Economy-Wide Energy Efficiency Using a Comprehensive Decomposition Method

This study compares the energy intensity performance in Indonesia to other South East Asia countries such as Vietnam, Thailand, Singapore, The Philippines and Malaysia for the period from 1971 to 2016. For this goal, this research employs a multiplicative Log Mean Divisia Index II method and Spatial-Temporal Index Decomposition Analysis. The manufacturing sector and commercial sector played a key role in the region’s economic structures that accounted for around 60% to 80% of the total economic output from 1971 to 2016. The contribution of manufacturing sector increased quite significantly, from 8% in 1971 to a peak of around 31% in 2001, before it fell to 28% in 2016. On the other hand, the contribution of agriculture sector dropped from 49% in 1971 to approximately 17% in 2016. It is demonstrated in this research that the aggregate trend of the changes of energy intensity in these countries in the past forty-five years has been decreasing. For Indonesia, aggregate energy intensity rose steadily by an average of 3% per year from 1971 to 1999, more than doubling over this period, while from 1999 to 2001 energy intensity fell by 1% per annum on average, falling by 17% overall in 2016. Overall, in terms of structure and industry effects on aggregate energy intensity, all these countries showed a shift in industry value added to more energy-intensive industries which also offset by falling within-industry energy intensity. However, the analysis shows that both element of this trend was most pronounced in Indonesia