Analysis and Decomposition of the Energy Intensity of Industries in California

In 2008, the gross domestic product (GDP) of California industry was larger than GDP of industry in any other U.S. states. This study analyses the energy use of and output from seventeen industry subsectors in California and performs decomposition analysis to assess the influence of different factors on California industry energy use. The logarithmic mean Divisia index method is used for the decomposition analysis. The decomposition analysis results show that the observed reduction of energy use in California industry since 2000 is the result of two main factors: the intensity effect and the structural effect. The intensity effect has started pushing final energy use downward in 2000 and has since amplified. The second large effect is the structural effect. The significant decrease of the energy-intensive "Oil and Gas Extraction" subsector's share of total industry value added, from 15% in 1997 to 5% in 2008, and the increase of the non-energy intensive "Electric and electronic equipment manufacturing" sector's share of value added, from 7% in 1997 to 30% in 2008, both contributed to a decrease in the energy intensity in the industry sector.