Assessing the role of technology in global manufacturing energy intensity change: A production-theoretical decomposition analysis

Decoupling manufacturing production from energy use is essential to mitigating global climate change. Production technology plays a fundamental role in manufacturing and affects energy use patterns. Assessing the impact of technology on manufacturing energy use is valuable for the design of effective measures to decouple the manufacturing industry. However, heterogeneous technologies and varying input allocation across manufacturing sectors impose challenges on this assessment. This study develops a two-stage production-theoretical decomposition analysis model that can examine energy use from a production systems perspective while accounting for sectoral heterogeneity and factor substitution. Furthermore, the proposed model is applied to empirically study the determinants of manufacturing energy intensity changes of 41 major economies during 2005-2014. The results show that the decreasing aggregate intensity in the decade was sourced primarily from the developed economies. Capital-energy substitution and technological progress contributed largely to the intensity improvement, while poor technical performance in production and energy utilization formed the primary barrier. Varying patterns of determinants are identified from the temporal, regional, and sectoral perspectives. Detailed results with discussions and policy implications are presented.