energy productivity - necst
TRANSCRIPT
Energy Productivity
2
What is Energy Productivity
and Why Does it Matter?
3
Global Climate Change and Attempts to Govern Emissions
Who is listening?
How do you
persuade them to
listen?
4
Priorities in Global Discussions
Energy Intensity vs
Carbon Intensity
Limited Access to
Energy
Limited Ability to
Emit GHGs
Energy Productivity
5
Energy: Efficiency vs Intensity vs Productivity
Energy
GDP
Energy
Steel
GDP
Energy
Steel
Energy
Macro
Level
Micro
Level
Energy
Intensity
Energy
Efficiency Energy
Productivity
Defined in
terms of
energy
Defined in
terms of
output
Energy
Productivity
6
A paradox: can negative cost abatement options exist?
Source: McKinsey, 2009 Pathways to a low carbon economy
7
Energy Productivity v. Energy Intensity
Energy intensity is more commonly used.
However, there are important reasons to believe that energy productivity
provides a better way forward.
Economic Development
Environmental Sustainability
Energy Security
Indicators such as energy efficiency, intensity and
productivity are increasingly used to address
three key, interrelated issues facing policymakers.
𝐄𝐧𝐞𝐫𝐠𝐲 𝐈𝐧𝐭𝐞𝐧𝐬𝐢𝐭𝐲 =𝐄𝐧𝐞𝐫𝐠𝐲 𝐂𝐨𝐧𝐬𝐮𝐦𝐩𝐭𝐢𝐨𝐧
𝐆𝐫𝐨𝐬𝐬 𝐃𝐨𝐦𝐞𝐬𝐭𝐢𝐜 𝐏𝐫𝐨𝐝𝐮𝐜𝐭
𝐄𝐧𝐞𝐫𝐠𝐲 𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐯𝐢𝐭𝐲 =𝐆𝐫𝐨𝐬𝐬 𝐃𝐨𝐦𝐞𝐬𝐭𝐢𝐜 𝐏𝐫𝐨𝐝𝐮𝐜𝐭
𝐄𝐧𝐞𝐫𝐠𝐲 𝐂𝐨𝐧𝐬𝐮𝐦𝐩𝐭𝐢𝐨𝐧
How can that be if energy productivity and energy
intensity are merely reciprocals?
8
The Case for Energy Productivity
Energy productivity has a number of advantages over energy intensity:
• ‘Productivity’ conveys a more positive quality than ‘intensity’.
• Psychology and behavioral economics research has found people react differently to choices based on how they are presented and framed.
Positive Connotation
• An improvement in energy productivity is represented by an increase in its value, whereas energy intensity improvements are decreases in value.
• Objects and choices described in positive terms are preferentially adopted or have higher performance compared to identical alternatives framed in negative terms.
Intuitive Framing
• Energy productivity is more closely aligned with the widely understood concept of energy efficiency, as both are measures of output divided by input.
• At a disaggregated, sector-specific or process-level basis, energy productivity becomes almost synonymous with energy efficiency.
Aligns with Efficiency
• Energy productivity is measured in dollars of GDP per unit of energy, which is more readily understood given the well-established frame of reference for monetary values.
• By contrast, energy intensity is measured in less intuitive energy consumption units like tons of oil equivalent.
Instinctive Understanding
9
The Case for Energy Productivity: It’s not Just Semantics
There are also mathematical advantages:
• The amplified dynamics of energy productivity targets can give them broader appeal, not only because they are framed as positive actions, but also because such targets appear more ambitious than the equivalent intensity target.
• A goal of reducing intensity by 50% can instead be framed as a 100% increase in productivity.
Portrayal of Grander Ambition
• GDP is generally increasing faster than changes in energy consumption, and since GDP is the denominator in energy intensity, changes over time exhibit a pattern of decay.
• This gives rise to the Energy Intensity Illusion, which clouds the gap of relative performance between countries.
The Energy Intensity Illusion
Energy Intensity
Countries with a high initial energy
intensity make large gains in both
absolute and relative terms.
While countries with lower initial
energy intensity do not appear to
make large gains.
Energy Productivity
Countries that appeared to lag in
energy intensity improvements
actually make larger energy
productivity gains in absolute terms.
10
The Energy Intensity Illusion
Energy Intensity
Energy
Productivity
EIA,0
EPA,0
EIA,1
EPA,1
For energy intensive
countries, like Country A, a
large reduction in energy
intensity yields a small energy
productivity improvement.
EIB,1
EPB,1
EIB,0
EPB,0
For countries with low a
energy intensity, like Country
B, a small intensity reduction
yields a large energy
productivity gain.
11
What Causes Changes in
Energy Productivity?
12
Investigating Improvements in Energy Productivity
Are energy productivity improvements occurring because countries are
becoming more energy efficient? Or is it because the structure of their
economies is shifting towards more energy productive sectors?
