Understanding industrial energy use: Physical energy intensity changes in Indian manufacturing sector

This study develops and examines physical energy intensity indicators in five industrial sub-sectors—iron and steel, aluminum, textiles, paper, and cement—and investigates mitigation options for energy related CO2 emissions (during 1991–2005). Decomposition analysis has been employed to separate the structural effect (share of different products in the sector) from pure intensity effect (efficiency increase through technical improvement) for each industry. The results show that the combined effect (considering both structural and intensity effects together) on both iron and steel and paper and pulp industries is negative while it is positive for aluminum and textiles. The intensity effect for all the industries, barring textiles, is negative showing improvement in energy efficiency; iron and steel in particular, has seen a decrease of 134 PJ in energy consumption owing to improvements in efficiency. However, energy intensity in textiles has risen by 47 PJ due to increased mechanization. Structural effect is positive in aluminum and iron and steel industries indicating a movement towards higher energy-intensive products. In the case of aluminum, positive structural effect dominates over negative intensive effect whereas negative intensive effect dominates iron and steel industry. The paper helps in designing policies for improving productivity and reduce energy consumption in Indiaʹs manufacturing sector.