A proposal to combine classical and hypothetical extraction input–output methods to identify key sectors for the production and distribution of electricity

Abstract

This analysis explores the possibility of merging into a ‘combined’ proposal two standard I-O methods identifying key sectors, the Classical Multiplier and Hypothetical Extraction. In the context of the latest revision of the European Union Energy Efficiency Plan, we use this proposal to single out key sectors that boost potential energy savings in the economic system—specifically, in the production and distribution of electricity. Using the main distinctions and complementarities of the two traditional I-O key-sector approaches, the combined formulation allows us to disaggregate the backward stimuli of the electricity sector into three indicators: total, internal and external backward indicators. This combined proposal provides additional insights into the structure of the industrial linkages that participate in the production and distribution of electricity. Our results reveal that the explanation for the intensity of the backward effects of the electricity sector depends not only on other energy sectors but also on some manufacturing industries. We put forward that these findings may be important for developing a more balanced and cost-effective design for energy efficiency policies.