Energy-Output Coefficients: Complex Realities Behind Simple Ratios

The demand for energy is a derived demand, since it is transmitted from demands for goods and services that incorporate energy as an input. Trends in the ratio of energy consumption to the level of output the so-called energy coefficient-are often used to examine energy demand in the industrial and other demand sectors.' In a market economy, the inference of this approach is that at a time of increasing energy prices, a rise in the energy coefficient is an indication of waste and inefficiency or of a perverse price response. Correspondingly, a fall in the energy coefficient is evidence of the efficacy of the price mechanism and government regulations in promoting energy conservation.