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Changing patterns of electricity use in European manufacturing: A decomposition analysis

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  • Wenzel, Lars
  • Wolf, André

Abstract

This paper sets out to investigate the changing patterns of electricity intensity in European manufacturing for the time span 2000-2011. While GVA in Manufacturing has grown and electricity use has declined, it is not clear that this decrease in intensity is directly associated with improvements in technology. Decomposition of the effect suggests that a switch towards less energy intensive sectors accounted for roughly 10% of the total change in electricity intensity. A further level of disaggregation was added in order to account for the factor mix in the form of potential substitution between labor and electricity. The factor mix effect was largely positive, implying that substitution from labor to electricity has been the norm. The average decrease in labor intensity has been more pronounced than the corresponding decrease in electricity intensity. Accordingly, aggregate changes cannot purely be attributed to less electricity-dependent modes of production, but are rather due to general improvements in productivity. Interestingly, this does not appear to be driven by factor prices, as electricity prices grew significantly more than wage compensations within the period at hand.

Suggested Citation

  • Wenzel, Lars & Wolf, André, 2014. "Changing patterns of electricity use in European manufacturing: A decomposition analysis," HWWI Research Papers 150, Hamburg Institute of International Economics (HWWI).
    • Handle: RePEc:zbw:hwwirp:150
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    References listed on IDEAS

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    Cited by:

    1. Gutiérrez-Pedrero, María Jesús & Tarancón, Miguel Ángel & del Río, Pablo & Alcántara, Vicent, 2018. "Analysing the drivers of the intensity of electricity consumption of non-residential sectors in Europe," Applied Energy, Elsevier, vol. 211(C), pages 743-754.
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    4. Bräuninger, Michael, 2014. "Tax sovereignty and feasibility of international regulations for tobacco tax policies," HWWI Research Papers 152, Hamburg Institute of International Economics (HWWI).

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    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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