Changes in Energy Intensity in Canada

Abstract

Canada is one of the top energy users and CO 2 emitters among the OECD countries. However, energy intensity has been declining, on average, by about 1.4 percent since 1980. In this paper, we use the Fisher Ideal Index to determine the contribution of changes in the composition of economic activities and efficiency to a decline in energy intensity in Canada at national, provincial, and industry levels. We also apply panel data estimation methods to further investigate the factors driving energy intensity, efficiency and activity indexes for the period 1981-2008. We test for endogeneity as well as cross-section dependency in the provincial data and control for factors such as climate, policy, and energy endowment. The national and provincial decomposition results suggest that most of the reduction in energy intensity has occurred mainly due to improvements in energy efficiency rather than shifts in economic activities. Within the industry, while energy intensity has declined significantly in manufacturing, it has remained stable in transportation, utilities, and construction, and increased significantly in oil extraction and mining industries. The provincial panel regression results indicate that energy intensity is higher in provinces with higher average incomes, faster population growth, colder climate, and a higher capital-labour ratio, and lower in provinces with higher energy prices and higher investment. The industry panel regression results show that investment has contributed to energy efficiency in utilities and mining and to a shift away from energy-intensive activities in manufacturing and transportation industries. Technological advances have been most effective in increasing energy efficiency in construction and utilities and in decreasing energy-intensive activities in manufacturing industries. The results indicate that although efficiency contributes to a reduction in energy intensity in Canada, increasing activity in energy-intensive industries, such as oil and mining, partially offsets the efficiency gains in other industries.

The underlying trend of OPEC energy intensity and the environmental implications

“…5. The efficiency index (also known as the technical change) therefore attributes the actual changes in the level of energy intensity to efficiency change holding structural changes constant, and the activity index attributes changes in energy intensity to structural changes in economic activities holding efficiency across sectors constant (Moshiri and Duah, 2016;Inglesi-Lotz and Pouris, 2012). 6.…”

“…A separate strand of the literature also decomposed energy intensity as well as examined the underlying determinants (e.g. Metcalf, 2008;Oseni, 2011;Jimenez and Mercado, 2014;Moshiri and Duah, 2016). More recently, a study by Tajudeen et al (2018) separated energy efficiency from energy intensity and provided a modelling framework for estimating the relationship between energy efficiency and CO 2 emission at the macro-level.…”

Addressing Key Drivers of Regional CO2 Emissions of the Manufacturing Industry in Japan

“…There have also been previous studies 1. There are other decomposition studies related to this topic such as energy demand, energy efficiency, and energy intensity (Filippini and Hunt, 2006;Metcalf, 2008;Huntington, 2010;Mulder, 2015;Moshiri and Duah, 2016;Grossi and Mussini, 2017;Croner and Frankovic, 2018;Voigt et al, 2014). However, in the literature review, our focus was on decomposition analysis in relation to CO 2 emissions.…”

Reconciling energy efficiency and energy intensity metrics: an integrated decomposition analysis

“…Our objective is to describe and illustrate a method for quantifying the energy efficiency and structural components of changes in energy intensity (Δ(E/GDP) so as to better inform policy, program evaluation and energy forecasting. Energy intensity is easily quantified with economic and energy data that is readily available in most countries and is sometimes conflated with energy efficiency (Moshiri and Duah 2016;Andreoni and Galmarini 2016;Colinet Carmona and Román Collado 2016;Fernández González 2015;Moutinho et al 2016). 1 However, energy intensity is a complex variable that is influenced by other factors that can augment or offset energy efficiency gains.…”