Changes in the Energy Consumption in EU-27 Countries

Vladimír Hajko
2012 Review of Economic Perspectives  
The complete decomposition method is applied to changes in energy consumption in the countries of EU-27. This method decomposes the changes in energy use into three different effects: a change in energy consumption due to an increase of economic activity (the activity effect), a change in energy consumption due to a relative increase of significance of a country in the group (the structure effect) and a change in energy consumption due to a change of energy efficiency measured as energy
more » ... y (the intensity effect). The results confirm that there is a difference in development of these effects between the old (EU-15) and the new member countries. The results show that the activity effect is the most significant effect in old member countries (EU-15), and is on average 1.13 times higher than in new member countries. The intensity effect is the main diversifying factor between the two groups and the most significant effect for the new member countries. The intensity effect is almost universally negative in all countries, and compensates for the other effects. Because of the importance of the effect, energy intensity convergence is examined. It is found that even by the "rough" distinction between the new and the old member countries, the convergence in energy intensity in new member countries can be found (in the old member countries there is no energy intensity convergence). REVIEW OF ECONOMIC PERSPECTIVES 4 use plays an important role in virtually every economic activity, it is, to a certain extent 2 , a common proxy of development both in the economic structure and efficiency. The 2004 and 2007 enlargement that expanded the EU by 12 countries mostly from the former Eastern bloc, and (if compared with the original EU-15) also with a rather low economic level as indicated by GDP per capita, the one obvious differentiation is to observe "new" 3 and "old" 4 member countries separately. The analysis of the suspected different patterns of development in energy use between the original EU-15 members and the new member countries is the object of this article. The grounds for the analysis of the change in energy use are provided by the results of the complete decomposition method. This method provides greater insight into how and why has the energy use changed. This insight is provided by decomposing the change in energy consumption to three different effects: activity effect, structure effect and intensity effect. As indicated in the model specification, the essence is to measure an impact of change in one of the factors while keeping the other ones fixed on values of base year. By doing so, the activity effect captures the change in energy consumption due to the overall increase of economic activity while keeping the energy intensities and economic structure of the countries fixed. The change in energy consumption caused by the change in the share of activity relative to the overall activity of the aggregate 5 is called the structure effect 6 . Finally, the intensity effect represents a change in energy consumption due to a change of energy efficiency (measured as energy intensity). 2 Mainly due to the long-run character of extensive capital investments, the development in energy sectors exhibits sometimes significant inertia 3 "New member countries" being Bulgaria,
doi:10.2478/v10135-012-0001-y fatcat:e5avihvxkbetvdcdncvgwlfhgu