Economy-wide energy efficiency using a comprehensive decomposition method

Abstract

This study compares the energy intensity performance in Indonesia to other south-east Asia countries such as Vietnam, Thailand, Singapore, The Philippines and Malaysia for the period from 1971 to 2016. For this goal, this research employs a multiplicative Log Mean Divisia Index II method and Spatial-Temporal Index Decomposition Analysis. The manufacturing sector and commercial sector played a key role in the regions economic structures that accounted for around 60% to 80% of the total economic output from 1971 to 2016. The contribution of the manufacturing sector increased quite significantly, from 8% in 1971 to a peak of around 31% in 2001, before it fell to 28% in 2016. On the other hand, the contribution of agriculture sector dropped from 49% in 1971 to approximately 17% in 2016. It is demonstrated in this research that the aggregate trend of the changes in energy intensity in these countries in the past forty-five years has been decreasing. For Indonesia, aggregate energy intensity rose steadily by an average of 3% per year from 1971 to 1999, more than doubling over this period, while from 1999 to 2001 energy intensity fell by 1% per annum on average, falling by 17% overall in 2016. Overall, in terms of structure and industry effects on aggregate energy intensity, all these countries showed a shift in industry value added to more energy-intensive industries which also offset by falling within-industry energy intensity. However, the analysis shows that both element of this trend was most pronounced in Indonesia.