three To understand the structural change important to

common sources: divide the activities/sectors into energy-intensive and
non energy-intensive sectors.
Change in the level of activity: If the
level of activity increases then energy
demand increases (Activity Effect- AE)
43%
Change in structure: If there is a shift
towards less energy consuming 25%
activities then energy demand decreases 36%
(Structural Effect SE) 50%

21%
25%
Change in energy intensity: If energy
intensity declines then energy demand
is reduced (Energy Intensity Effect IE)

5
IDA: Example from Indian Industries

120 Can falling energy intensity deliver the decoupling of

100
80 industrial activity growth from energy use in Indian
60
40
World best
in 2008, 70.6
manufacturing industries?
20
0
Activity effect: Change in energy demand due to change
in total industrial production, other things remaining
1000
constant.
800
600 Structural effect: Divide the industries into two sectors:
400 World best in
200
2009, 650 energy-intensive (aluminium, cement, iron and steel,
0 chlor alkali, fertilizer, pulp and paper, and textile) and
less energy-intensive (rest of the manufacturing). If the
share of production of the energy-intensive sector
50 increases, then, energy use increases (other things
40
30 remaining constant) due to structural effect.
20
10 World best in
0 2009, 16.6 Energy Intensity Effect: If energy consumption per unit
of production declines, then other things remaining
constant, energy use of the industrial sectors declines.
6
Log Mean Divisia Index

i denotes the industry group i.e. energy-intensive and less energy-intensive

Et = Total industrial energy consumption, S i.t = Yi,t/Yt= Production share of industry group i

Ei,t = Energy consumption in industry group i It=Et/Yt= EI of the aggregate industry sector

Yt= Total industrial production Ii.t = Ei,t/Yi,t= EI for industry group i

Yi,t = Production of industry group i

7
Log Mean Divisia Index

The change in energy use in additive form

The change in energy use in multiplicative form

8
Log Mean Divisia Index

The change in energy use in additive form

Additive Form

The change in energy use in multiplicative form

9
Log Mean Divisia Index

The change in energy use in additive form

Multiplicative Form

The change in energy use in multiplicative form

10
 Log Mean Divisia Index

The Divisia Index was first introduced as an alternative to Laspeyres

decompose and separate the changing composition of US manufacturing production from energy
efficiency improvements.

Improvements: A Divisia 96.

Ang, B. W., and F.L.Liu

548.

11
Industry group-wise production and energy use in Rs. Lakhs (constant
prices) in manufacturing industries in India (1990-91 and 2010-11)

1990-91 (t=0) 2010-11 (t=T)

Energy Use Output Energy Use Output

Industry groups (Ei0) (Yi0) (EiT) (YiT)

Energy intensive manufacturing 5105 47563 9347 194572

industries (Group 1)
Less-energy intensive 3714 86342 7853 637131
manufacturing industries (Group 2)

Total 8819 133905 17200 831703

Notice, both energy and production are measured in value terms.

12
Computation of LMDI for Indian Industries (1990-91 2010-11)
1990-91 (t=0) 2010-11 (t=T)
Industry
Ei0 Yi0 Si0= Yi0/Y0 Ii0=Ei0/ Yi0 EiT YiT SiT= YiT/YT IiT= EiT/ YiT
groups
1990-91 (t=0)

Energy Use Output

E10 Y10 S10 I10 E1T Y1T S1T I1T
Group 1
=5105 =47563 =0.36 =0.11 Industry groups
=9347 =194572 =0.23 (Ei0) =0.05 (Yi0)

Energy intensive 5105 47563

manufacturing industries
E20 E20 S20 I20 E2T
(Group 1) Y2T S2T I2T
Group 2
=3714 =86342 =0.64 =0.04 Less-energy=637131
=7853 intensive =0.77 3714 =0.0186342
manufacturing industries
(Group 2)
E0 Y0 S0 I0 Total
ET YT ST 8819 IT 133905
Total
=8819 =133905 =1 =0.07 =17200 =831703 =1 =0.02

13
Computation of LMDI for Indian Industries (1990-91 2010-11)
1990-91 (t=0) 2010-11 (t=T)
Industry
Ei0 Yi0 Si0= Yi0/Y0 Ii0=Ei0/ Yi0 EiT YiT SiT= YiT/YT IiT= EiT/ YiT
groups
1990-91 (t=0)

