Decomposition of Energy Consumption and Energy Intensity in Indian Manufacturing Industries

Binay Kumar Ray
B.Sudhakara Reddy
JEL codes: 
Of the total final energy consumption in India, the industrial sector accounts for about 37 percent, of which the manufacturing sector consumes about 66 percent (2004-2005 figures) with chemicals and petrochemicals, iron and steel, pulp and paper and cement industries being the largest energy users. In the recent past, energy intensity in the manufacturing sector has been decreasing. This decline is mainly due to fuel substitution away from coal in some of the sectors, most notably cement. While industrial production in developed countries stabilizes and declines, the industrial output in the developing world continues to expand owing to rising populations and catching up on economic growth. This can result in higher energy use energy provided primarily by the combustion of fossil fuels and thereby higher carbon-dioxide (CO2) emissions. Using the decomposition analysis we show that most of the intensity reductions are driven purely by structural effect rather than energy intensity.