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Final Energy Consumption Intensity EN21 Final Energy Consumption Intensity Key message Economic growth has continued to require less additional final energy consumption within the EU- 25 economy. However, this improvement has not been sufficient to prevent total final energy consumption from rising. Decoupling was most successful in the industry sector as a result of technical improvements and structural changes, while private households consumed more energy per capita due to larger and more dwellings and more electrical appliances. While energy intensity continues to decline at a faster rate in the new EU10 Member States, it remains much higher than in the EU-15. Rationale Historically, economic growth has driven energy consumption in the end-use sectors of transport, industry and services, while household’s final energy consumption is mainly influenced by household wealth, population size and the number of households. The indicator measures to what extent there is a decoupling between final energy consumption and these drivers, indicating one way of reducing the associated environmental pressures. Fig. 1: Index of final energy intensity and energy intensity by sector, EU-25 120 110 100 90 Index (1990 = 100) = (1990 Index 80 Households Transport 70 Final energy intensity Services, agriculture and other sectors Industry 60 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Data Source: Eurostat and the European Commission’s Ameco database. Note: Final energy intensities between sectors, and also the total final energy intensity, are not comparable, because the normalising variables are not the same. The indicator serves to highlight the evolution in energy intensity within each sector. The denominators for the total, household, transport, industry (excl. construction) and services (incl. agriculture) sector energy intensities are, respectively; GDP, population, GDP, Gross Value added in industry (excl. construction), and Gross Value Added in Services (incl. agriculture). EN21 Final Energy Consumption Intensity 1 1. Indicator assessment 1.1 Trends across the EU-25 Over the period 1990 to 2004 the total gross domestic product (GDP) of the EU-25 grew at an annual average rate of 2.1 % and final energy consumption by 0.8 %. This led to a decrease in final energy consumption intensity at an average annual rate of –1.2 %. However, this trend has slowed in recent years with final energy intensity actually increasing by 1.5 % from 2002 to 2003, and only showing a small decrease between 2003 and2004. Improvements in final energy intensity are, in general terms, influenced both by structural changes of the economy such as a shift from industry towards services and within industry to less energy-intensive industries, and improvements in the technical efficiency of appliances or processes or better insulation. Decomposition analysis suggests that in the EU-15, structural changes in economy contributed significantly to the decrease in overall energy intensity during the first part of the 1990s. This has dropped with energy efficiency becoming responsible for a higher share of intensity improvements. However, a slow-down in energy efficiency improvements from the late 1990s onwards has led to a similar slowing in the rate of decline of final energy intensity (Enerdata et al, 2003; ADEME, 2005). The drivers and the pace of final energy intensity improvement are significantly different between the new Member States and the pre-2004 EU-15 (-3.9 % and -0.9 % average annual change, respectively, over the period 1990 to 2004). In the EU-15 during the early 1990s, a combination of low growth in GDP, continued low fossil fuel prices (see EN31) and a general low priority for energy saving in most Member States contributed to a slowing down of the reduction in final energy consumption intensity. During this period much of the reduction came from the aforementioned structural changes in the economy, particularly a shift towards services1, with few proactive energy efficiency efforts (see EN17). Since then energy-efficiency improvements became more important in reducing final energy intensity (ADEME, 2005). Final energy consumption intensity differs widely across countries. In the new Member States it is still around 1.3 times higher than in the EU-15, although there is a converging trend. The main factors leading to improvements in energy intensity of the New Member States were structural changes of the national economies and a rise in energy prices. 1.2 Sectoral trends Examining trends in final energy consumption intensity by sector for the EU-25 indicates that both the industry and services sectors have seen substantial improvements in their energy intensity over the past decade. In contrast, the energy intensity of the household sector (final energy consumption of the household sector per capita) has actually worsened and the transport sector shows only a very limited decoupling of transport energy consumption from economic growth. Between 2003-4, all sectors showed a slight decrease in energy intensity after having increased in 2002-3. The energy intensity of the industry sector fell steadily between 1990 and 1999 but has slowed down since. The average annual decrease over the period 1990-2004 was -1.8 % (with the average annual decrease since 1999 only -0.6 %), although industry final energy consumption declined far more slowly. Hence this improvement was mainly due to a rise in value added within the sector during the 1990s and almost stagnation since then, coupled to relatively static final energy consumption. In the EU-15 the improvement has been induced by a wide range of factors reflecting structural changes in specific countries - shifts towards high value added, but less energy intensive industries, changes in energy intensive industries - and some general improvement in the use of energy. For example, production of goods such as electronic equipment requires less energy per unit of value added than more traditional products such as cars (IEA, 2004), and the production of machinery or equipment needs 11 times less energy per unit of value added than the production of primary metals (ADEME, 2005). The analysis of energy intensity is complex and the decrease in energy intensity can only partly be explained by structural changes. It is also the result of improvements in energy efficiency, influenced by technological innovation. Recently published results indicate that most manufacturing industries (except textiles) experienced increasing energy efficiency between 1990 and 2002 in the EU-15, influenced by improved production processes and innovative technologies (ADEME, 2005). In the new Member States the economic restructuring of the early 1990s led to a substantial initial decline in both the energy consumption and output of heavy industry. Since 1995, industrial production has started to recover, while energy consumption continues in a downward trend, with the overall result that final energy intensity has reduced much more rapidly than in the EU-15. The largest shift to less energy intensive branches of industries between 1996 and 2001 was observed in Hungary and Slovakia (Lapillonne 2004). The services, agriculture and other sector has a relatively low level of final energy consumption intensity. In the EU-25, energy intensity declined by 1.6% per year on average, largely due to a significant reduction between 1996 and 2000, although there was some fluctuation in energy intensity over this period. This was due to the value added of the sector growing at a faster average annual rate than final energy consumption, 2.4% compared with 0.8% respectively. The rate of reduction in intensity was over three times faster for the new Member States than for the EU-15, although the overall EU-25 trend is dominated by the EU-15. A wide range of drivers impact on services final energy intensity, although the impact of each is difficult to quantify. These include: improvements in energy efficiency, counteracted by an increased use of information and communication technology in offices; change in the average office or floor space per unit of added value, and changes in 1 Creating one unit of GDP in the services sector requires around 1/8 of the energy that would be needed to create one unit of GDP in the manufacturing sector (EU-15 average); 2 EN21 Final Energy Consumption Intensity climatic conditions, and improvements in insulation. In addition, much of the energy consumption in the service sector is not directly related to the level of economic output as a large proportion is ‘information based’, in contrast to a physical increase in the output of cement, cars etc. It is rather dependent on the physical size of the sector (number of people employed, floor area of buildings) and can be considered as a fixed cost for much of the sector (which does not imply that there is no important reduction potential in e.g. reducing energy for space heating or electrical appliances). However, the sector’s economic output is sensitive to economic growth cycles (following the overall economy’s pattern of investment and divestment/disinvestment) and consumer spending. Fluctuations in energy intensity may therefore reflect the cyclical nature of the economy, and also year-on- year fluctuations in climatic conditions which can contribute significantly to energy intensity trends as they affect building requirements for space heating. The final energy consumption intensity of the household sector increased slightly over the period 1990-2004 (by 0.9% on average per year), with average annual population growth of 0.3 % and final household energy consumption growing by 1.2 % per annum. As the indicator is sensitive to both changing population size and household size, it is measured per capita and not per household. The household sector’s energy intensity is also linked closely with climatic conditions, as the major part of the energy is used for space heating2. Hence the rate of change in energy intensity varies greatly year on year due to fluctuations in final energy consumption (see EN16).
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