**4. Energy indicators**

Energy indicators relating energy to economic issues can be useful tools for policy makers. They provide a way to structure and clarify statistical data to give better insight into the factors that affect energy, environment, economics and social well-being. Indicators can also be used to monitor progress of past policies.

All sectors of an economy – agriculture, manufacturing and mining, and services – require energy. These energy services in turn foster economic and social development at the local level by raising productivity and facilitating local income generation. Energy indicators provide a measure of efficiency and sustainability in economical, social, and environmental programs. Indicators of energy use are usually expressed as normalized quantities of total energy use to facilitate comparison.

The following Energy indicators within the economic dimension are the most commonly used:


Energy and Economy Links – A Review of Indicators and Methods 273

At the sub-sector or component level, energy intensity is defined as the ratio of energy use per unit of activity. Thus, if Ei is the energy use for component Ei and Ai is the activity for

When two or more components or sub-sectors are aggregated, the aggregate intensity i is

� = <sup>∑</sup> �� ∑ ��

For some applications, the aggregate energy intensities are useful summary indicators, as they have either a straightforward interpretation expressed in physical units or they can be converted to a time series based index. However, changes in the aggregate intensity over time are influenced not only by changes in the energy intensities of the various components

Various types of factorization methods have been employed by which structural and compositional effects can be distinguished from the overall change in the energy intensities as represented by the component-based intensity index. A key objective in the system of energy intensity indicators is the development of time series indexes that satisfy a multiplicative relationship of the energy-economy. Decomposition analysis is a tool to quantitative assessment of factors that contributes to changes in energy consumption. It helps in understanding the past trends of energy use for measuring the effectiveness of energy-related policies, and forecasting future energy demand and pollutant emissions. The three main factors that play a significant role in affecting the level of energy consumption in an economy are: the level of overall activity or production, the composition or structure of the economy, and the output or activity per unit of energy consumed (Nooji et al, 2003).

Energy use = activity × structure × intensity Energy consumption can be expressed as an extended Kaya identity, which is a useful tool

���� × ���� <sup>=</sup> <sup>∑</sup> ���

The change of energy consumption between a base year 0 and a target year t, denoted by ΔEC, can be decomposed to three effects in additive form: (i) the changes in the energy intensity effect (denoted by EI effect); (ii) the changes in the structural changes effect (denoted by ES effect); and (iii) the growth in the economic activity effect (denoted by G

In this regard, energy intensity indicators play a significant role to study the trend and the changes in the output levels. Energy intensity is thought to be inversely related to efficiency. Therefore, declining energy intensities over time may be indicators of improvements in energy efficiencies. The decomposition of the overall change into these

� × ���

���=��� � ��� = �� � �� � � (8)

� × �� (7)

to decompose total national energy consumption. It is shown as bellow:

� ���� � × ���� �

��� <sup>=</sup> <sup>∑</sup> ��

effect), as shown in Eq. (8):

�� = ����� (5)

(6)

component i, the component-based intensity is defined as:

but also the relative shares of each activity components.

defined as:


Energy intensity is a common indicator to measure the relationship between energy use and economic development of a country through time. It means ratios of energy consumption to gross domestic products (GDP) or value added measured in energy units per monetary unit at constant prices. In the same way electricity intensities or carbon intensities can be computed.

This indicator provides an assessment of how much energy intensive is an economy. Energy intensities variations over time indicate trends in "overall economic efficiency" or "energy productivity". The economy is more "energy intensive" when the energy consumption increases more rapidly than the GDP. Energy intensity can be used to indicate the general relationship of energy consumption to economic development and provide a basis for projecting energy consumption and its environmental impacts with economic growth. There are other credible and viable indicators that focus on energy, but they are notable for their flexibility of use and their specific orientation towards sustainability dimensions, such as economic, social and environmental.

Energy consumption indicator is aggregate energy consumption which measured in Tones of Oil Equivalent (TOE). It can be expressed as per capita or per unit GDP (at market prices). This indicator provides an indication of the level and trend of the total annual amount of commercial energy consumed in the country. The indicator can be disaggregated by energy carrier (liquid petroleum fuels, electricity, and coal), then measures the contribution of each commercial energy carrier towards the total national consumption. It can provide warning signals on inefficient and unsustainable utilization of resources and environmental impact.

Energy mix indicator shows the importance of each fuel in the total energy consumption and development scene.

Energy price indicator provides an indication of the efficiency across the different fuels. It also enables prices comparison in one country with other countries. In general fuel consumption tends to be price related. Thus price can be used to influence use of particular fuels.

The energy indicators are useful to track the changes in energy in relation to economic dimensions. From another perspective there are three types of indexes that explain the change in energy use over time:


Energy intensity is a common indicator to measure the relationship between energy use and economic development of a country through time. It means ratios of energy consumption to gross domestic products (GDP) or value added measured in energy units per monetary unit at constant prices. In the same way electricity intensities or carbon

This indicator provides an assessment of how much energy intensive is an economy. Energy intensities variations over time indicate trends in "overall economic efficiency" or "energy productivity". The economy is more "energy intensive" when the energy consumption increases more rapidly than the GDP. Energy intensity can be used to indicate the general relationship of energy consumption to economic development and provide a basis for projecting energy consumption and its environmental impacts with economic growth. There are other credible and viable indicators that focus on energy, but they are notable for their flexibility of use and their specific orientation towards sustainability dimensions, such as

Energy consumption indicator is aggregate energy consumption which measured in Tones of Oil Equivalent (TOE). It can be expressed as per capita or per unit GDP (at market prices). This indicator provides an indication of the level and trend of the total annual amount of commercial energy consumed in the country. The indicator can be disaggregated by energy carrier (liquid petroleum fuels, electricity, and coal), then measures the contribution of each commercial energy carrier towards the total national consumption. It can provide warning signals on inefficient and unsustainable utilization

Energy mix indicator shows the importance of each fuel in the total energy consumption

Energy price indicator provides an indication of the efficiency across the different fuels. It also enables prices comparison in one country with other countries. In general fuel consumption tends to be price related. Thus price can be used to influence use of particular

The energy indicators are useful to track the changes in energy in relation to economic dimensions. From another perspective there are three types of indexes that explain the

1. Activity index shows the changes in the level of activity for a sector of an economy. 2. Component-based energy intensity index represents the effect of changing energy

intensity for sub-sectors or detailed components of the economy. 3. Structural index shows the effect of changing economic structure.

