Calculating economy-wide energy intensity decline rate: The role of sectoral output and energy shares

We specify formulas for computing the rate of decline in economy-wide energy intensity by aggregating its two determinants—technical efficiency improvements in the various sectors of the economy, and shifts in economic activity among these sectors. The formulas incorporate the interdependence between sectoral shares, and establish a one-to-one relation between sectoral output and energy shares. This helps to eliminate future energy intensity decline scenarios which involve implausible values of either sectoral share. An illustrative application of the formulas is provided, using within-sector efficiency improvement estimates suggested by Lightfoot–Green and Harvey.