Is decoupling a red herring? The role of structural effects and energy policies in Europe

Abstract

Decoupling energy consumption and carbon emissions from economic growth is at the core of the climate change debate: successful decoupling is evidence that efficiency measures can be economically sustainable. In this article, the authors analyze the underlying nature of this decoupling in the European Union from 1990 to 2014. The objective is to quantify the role of structural changes and the effectiveness of energy efficiency measures in lowering energy consumption. We decompose final energy consumption per sector, including households and transportation into three key drivers: economic growth, economic structure and energy intensity. Our results show that a significant part of the reduction in energy consumption can be attributed to structural changes, such as deindustrialization, while an equally significant part can be attributed to energy efficiency. This further corroborates the idea that much of the observed decoupling is virtual; largely due to outsourcing of energy intensive activities. Energy is then imported in the form of embodied energy in goods and services. The dynamics of these effects suggest that a shift in our understanding of decoupling is necessary. The implementation of effective energy efficiency policies, accounting for embodied energy, remain of high priority.