The multi-factor energy input–output model

Abstract

Energy input–output analysis (EIO analysis) is a noteworthy tool for the analysis of the role of energy in the economy. However, it has relied on models that provide a limited description of energy flows in the economic system and do not allow an adequate analysis of energy efficiency. This paper introduces a novel energy input–output model, the multi-factor energy input–output model (MF-EIO model), which is obtained from a partitioning of a hybrid-unit input–output system of the economy. This model improves on current models by describing the energy flows according to the processes of energy conversion and the levels of energy use in the economy. It characterizes the vector of total energy output as a function of seven factors: two energy efficiency indicators; two characteristics of end-use energy consumption; and three economic features of the rest of the economy. Moreover, it is consistent with the standard model for EIO analysis, i.e., the hybrid-unit model. This paper also introduces an approximate version of the MF-EIO model, which is equivalent to the former under equal energy prices for industries and final consumers, but requires less data processing. The latter is composed by two linked models: a model of the energy sector in physical units, and a model of the rest of the economy in monetary units. In conclusion, the proposed modelling framework improves EIO analysis and extends EIO applications to the accounting for energy efficiency of the economy.