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Analyzing the Energy Intensity Trend in Indonesia, using Econometric and Decomposition Analysis

Author

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  • Muhammad Iqbal Nugraha

    (Master of Applied Economics, Padjadjaran University)

Abstract

The need for energy efficiency comes with energy security. High energy consumption rates with the scarcity of fossil-based energy promote the energy-saving awareness. Meanwhile, one of the most used indicators for energy efficiency is energy intensity, a ratio of energy consumed divided by output produced. In this regard, the decrease in energy intensity reflects an improvement in energy efficiency. This study discusses the trend and the impact of several factors determining energy intensity in Indonesia, using both econometric and decomposition analyses. Using the fully modified ordinary least square (FMOLS) for the econometric, this study found that economic growth and energy price negatively impacted energy intensity while industrialization and energy mix affected energy intensity positively. On the other hand, the decomposition results illustrated that efficiency mattered more in influencing energy intensity rather than the structural effects. Several policy implications, including energy conversion promotion, were then derived from the findings of this study.

Suggested Citation

  • Muhammad Iqbal Nugraha, 2019. "Analyzing the Energy Intensity Trend in Indonesia, using Econometric and Decomposition Analysis," Working Papers in Economics and Development Studies (WoPEDS) 201901, Department of Economics, Padjadjaran University, revised Nov 2019.
    • Handle: RePEc:unp:wpaper:201901
    as

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    File URL: http://ceds.feb.unpad.ac.id/wopeds/201901.pdf
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    References listed on IDEAS

    as
    1. Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB), 2015. "Fossil Fuel Subsidies in Indonesia: Trends, Impacts, and Reforms," ADB Reports RPT157694-2, Asian Development Bank (ADB).
    2. Yu, Huayi, 2012. "The influential factors of China's regional energy intensity and its spatial linkages: 1988–2007," Energy Policy, Elsevier, vol. 45(C), pages 583-593.
    3. Zhang, Ming & Li, Huanan & Zhou, Min & Mu, Hailin, 2011. "Decomposition analysis of energy consumption in Chinese transportation sector," Applied Energy, Elsevier, vol. 88(6), pages 2279-2285, June.
    4. Wilson, Bruce & Trieu, Luan Ho & Bowen, Bruce, 1994. "Energy efficiency trends in Australia," Energy Policy, Elsevier, vol. 22(4), pages 287-295, April.
    5. Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB), 2015. "Fossil Fuel Subsidies in Thailand: Trends, Impacts, and Reforms," ADB Reports RPT157695-2, Asian Development Bank (ADB).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    energy intensity; energy efficiency; fully modified ordinary least square;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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