1.                  INDICATOR

(a)                Name:  Energy Use per unit of GDP.

(b)               Brief Definition:  Ratio of total energy use to GDP.

(c)                Unit of Measurement:  Megajoules (mJ) per $.

(d)               Placement in the CSD Indicator Set:  Economic/Consumption and Production Patterns/ Energy Use.

2.         POLICY RELEVANCE

(a)        Purpose:  Trends in overall energy use relative to GDP indicate the general relationship of energy consumption to economic development and provide a rough basis for projecting energy consumption and its environmental impacts with economic growth.  For energy policy-making, however, sectoral or sub-sectoral energy intensities should be used.

(b)        Relevance to Sustainable/Unsustainable Development (theme/sub-theme):  Energy is essential for economic and social development, but consumption of fossil fuels is the major cause of air pollution and climate change.  Improving energy efficiency and delinking economic development from energy consumption, particularly of fossil fuels, is essential to sustainable development.

(c)        International Conventions and Agreements:  UNFCCC and its Kyoto Protocol call for limitations on total greenhouse gas emissions, which are dominated by CO2 from fossil fuels.

(d)        International Targets/Recommended Standards:  No specific target for energy intensity.  The Kyoto Protocol sets targets for total greenhouse gas emissions for annex I (developed) countries. 

(e)        Linkages to Other Indicators:  The ratio of energy use to GDP is an aggregate of sectoral energy intensity indicators and is thus linked to the energy intensities for the manufacturing, transportation, commercial/services and residential sectors, for which separate methodology sheets have been prepared.  This indicator is also linked to indicators for total energy consumption, greenhouse gas emissions and air pollution emissions.

3.                  METHODOLOGICAL DESCRIPTION

(a)                Underlying Definitions and Concepts:  The ratio of energy use to GDP is also called “energy intensity”.  The term “energy intensity” is better used for sectoral or sub-sectoral ratios of energy use to output.  The indicator could be called “aggregate energy intensity” or “economy-wide energy intensity”.

 The ratio of energy use to GDP indicates the total energy being used to support economic and social activity.  It represents an aggregate of energy consumption resulting from a wide range of production and consumption activities.  In specific economic sectors and sub-sectors, the ratio of energy use to output or activity is the “energy intensity” (if the output is measured in economic units) or the “specific energy requirement” (if the output is measured in physical units such as tonnes or passenger-kilometers).

Due to the limitations described in section 3 (c) below, total energy use should be disaggregated into components, by sector (manufacturing, transportation, residential, commercial/services, industry, agriculture, construction, etc.) or sub-sector.  For each sector or sub-sector, energy use can be related to a convenient measure of output to provide a sectoral or sub-sectoral energy intensity.  Examples include energy use for steel-making relative to tonnes of steel produced; energy consumption by passenger vehicles relative to passenger- or vehicle-kilometers; energy consumption in buildings relative to their floor area.  (See separate methodology sheets for manufacturing, transportation, commercial/services, and residential sectors).

The energy intensity of a process (energy consumed per unit of output) is the inverse of the “energy efficiency” of the process (output per unit energy consumed).

(b)               Measurement Methods:

·        Energy Use:  Total and sectoral energy consumption is obtained from national energy balances. Household and services/commercial consumption should be carefully separated, and manufacturing (ISIC D, formerly 3) should be separated from other industrial uses (ISIC C and F, formerly 2 and 5) and agriculture (ISIC A and B, formerly 1).

  Unit:    Energy is measured in terajoules (TJ, 1012J), petajoules (PJ, 1015J), or exajoules (EJ, 1018J).

  ·        Output:  Components of GDP should be deflated to constant dollars by chaining each component, not simply by deflating each component by the overall GDP deflator.

  Unit:    GDP is measured in US dollars, converted from real local currency at purchasing power parity for the base year to which local currency was deflated.