Decomposition Analysis
Economic Output
Energy Consumption
Structural economic
shifts
Energy Efficiency
Improvements
Energy Productivity
13
Decomposition Analysis Dataset – the World Input Output Database
Energy and gross output for 40 countries and 34 sectors, 1995-2009
Countries included account for 85% of global GDP and 80% of global
energy consumption
WIOD Sector Disaggregation
1. Agriculture, hunting, forestry and fishing
2. Mining and quarrying
3. Food, beverages and tobacco
4. Textiles and textile products
5. Leather, leather products and footwear
6. Wood and products of wood and cork
7. Pulp, paper, printing and publishing
8. Coke, refined petroleum and nuclear fuel
9. Chemicals and chemical products
10. Rubber and plastics
11. Other non-metallic mineral
12. Basic metals and fabricated metal
13. Machinery, nec
14. Electrical and optical equipment
15. Transport equipment
16. Manufacturing nec, recycling
17. Electricity, gas and water supply
18. Construction
19. Sale, maintenance and repair of motor vehicles
20. Wholesale trade and commission trade
21. Retail trade, except of motor vehicles & motorcycles
22. Hotels and restaurants
23. Inland transport
24. Water transport
25. Air transport
26. Supporting and auxiliary transport activities
27. Post and telecommunications
28. Financial intermediation
29. Real estate activities
30. Renting of machinery & equipment & other business
activities
31. Public administration and defense, social security
32. Education
33. Health and social work
34. Other community, social and personal services
= Nations
included in WIOD
14
Decomposition Analysis
Methodology: Fisher Ideal Index
The product of structural and efficiency indexes
Yields a perfect decomposition
Energy ProductivitytEnergy Productivity0
= FtStructural ∗ Ft
Efficiency
Structural index: how has the mix of an economy’s output changed over
time? Has the share of economic output shifted towards more energy
productive or energy intensive sectors?
Efficiency index: have sectors become more energy efficient over time?
Energy efficiency is represented as the energy productivity (gross output /
energy consumption) of sectors.
Findings:
Changes occurred primarily through the energy efficiency channel
Rapid and volatile changes in efficiency and gradual structural economic shifts
Efficiency gains since 1995
are responsible for 30 billion
tons of oil equivalent of
avoided energy consumption
– equivalent to 7 years of oil
consumption
15
Decomposition Analysis: United States and China
40% increase in energy productivity
Driven by efficiency gains, most notably
in:
Coke, refined petroleum and nuclear fuel
Wood and wood products
Mining and quarrying
Structural shift due largely to financial
intermediation sector
2.5 fold energy productivity improvement,
attributable to efficiency gains
Electricity, gas, and water supply
Chemicals and chemical products
Water transportation
China’s economy shifted towards more
energy intensive sectors at the expense of
the agricultural, forestry and fishing sector
0
0,5
1
1,5
2
2,5
3
3,5
1995 1997 1999 2001 2003 2005 2007 2009
Fis
her
Ind
ex (
1995 =
1)
China
Structural Efficiency Energy Productivity
0
0,2
0,4
0,6
0,8
1
1,2
1,4
1,6
1995 1997 1999 2001 2003 2005 2007 2009
Fis
her
Ind
ex (
1995 =
1)
USA
Structural Efficiency Energy Productivity
16
Drivers of Embodied
Energy in Trade: The
Role of Specialization
17
What is embodied energy?
The embodied energy in a good or service is the energy that was
consumed in order to produce that good or service.
We can calculate the embodied energy in each country’s exports and
imports.
For example, 50 tonnes of oil equivalent (toe) might
have been consumed to produce this car.
If the embodied energy in exports is greater than the
embodied energy in imports, then a country is a net
exporter of embodied energy.
18
The embodied energy calculations generally show that:
Developed nations net importers of embodied energy
Developing nations net exporters of embodied energy
The embodied energy in a country’s trade
-300,0 -200,0 -100,0 0,0 100,0 200,0 300,0
USA
JPN
DEU
FRA
ITA
GBR
ESP
AUS
MEX
IND
BRA
ROU
BEL
HUN
POL
NLD
CZE
IDN
CAN
TWN
KOR
RUS
RoW
CHN
Embodied energy in net exports (Mtoe)
19
It is sometimes claimed that the “offshoring” of energy intensive industries
is causing these embodied energy flows.
For example, The Economist made the following comment on this strand
of research: “Rich countries are outsourcing carbon-dioxide emissions”.
This leads us to our research question:
Is offshoring really driving these embodied energy flows?
Is offshoring the cause?
vs
Developed countries
specialized in services
Developing countries
specialized in heavy industry
20
What factors can lead to net exports of embodied energy?
Suppose Exportistan and Importistan had the same efficiency and
specialization. If Exportistan has a positive trade balance with
Importistan, then:
∴ Exportistan is a net exporter of embodied energy because of trade
Suppose Inefficienstan and Efficienstan had the same specialization and
balanced trade. If Inefficienstan was less energy efficient, then:
∴ Inefficienstan is a net exporter of embodied energy because of inefficiency
Suppose Industan and Servistan had the same efficiency and balanced
trade. If Industan was more specialized in energy intensive exports, then:
∴ Industan is a net exporter of embodied energy because of specialization
21
The three drivers of embodied energy
There are three drivers, each of which can lead to net exports of
embodied energy by itself:
trade balance
energy efficiency
specialization
To determine the role each driver plays, it needs to be measured:
The trade balance can be easily measured using readily available data:
𝑛𝑒𝑡 𝑒𝑥𝑝𝑜𝑟𝑡𝑠 = 𝑋 −𝑀 ($)
Energy efficiency at an aggregate level can be measured using intensity:
𝑒𝑛𝑒𝑟𝑔𝑦 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦 = 𝑒𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛 𝑔𝑟𝑜𝑠𝑠 𝑑𝑜𝑚𝑒𝑠𝑡𝑖𝑐 𝑝𝑟𝑜𝑑𝑢𝑐𝑡 (𝑡𝑜𝑒 $)
But how to measure specialization?
