1.         INDICATOR 

(a)        Name:  Intensity of Energy Use in Manufacturing. 

(b)        Brief Definition:  Energy consumption per unit of manufacturing output. 

(c)                Unit of Measurement:  Megajoules (mJ) per unit output of the manufacturing sector in constant US dollars. 

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

2.         POLICY RELEVANCE

(a)                Purpose:  The manufacturing sector is a major consumer of energy.  This indicator is a measure of the efficiency of energy use in the sector that can be used for analysing trends and making international comparisons in energy efficiency, particularly when the indicator can be disaggregated to specific branches of manufacturing.

(b)               Relevance to Sustainable/Unsustainable Development (theme/sub-theme): Sustainable development requires increases in energy efficiency in order to reduce fossil fuel consumption, greenhouse gas emissions and related air pollution emissions.

(c)        International Conventions and Agreements:  UNFCCC and its Kyoto Protocol.

(d)               International Targets/Recommended Standards: Although there are no specific international targets regarding energy use or energy efficiency, many industrialized countries have targets for reducing energy use and carbon emissions from manufacturing branches.

(e)                Linkages to Other Indicators:  This indicator is one of a set for energy intensity in different sectors (manufacturing, transportation, commercial/services and residential), with the indicator for energy use per unit of GDP as an aggregate energy intensity indicator.  These indicators are also linked to indicators for total energy consumption, greenhouse gas emissions, and air pollution emissions.

3.         METHODOLOGICAL DESCRIPTION

(a)                Underlying Definitions and Concepts:  Energy consumption per unit of value added is one way of measuring energy requirements and energy efficiency in manufacturing.  While energy consumption per unit of physical output is a better indicator of energy efficiency in specific manufacturing processes, energy use per unit of economic output is more useful both for relating energy efficiency to economic activity and for aggregating and comparing energy efficiency across manufacturing sectors or across the entire economy.

(b)               Measurement Methods:

·        Energy Use:  Energy use is usually measured at the point of consumption, i.e., the factory or establishment. “Own energy” (including internal use of hydropower, biofuels, or internal waste heat) should be combined with purchased energy at useful heating values. For combined production of heat and electricity, no simple method exists for dividing the total energy consumed between these two outputs.  Where excess heat or electricity is sold or provided to outside establishments or a grid, the energy required for this out-going supply should not be allocated to the product of the establishment or branch and the income or apparent value added from these sales should be excluded from output value.

 In some cases, it may be preferable to measure total primary energy consumption, including losses incurred in the external production and distribution of the purchased electricity and heat, since these losses would occur if the establishment or branch used the primary energy directly. Primary energy consumption is a better measure of the total energy burden on the economy of a unit of output from an industry.  Generally, the energy loss from converting primary energy to electricity is estimated by the average ratio for electricity production in the economy.

 Complications in interpreting energy intensity data arise from the fact that some branches of manufacturing may be concentrated in regions of a country rich in certain kinds of power or heat sources, such that those branches constitute a lower energy burden on the economy than the indicator would suggest.  Interpretation is also complicated when a particular branch has significant internal energy resources, such as captive hydro, biofuels or coal.  There are various conventions for calculating the primary energy corresponding to electricity produced by nuclear, hydro or geothermal sources.

  It is also possible to measure total energy consumption, internal and external, for any final product by using input-output tables to measure the energy embodied in materials and intermediate products. This is much more data intensive, because the input-output tables are complex. Such tables are not produced regularly, so this approach is difficult to follow, except at long intervals.

Unit:  Preferable units for measuring energy are multiples of joules, usually terajoules (1012J), petajoules (1015J), or exajoules (1018J).

  ·        Output.  There are different approaches for measuring output in manufacturing. For some purposes, physical output would be preferable, but this is not possible using the energy consumption statistics available in many countries, and there are many sectors for which aggregate physical output cannot be easily defined.