  (c)                Limitations of the Indicator:  The ratio of aggregate energy use to GDP, often called “energy intensity” or the “energy ratio”, is not an ideal indicator of energy efficiency, sustainability of energy use, or technological development, as it has been commonly used.  The aggregate ratio depends as much on the structure of the economy as on the energy intensities of sectors or activities, and changes in the ratio over time are influenced almost as much by changes in the structure of the economy as by changes in sectoral energy intensities.

  Measurement and interpretation of energy intensities are complicated by differences among products within a category, such as size (e.g., automobile weight or refrigerator capacity), features (power steering and automatic transmission in cars, freezer compartments in refrigerators), and utilization  (hours per year a stove is used, vehicle occupancy if passenger-km is the measure of output).

  Comparison among countries of the ratio of energy use to GDP is complicated by geographical factors.  Large countries, for example, tend to have high levels of freight transportation as many goods are distributed nationwide.  Compared with countries with moderate climates, cold countries may consume as much as 20 per cent more energy per capita due to demand for space heating, while hot countries may use 5 per cent more energy per capita, due to demand for air conditioning.  Countries with large raw materials industries may use twice as much energy per unit of manufacturing output compared to countries that import processed materials, due to the high energy intensity of raw material processing.  Canada, for example, has a high ratio of energy use to GDP, due in part to that fact that it is a large, cold country with a large raw materials processing sector.  In Japan, the climate is milder, raw materials are limited, and high population density results in smaller residential units and less distance travelled, contributing to a lower ratio of energy use to GDP.

  Interpreting the ratio of energy use to GDP in terms of environmental impact or sustainability is also complicated by differences in environmental impact among energy sources.  Canada, for example, has substantial hydropower, nuclear power and natural gas, all of which have lower environmental impacts than coal or oil.

  Given the large number of factors that affect energy consumption, the ratio of total energy consumption to GDP should not be used as an indicator of energy efficiency or sustainability for policy-making purposes.

  (d)               Status of the Methodology:  The ratio of energy use to GDP, as well as sectoral and sub-sectoral energy intensities, are in widespread use, but without a standardized methodology.

  (e)                Alternative Definitions/Indicators:  The ratio of sectoral or sub-sectoral energy use to the output or activity of the sector or sub-sector provides a more useful indicator of energy intensity. Four separate methodology sheets have been prepared for manufacturing, transportation, commercial/services, and residential sectors.

  4.         ASSESSMENT OF DATA

(a)                Data needed to compile the indicator:

(i)            Sectoral energy consumption;

(ii)          Real GDP in US dollars.

  (b)        National and international data availability and sources:  The International Energy Agency maintains the most thorough set of energy balances and energy accounts, based primarily on national data or data collected from reliable regional agencies.  For OECD countries, the OECD maintains the most reliable set of national accounts with a breakdown of GDP by sector and sub-sector.  IEA energy data now cover virtually all developing countries.

  GDP and value-added by industry are published in the United Nations National Accounts Statistics.  The IMF “International Financial Statistics” provides nominal and real GDP for most countries.  Data on components of GDP are often available from regional development banks or national sources.

  (c)     Data References:

  IEA:     Energy Balances of Member Countries

            Energy Balances of Non-Member Countries

 Eurostat:     Energy balances

Latin American Energy Organization/ OrganizacRon Latinoamericana de EnergRa (OLADE)

                  Asia Pacific Energy Research Centre (APERC)

 UN:      National Accounts Statistics

 IMF:    International Financial Statistics

 5.         AGENCIES INVOLVED IN THE DEVELOPMENT OF THE INDICATOR

(a)        Lead Agency:  The lead agency is the International Energy Agency (IEA).

(b)        Other Contributing Organizations:  Virtually every national and international energy agency uses the ratio of total energy use to GDP, often inappropriately.  Key agencies involved in more detailed development of sectoral and sub-sectoral indicators, including energy intensity and energy efficiency indicators, are Eurostat and the Directorate-General for Energy and Transport of the European Commission.  The IEA has a parallel effort with a particular focus on non-EU countries.  Work is also being done by APERC, with a focus on the Asia-Pacific Region, and OLADE for Latin America.

6.                  REFERENCES

Internet site:  International Energy Agency:  http://www.iea.org