ENERGY EFFICIENCY AND ENERGY INTENSITY — CAN THEY HELP REDUCE ENERGY USE?

Improving energy efficiency has few critics. An investment which saves money, slows down the exhaustion of limited resources and checks environmental damage seems ideal. However, in practice, this notion is often not well-understood. This paper discusses the two related concepts of energy efficiency and intensity. Intensity measures are constructed for the UK since 1960 for the following sectors: domestic, passenger travel, freight transport, industry and the whole economy. Intensities can change because of compositional changes, genuine efficiency gains or through income effects, usually seen as comfort/features improvements.

Different output measures are contrasted in each of the sectors, showing how conclusions about the economy's energy use can be altered by using different metrics. These measures are used to explore the feasibility of government targets for energy savings from efficiency improvements. There is scope for the transport sector to contribute, with only slight reductions in intensity of energy use required. In contrast, marked reductions in domestic energy intensities is necessary to achieve change. This sector is currently the main focus of public policy. Policy may need to shift its emphasis to be successful, spreading the burden more widely.