LMDI decomposition analysis of change in energy consumption in the non-energy industrial sector: The Algerian case

Abstract

The reduction of energy consumption is an important key not only to improving the performance of the Algerian economy but also to contributing to the effective mitigation of greenhouse gas emissions. This study provides a decomposition analysis of a set of sub-sectors belonging to the non-energy industry in terms of energy use. The Logarithmic Mean Divisia Index (LMDI) is used to identify the factors affecting the change in energy consumption between 2002 and 2015. It is estimated that the energy consumption of Algeria's non-energy industries has increased from 4904 ktoe in 2002 to 8818 ktoe in 2015. The findings reveal that the increase in energy consumption in Algeria’s non-energy industry was due to the activity effect, whereas the structure and intensity effects contributed to the decrease. The increase in energy consumption due to the activity effect is largest in the construction materials industry. The intensity effect has a significant impact on energy consumption in the iron and steel, mechanical, electronic, and electrical equipment industries. Furthermore, the construction materials industry had a large share of the total change in energy consumption for the entire non-energy industry during 2002–2015, accounting for 136%.