An international comparison of energy use in industry: United Kingdom, West Germany, and Italy

The paper presents an investigation on the relation between energy use and economic activity in eight industrial sectors in the United Kingdom, West Germany, and Italy. The approach relies on the analysis of time-series data. In the first section, we point to the role of energy in its interrelationship with the structural characteristics of the national economies. Subsequently, having observed that unit energy requirements vary in the same sector across the three countries, the analysis focuses on possible explanations. The different unit energy consumption pattern, as exhibited by most of the Italian sectors when compared with both the British and the West German ones, is not related to different unit labour and unit capital utilisation patterns. The lack, in the Italian sectors, of a large coal consumption share in the first post-war decade provides an intuitively plausible explanation for the observed unit energy consumption. We test the hypothesis that interfuel substitution alone can account for increased energy productivity. From the results obtained, we deduce that, for a small subset of our sectors, the tested hypothesis turns out to be a meaningful one. In a subsequent section, we analyse and compare the substitution characteristics and the price elasticities of consumption for four fuels. We also take account of the price of labour. Our results support the conclusion that electricity tends to be used as a complement to the other fuels, while the fossil fuels substitute for each other.