𝑠𝑝𝑒𝑐𝑖𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛 = ?
22
Measuring specialization
First, we measure the embodied energy in exports:
𝐸𝐸𝑋 = 𝑒𝑚𝑏𝑜𝑑𝑖𝑒𝑑 𝑒𝑛𝑒𝑟𝑔𝑦 𝑖𝑛 𝑒𝑥𝑝𝑜𝑟𝑡𝑠 (𝑡𝑜𝑒)
𝑋 = 𝑚𝑜𝑛𝑒𝑡𝑎𝑟𝑦 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑒𝑥𝑝𝑜𝑟𝑡𝑠 ($)
We can then define the “intensity of exports”:
𝐸𝐸𝑋
𝑋= 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦 𝑜𝑓 𝑒𝑥𝑝𝑜𝑟𝑡𝑠 𝑡𝑜𝑒 $
The intensity of exports can be compared to the overall energy intensity
of a nation. If this ratio is greater than one, then the country is specialized
in energy intensive industries.
𝐼𝐹 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦 𝑜𝑓 𝑒𝑥𝑝𝑜𝑟𝑡𝑠
𝑒𝑛𝑒𝑟𝑔𝑦 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦 > 1 , 𝑇𝐻𝐸𝑁 𝑠𝑝𝑒𝑐𝑖𝑎𝑙𝑖𝑧𝑒𝑑
23
Basic decomposition (using China as an example)
The embodied energy (EE) in China’s exports and imports:
𝐸𝐸 𝑖𝑛 𝑒𝑥𝑝𝑜𝑟𝑡𝑠 (𝑡𝑜𝑒) = 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦𝑐ℎ𝑖𝑛𝑎 𝑡𝑜𝑒/$ × 𝑠𝑝𝑒𝑐𝑖𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛𝑐ℎ𝑖𝑛𝑎 × 𝑒𝑥𝑝𝑜𝑟𝑡𝑠𝑐ℎ𝑖𝑛𝑎 $
𝐸𝐸 𝑖𝑛 𝑖𝑚𝑝𝑜𝑟𝑡𝑠(𝑡𝑜𝑒) = 𝑖𝑛𝑡𝑒𝑛𝑠𝑖𝑡𝑦𝑤𝑜𝑟𝑙𝑑 𝑡𝑜𝑒/$ × 𝑠𝑝𝑒𝑐𝑖𝑎𝑙𝑖𝑧𝑎𝑡𝑖𝑜𝑛𝑤𝑜𝑟𝑙𝑑 × 𝑖𝑚𝑝𝑜𝑟𝑡𝑠𝑐ℎ𝑖𝑛𝑎 ($)
The EE in net exports can be additively decomposed into three effects:
𝐸𝐸 𝑖𝑛 𝑛𝑒𝑡 𝑒𝑥𝑝𝑜𝑟𝑡𝑠= 𝒓𝒆𝒍𝒂𝒕𝒊𝒗𝒆 𝒊𝒏𝒕𝒆𝒏𝒔𝒊𝒕𝒚 + 𝒓𝒆𝒍𝒂𝒕𝒊𝒗𝒆 𝒔𝒑𝒆𝒄𝒊𝒂𝒍𝒊𝒛𝒂𝒕𝒊𝒐𝒏 + 𝒕𝒓𝒂𝒅𝒆 𝒃𝒂𝒍𝒂𝒏𝒄𝒆
China
China
24
-100% -80% -60% -40% -20% 0% 20% 40% 60% 80% 100%
FRA
USA
ITA
GBR
GRC
ESP
AUS
MEX
AUT
JPN
IND
HUN
DEU
PRT
TUR
ROU
BEL
SWE
FIN
BRA
POL
NLD
IDN
ROW
TWN
CZE
KOR
CAN
CHN
RUS
Efficiency Effect Specialization Effect TB Effect
Which of the three drivers is most prominent?
The decomposition
analysis shows that:
1. Relative intensity
accounts for 36% of
embodied energy flows.
2. Relative specialization
accounts for 43%.
3. The trade balance
accounts for 21%.
All of these
bars add
up to 100%
25
Conclusions
Offshoring alone does not explain embodied energy flows:
Offshoring (as measured by relative specialization) accounts for 43% of the
global embodied energy flows—making it the most important driver.
Nevertheless, this is less than half of embodied energy in international trade.
Energy efficiency (as measured by relative intensity) and the trade balance
account for the remainder.
These insights can help ease climate change discussions, which tend to
be beleaguered by “finger-pointing” between countries.