Best Decomposition Method Furnishing Comprehensive Decomposition Outputs | LMDI

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POLICY AND PLANNING OF ENERGY
CONSERVATION
(Energy Planning and Policy Program)
Spring Semester 2017
Assignment # 1
By
<Student Name>
(student ID)
University of Technology, Sydney
Table of Contents
1. Introduction 1
2. Mathemetical Formulation of LMDI Method 1
Formula of logarithmic mean Divisia index (LMDI) 1
3. Calculation from LMDI: 3
4. Findings of Analysis using LMDI method 5
5. Calculation of energy intensity trends 6
6. Philosophical Perspective 7
References 8
Appendix A
List of Figures
Figure 1 Total additive changes (rolling base) during 1980-2012..................................................4
Figure 2 Contribution of four effects in total additive changes (rolling base) during 1980-2012...4
Figure 3 Total multiplicative changes (rolling base) during 1980-2012.........................................5
Figure 4 Contribution of four effects in total multiplicative changes (rolling base) during 1980-
2012.................................................................................................................................................5
Figure 5 Törnqvist index during 1980-2012....................................................................................6
1. Introduction
Energy efficiency improvement is considered as one of the most significant aspects for lessening
the greenhouse gas emissions and energy imports of countries. Many theoretical and empirical
literatures have described the association the variation in energy intensity with the country’s
development of economy by decomposing the energy intensity into its elements (Xu, He, &
Long, 2014). It is very crucial to recognize the economic activities, due to their special effect on
energy, and fundamental characteristics to lessen consumption of energy, as well as potential
measures which can enhance the energy efficiency (Chang, Ries, & Wang, 2010). Many research
papers have made extensive analysis of combined economy by utilizing sectoral data (Wu,
2012). In this study, we have employed a Divisia index method, as LMDI is the best
decomposition method furnishing comprehensive decomposition outputs with no residual effects
within different alternative methods. This study decomposes the factors which influence
consumption of the energy from four fuel sources, for five sectors using the logarithmic mean
Divisia index (LMDI) method and examines the specific trend of consumption energy from 1980
to 2012, and aims to study specific characteristics of energy intensity during this period. This
study uses not only additive LMDI methods but also multiplicative methods to understand which
aspects influence on consumption and intensity of energy. This decomposition of the factors is
mainly associated with the activity, structure, intensity, and substitution effects.
1

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