  There are two basic alternatives for measuring economic output.  In either case, we use real local currency, deflated by the deflator for the sector or branch to a base year.  This step is crucial, so that the weight of each sector or branch reflects the correct weight in the base year.  The value of output is then converted to a common international currency, usually US dollars, preferably using purchasing power parities (PPP). One alternative is to calculate the total value of production or shipments.  This measures literally the total output from an industry, and is defined for most countries.  The other alternative is to calculate the value-added or contribution to GDP, representing only the increase in economic output produced by the sector or branch in question.

  The total value of output tends to be more stable over time, but has the disadvantage that it cannot be aggregated to total output, because of double counting: inputs to one branch may be the outputs of another branch.  Value added can be aggregated, but may have greater fluctuations from year to year if input costs or output prices change, which is common for many basic raw materials, particularly crude oil.  Unfortunately, there is no simple correspondence between the two measures of output.

  Unit:  Constant US dollars.  Market value of output in real local currency deflated to a base year using GDP deflators for each sector or branch.  Local currency is converted to US dollars, using purchasing power parity for the base year.

  (c)                Limitations of the Indicator:  The aggregate indicator for the manufacturing sector reflects both the energy intensity of various branches of manufacturing and the composition of the manufacturing sector.  Changes in the aggregate indicator can therefore be due either to changes in energy intensity or to changes in relative branch output.  Similarly, differences between countries may be due either to differences in energy efficiency or differences in the structure of the manufacturing sector.  A country with large energy-intensive industries, such as pulping, primary metals or fertilizers, for example, will have a high energy intensity, even if the industry is energy efficient.  For this reason, it is desirable to disaggregate energy intensity by branch of manufacturing.

  Detailed calculations such as total energy consumption for particular products, using input-output tables, while desirable, are very data intensive and difficult to update regularly.

  (d)        Status of the Methodology:  The methodology is in use in many developed countries.

  (e)        Alternative Definitions/Indicators: In the context of climate change, it has become increasingly desirable to convert energy consumption to carbon emissions per unit of production.  The fuels consumed can be converted to carbon emissions using IPCC coefficients. Carbon emissions will therefore change both with changes in energy efficiency and changes in fuel type.

  4.         ASSESSMENT OF DATA

  (a)                Data needed to Compile the Indicator:

  (i)            Energy consumption by manufacturing sector and branches;

(ii)          Real output of the sector and branches.

(b)        National and International Data Availability and Sources:  Value added in manufacturing at the three and four digit ISIC level for most OECD countries is now compiled by OECD as part of its STAN data base.  The United Nations compiles value added at the two or three digit level for developed and developing countries.  The European Union produces data on value added at the two and three-digit level in the NACE system, and suitable bridges exist to translate NACE into ISIC.

One persistent data problem at the aggregate level is distinguishing between “industry” (ISIC C, D, F and even E) and manufacturing (ISIC D).  Some countries also lump agriculture, forestry and fishing (ISIC A, B) in the aggregate “industry” classification.  For these reasons, it is strongly recommended that data be checked to ascertain exactly what sectors are covered.  Manufacturing is the preferable aggregate, since inclusion of the other sectors mentioned can distort time series analysis and comparisons among countries.

(c)        Data References:

IEA:     Energy Balances of Member Countries

            Energy Balances of non-Member Countries

Eurostat:  Energy Balances

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

Asia Pacific Energy Research Centre (APERC)

UN:  Industrial Statistics, National Accounts

OECD:  STAN database (structural analysis database)

EU:  NACE system

  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:  OECD and IEA have collected detailed value added and energy consumption data at the four-digit level in the ISIC database.  Less detailed two-digit data are also available.  IEA now collects two-digit energy consumption data for manufacturing for about half of the developing countries as well.

  6.         REFERENCES

  (a)        Readings:  

Energy Policy, June/July 1997 issue, Elsevier Science Limited, various articles in this issue discuss the physical and monetary measures of output and various problems associated with indicators of manufacturing energy use and intensity.  

Phylipsen, G.J.M, Blok, K., and Worrell, E., 1997. Handbook on International Comparison of Energy Efficiency in the Manufacturing Industry.  Utrecht: Dept. of Science, Technology, and Society.             

IEA, 1997.  Indicators of Energy Use and Energy Efficiency.  Paris: OECD.  

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