Energy Use Output

E10 Y10 S10 I10 E1T Y1T S1T I1T
Group 1
=5105 =47563 =0.36 =0.11 Industry groups
=9347 =194572 =0.23 (Ei0) =0.05 (Yi0)

Energy intensive 5105 47563

manufacturing industries
E20 E20 S20 I20 E2T
(Group 1) Y2T S2T I2T
Group 2
=3714 =86342 =0.64 =0.04 Less-energy=637131
=7853 intensive =0.77 3714 =0.0186342
manufacturing industries
(Group 2)
E0 Y0 S0 I0 Total
ET YT ST 8819 IT 133905
Total
=8819 =133905 =1 =0.07 =17200 =831703 =1 =0.02

14
Computation of LMDI for Indian Industries (1990-91 2010-11)
1990-91 (t=0) 2010-11 (t=T)
Industry
Ei0 Yi0 Si0= Yi0/Y0 Ii0=Ei0/ Yi0 EiT YiT SiT= YiT/YT IiT= EiT/ YiT
groups
1990-91 (t=0)

Energy Use Output

E10 Y10 S10 I10 E1T Y1T S1T I1T
Group 1
=5105 =47563 =0.36 =0.11 Industry groups
=9347 =194572 =0.23 (Ei0) =0.05 (Yi0)

Energy intensive 5105 47563

manufacturing industries
E20 E20 S20 I20 E2T
(Group 1) Y2T S2T I2T
Group 2
=3714 =86342 =0.64 =0.04 Less-energy=637131
=7853 intensive =0.77 3714 =0.0186342
manufacturing industries
(Group 2)
E0 Y0 S0 I0 Total
ET YT ST 8819 IT 133905
Total
=8819 =133905 =1 =0.07 =17200 =831703 =1 =0.02

15
 1990-91 (t=0) 2010-11 (t=T)

Energy Output Energy Output

Computation of effects Industry groups Use
(Yi0)
Use
(YiT)
(Ei0) (EiT)

Energy intensive 5105 47563 9347 194572

manufacturing
industries (Group 1)
Less-energy intensive 3714 86342 7853 637131
manufacturing
industries (Group 2)
Total 8819 133905 17200 831703

22904-1976-12547=8381=17200-8819

16
 25000

20000
Computation of effects
15000

10000

5000

0
Activity Effect Structural Effect Energy Intensity Effect
-5000

-10000

-15000
70%
60%
50%
40%
30% 273%

20%
10%
0%
-24%
-10%
-20% -150%
-30%
-40%
17
 1990-91 (t=0) 2010-11 (t=T)

Energy Output Energy Output

Computation of effects Industry groups Use
(Yi0)
Use
(YiT)
(Ei0) (EiT)

Energy intensive 5105 47563 9347 194572

manufacturing
industries (Group 1)
Less-energy intensive 3714 86342 7853 637131
manufacturing
industries (Group 2)
Total 8819 133905 17200 831703

6.20*0.85*0.37 = 1.95=17200/8819

18
Computation of effects
Activity Effect
7
6
5
4
3
2
1
0

Energy Intensity
Structural Effect
Effect

19
Indian manufacturing industries (1973-2011)
300%
250%
200% Energy intensive manufacturing industries : Aluminium, cement,
2%
150% 297% Fertilizer, Iron and steel, paper and textile, Chemical
100%
114% 173%
50%
0% -4%
-10% -24% When do you see a mark of decoupling?
-50% -75%
-100%
-150%
-173% What was the most significant event that was happened in India
-200% during that time?
1973-74 -1988-89 1889-90 - 1997-98 1998-99 - 2011-12

Energy Intensity Effect Structural Effect Activity Effect

25
20
15 Source: Dasgupta, S. and
10 Roy, J (2017). Analysing
5 energy intensity trends and
0 decoupling of growth from
-5 energy use in Indian
-10 manufacturing industries
-15 during 1973 1974 to 2011
Energy Intensity Effect (EI) Structural Effect (SE) 2012. Energy Efficiency,
Activity Effect (AE) Total Change in Energy Demand (TE) 10(4), 925 943.
20