AN ACCOUNTING FRAMEWORK FOR DECOMPOSING THE ENERGY-TO-GDP RATIO INTO ITS STRUCTURAL COMPONENTS OF CHANGE

An accounting methodology is presented for decomposing the total change in the energy-to-GDP ratio over time into its component parts: sectoral mix effect, changes in the quality of energy inputs, factor substitution effect, and a residual variable which mainly represents technical change. This residual is the energy analogue of the multifactor technical change variable developed by Solow and Denison. It is the underlying change in technical efficiency of energy utilisation which is measured by imputation. The methodology is applied to analysing changes in the New Zealand energy-to-GDP ratio over the 1971-1984 period in order to understand the structural basis for the internationally atypical upward movement in New Zealand's ratio over this period. In applying the methodology special attention is given to the problem of measuring aggregate consumption with respect to dealing with energy inputs of different qualities.