Structural Decomposition Analysis to Investigate the Changes in Energy Consumption in Pakistan

The world energy demand is increasing due to rapid growth in the global economy, industrialization, and urbanization. Pakistan is also confronted with increasing energy demand on one hand and is confronted with the challenge of energy demand-supply gap on the other hand. Since energy is the major driver for growth, it becomes important to investigate the trends of energy consumption in a country and the factors that are most affecting the changes in the use of energy. This particular study aims to investigate the use of energy by all the economic sectors of Pakistan during 2000-2012. The major contribution is the first time application of structural decomposition analysis (SDA) for energy usage along with using Input-Output data for the period of 2002-2012. The results show the fluctuation of the energy intensity of the sectors throughout the study period. Also, the overall effect of energy intensity is negative on energy consumption and it shows a negative contribution value of -80.90% for the study period. Furthermore, the focus on more energy-intensive products like cement, automobiles, iron, steel products and the increasing final demand of the economy contributes to the growth of energy consumption in Pakistan during 2000-2012.