Many differences can be found among the existing accounting systems for tracking economy-wide energy efficiency trends. There is a need for greater uniformity in the design and application of such systems but a formal study does not exist. This paper seeks to fill some of the gaps. It begins by introducing the basic concepts, indicators and terminology in this study area. This is followed by a review of the existing economy-wide energy efficiency accounting systems with a focus on the analytical framework. The merit of having a precise and meaningful relationship between two basic energy indicators, the energy efficiency index and the energy savings due to efficiency improvement, is elaborated. An accounting framework based on the LMDI decomposition technique which possesses a number of desirable properties is proposed. Numerical examples are presented to highlight these properties and show the differences among the various accounting frameworks. Several methodological and application issues are discussed, and the study concludes with key findings and recommendations.
Energy efficiency has now been recognised as one of the most cost-effective ways of reducing dependence on fossil fuels, increasing security of energy supply, and improving industry competitiveness. Improving energy efficiency also helps to reduce greenhouse gas emissions and is an essential component of sustainable development policy. In short, energy efficiency plays a vital role for a country to strive to achieve the three basic goals of its energy policy, namely economic competitiveness, energy security, and environmental sustainability. It is therefore not surprising that tracking economy-wide energy efficiency trends is being undertaken in many countries on a regular basis.
Tracking energy efficiency trends involves substantial efforts in systems design and development as well as in data collection. It is known to be rather complex and in some specific areas tricky. Nevertheless, energy efficiency performance assessment is needed to ascertain, for example, whether trends in energy use turned out to be the same as what policy makers believe they ought to be or whether energy efficiency targets are being met. The performance indicators developed in the process can be used for international comparisons and benchmarking. With effective dissemination, these indicators or indices help to raise public awareness of energy efficiency and facilitate continuous improvement.
Since the early 1990s, several accounting systems for tracking economy-wide energy efficiency trends have been developed to give energy efficiency indicators that could replace the primary energy consumption to GDP ratio, as the latter is not a good indicator for tracking economy-wide energy efficiency trends. Progress in the development of such accounting systems has been made over the years. Many were developed independently, although sharing of experiences has continuously been taking place. It is therefore not surprising that there are wide variations among the existing accounting systems in many respects, including the analytical framework used and the way in which performance is measured and reported. Given a certain specific dataset, application of different accounting systems will lead to different numerical results and therefore levels of achievement in energy efficiency improvement. The use of a standard accounting framework by all will help to ensure consistency and transparency. This is still far from the case and one of the reasons is the lack of a comprehensive and formal study on the issue.
The problem is understandably a major one and this study seeks to fill some of the gaps. We begin by discussing some fundamental concepts in and approaches to economy-wide energy efficiency accounting, and introduce two indicators that are often included in an energy efficiency accounting system, namely the energy efficiency index and energy savings resulting from energy efficiency improvement. We compare the main features of existing accounting systems and explain how these two indicators are computed in each of them. We then propose an accounting framework based on the logarithmic mean Divisia index approach (LMDI) in index decomposition analysis (IDA), and describe its desirable features.1Numerical examples are presented to highlight some of the accounting issues and problems. Finally we look into some methodological and applications issues, and provide recommendations. The study will be useful to researchers and analysts interested in the development and application of an economy-wide energy efficiency system. Table 1summarizes some notations and acronyms used in this study.
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