Energy prices;

Energy mix;

 Energy supply efficiency; Energy use per unit GDP; Energy consumption per capita;

Taxation and subsidies;

intensities can be computed.

economic, social and environmental.

of resources and environmental impact.

and development scene.

change in energy use over time:

fuels.

Energy intensities of economic sectors;

At the sub-sector or component level, energy intensity is defined as the ratio of energy use per unit of activity. Thus, if Ei is the energy use for component Ei and Ai is the activity for component i, the component-based intensity is defined as:

$$I\_l = \mathbf{E}\_l / \mathbf{A}\_l \tag{5}$$

When two or more components or sub-sectors are aggregated, the aggregate intensity i is defined as:

$$I = \frac{\sum E\_l}{\sum A\_l} \tag{6}$$

For some applications, the aggregate energy intensities are useful summary indicators, as they have either a straightforward interpretation expressed in physical units or they can be converted to a time series based index. However, changes in the aggregate intensity over time are influenced not only by changes in the energy intensities of the various components but also the relative shares of each activity components.

Various types of factorization methods have been employed by which structural and compositional effects can be distinguished from the overall change in the energy intensities as represented by the component-based intensity index. A key objective in the system of energy intensity indicators is the development of time series indexes that satisfy a multiplicative relationship of the energy-economy. Decomposition analysis is a tool to quantitative assessment of factors that contributes to changes in energy consumption. It helps in understanding the past trends of energy use for measuring the effectiveness of energy-related policies, and forecasting future energy demand and pollutant emissions. The three main factors that play a significant role in affecting the level of energy consumption in an economy are: the level of overall activity or production, the composition or structure of the economy, and the output or activity per unit of energy consumed (Nooji et al, 2003).

#### Energy use = activity × structure × intensity

Energy consumption can be expressed as an extended Kaya identity, which is a useful tool to decompose total national energy consumption. It is shown as bellow:

$$EC^t = \sum \frac{E\_l^t}{GDP\_l^t} \times \frac{GDP\_l^t}{GDP^t} \times GDP^t = \sum EI\_l^t \times ES\_l^t \times G^t \tag{7}$$

The change of energy consumption between a base year 0 and a target year t, denoted by ΔEC, can be decomposed to three effects in additive form: (i) the changes in the energy intensity effect (denoted by EI effect); (ii) the changes in the structural changes effect (denoted by ES effect); and (iii) the growth in the economic activity effect (denoted by G effect), as shown in Eq. (8):

$$
\Delta \text{EC} = EC^t - EC^0 = EI + ES + G \tag{8}
$$

In this regard, energy intensity indicators play a significant role to study the trend and the changes in the output levels. Energy intensity is thought to be inversely related to efficiency. Therefore, declining energy intensities over time may be indicators of improvements in energy efficiencies. The decomposition of the overall change into these

Energy and Economy Links – A Review of Indicators and Methods 275

the potential reduction in the environmental intensity of economic production is

There is a hypothesis that states an inverted U-shape relation between various indicators of environmental degradation and income per capita. It is named EKC hypothesis in which pollution or other forms of degradation rises in the early stages of economic development

The production of energy (fossil fuel production and power generation) consumes a significant amount of energy and produces much of GHG emissions. These emissions can be reduced, through the adoption of more sustainable forms of energy production, such as community energy systems. Transportation contributes to GHG emissions, partly because the energy used to power vehicles is usually generated from fossil fuels. Regarding the supply side, the identified priority area is to diversify the energy mix, while promoting sustainable development, mainly by increasing the use of renewable energy resources.

This section of the chapter explores energy and economic growth trends in Iran. Taking the example of the Iran economy in the period 1967 to 2007, the final fossil fuel consumption increased by about 617%, and carbon dioxide emissions sharply increased about 610%. This

The major energy carriers in Iran are liquid petroleum fuels, electricity, coal and biomass. As the growth of petroleum fuels consumption has been higher than population growth, the per capita consumption of petroleum fuels has been increasing. Furthermore, increased petroleum energy use generally indicates air pollution increase, particularly because

Figure .1 shows the GDP trends of Iran during 1994-2007. Empirical evidence on economic growth in Iran over the last decade seems increasing simultaneously as energy increase. National Commercial Energy Consumption indicator provides a broad overview of the energy use situation and makes it possible to compare with other countries. As Fig. 2 illustrates, since the 1994 the amount of energy used has increased in almost all sectors.

Comprehensive utilization of energy saving potential can be the main Strategy.

was in accordance with a significant increase in GDP.

Fig. 1. Iran gross domestic products

technologies to control emissions are almost non-existent as in Iran.

eventually limited.

and falls in the later stages.

**6. Iran case study** 

three categories can provide policymakers with the information needed to design appropriate strategies for reduction in energy use while helping to mitigate the environmental impacts of industrial energy use. Three factors of structural, activity or technological changes play a significant role in reducing the energy consumption and intensity with respect to the output value.
