Exploring energy efficiency in several European countries. An attribution analysis of the Divisia structural change index

This paper aims at exploring the influence that the changes in sectoral composition in most EU economies have had on aggregate energy intensity. We rely on the so-called Logarithmic Mean Divisia Index (LMDI) method, implemented within a multiplicative energy intensity approach. Then, based on the Index Decomposition Analysis (IDA), we present, develop and apply a new methodology that enables the exploration of the contribution of each sector to the percent change in the structural factors index. Our findings show: (a) a greater importance of the intensity factor over the structural one, (b) a positive influence of structural change in some ex-communist countries, and (c) a strong, negative contribution of the industrial sector (including construction) to changes in aggregate energy intensity in most European economies, particularly in the Western ones. In short, adaptation to more efficient techniques, innovation, R&D, and substitution for higher quality energies, seem to be the action lines to follow, although in former communist countries these strategies should be accompanied by other policies aiming at accelerating the transition processes.