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An Analysis of Energy Intensity in Indonesian Manufacturing

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  • Tony Irawan

    ()
    (Department of Economics,Faculty of Economics and Management, Bogor Agricultural University;InterCAFE-LPPM, IPB)

  • Djoni Hartono

    ()
    (Graduate Program in Economics, Faculty of Economics and Business, University of Indonesia)

  • Noer Azam Achsani

    ()
    (Department of Economics,Faculty of Economics and Management, Bogor Agricultural University;InterCAFE-LPPM, IPB)

Abstract

Many countries utilize their resources at optimal capacity in fostering countries’ economic growth without any concern on environmental impact. Even though the importance of environmental issue as one of the important aspects in sustainable development is fully understood, the economic growth still remained as the priority target. In Indonesia, industry is one of the important sectors both in term of its contribution to national output and national energy consumption. Based on Indonesian Statistic Bureau, industry is always at the top list of contributor of national energy consumption since 2000. This paper employs the decomposition analysis to calculate what factors contribute to the change in energy intensity. We also conduct a panel data analysis to investigate the determinants of energy intensity using firm level data. The result suggests that, even though the industrial sector’s energy intensity is higher than national level, it varied across sub sectors within the industry. Meanwhile, the econometric analysis suggests that wage, age, capital intensity and share of capital owned by private sector have positive impact on energy intensity, whereas size of firms, labor productivity and technology intensity has negative impact on energy intensity.

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File URL: http://lp3e.fe.unpad.ac.id/wopeds/201007.pdf
File Function: First version, 2010
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Bibliographic Info

Paper provided by Department of Economics, Padjadjaran University in its series Working Papers in Economics and Development Studies (WoPEDS) with number 201007.

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Length: 12 pages
Date of creation: Aug 2010
Date of revision: Aug 2010
Handle: RePEc:unp:wpaper:201007

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Keywords: energy intensity; industry; firm; decomposition; panel data;

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  1. Zhang, ZhongXiang, 2001. "Why did the energy intensity fall in China's industrial sector in the 1990s? the relative importance of structural change and intensity change," MPRA Paper 13149, University Library of Munich, Germany.
  2. Gale A. Boyd and Joseph M. Roop, 2004. "A Note on the Fisher Ideal Index Decomposition for Structural Change in Energy Intensity," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 87-102.
  3. Sahu, Santosh & Narayanan, K, 2009. "Determinants of Energy Intensity: A Preliminary Investigation of Indian Manufacturing," MPRA Paper 16606, University Library of Munich, Germany.
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