The Impact of Disaggregated ICT Capital on Electricity Intensity of Production: Econometric Analysis of Major European Industries

Abstract

In this paper we empirically analyse the impact of disaggregated ICT capital on the electricity intensity in five major European industries (chemical, food, metal, pulp & paper and textile). The analysis of each industrial sector is based on an unbalanced panel including data for eight EU member countries (Denmark, Finland, Germany, Italy, Portugal, Slovenia, Sweden and the UK) for the period 1991-2005. The panel-econometric approach, in which we account for country-specific fixed effects, is based on a factor demand model that is similar to the one derived in Collard et al. (2005) [Energy Economics 27 (2): 541-550] for the French services sector. On the one hand, the analysis provides evidence for an electricity-saving effect on production induced by communication technologies in all of the sectors considered. On the other hand, the effect of computers and software on the electricity intensity of industrial production is not that clear-cut, but rather seems to be strongly dependent on the sector-specific production processes involved. Overall, the net effect of ICT diffusion on electricity intensity of production appears to be in favour of an enhancement of electricity efficiency in production.