Role of embodied energy in the European manufacturing industry: Application to short-term impacts of a carbon tax

Role of energy in the manufacturing industry is a major concern for energy and environmental policy design. Issues like energy prices, security of supply and carbon mitigation are often connected to the industry and its competitiveness. This paper examines the role and consequences of embodied energy in the European industry. To this end, a multi-regional input–output analysis including 59 industrial sectors for all European Union countries and 17 more aggregated industries for other regions of the World is developed. Other segments of the economy are not included. This base is combined with energy consumption, carbon emission as well as bilateral trade data for every sector in all included countries. Our main result is that embodied energy in manufactured productsʹ imports represents a significant aspect of the energy situation in European industries, with quantities close to the direct energy consumption. These flows can further be broken down for detailed analysis at the sector level thanks to the number of distinct industries included. Results demonstrate that an important part of embodied energy inside European products is not concerned with domestic energy price changes. In addition, a European-wide carbon tax would induce an unbalanced burden on industries and countries.