Decomposition Analysis of Energy Intensity Changes in Industries at the Provincial Level in Iran: Average Distribution of Cross Changes Approach

In this paper energy intensity changes in industries of Iran as a whole and for each province separately have been calculated in the period of 2005-2019. These changes are divided to structural and efficiency effects by using average distribution on the amount of changes in cross method. The results show that during this period, energy intensity has increased throughout the country and in all provinces, indicating the continuation of non-optimal behaviors in energy consumption. Decomposition of energy intensity changes into its components shows that structural effect in the country, especially changes in the combination of products, has led to an improvement in energy intensity. In contrast, the efficiency effect that means efficiency in energy consumption, has led to an increase in energy intensity throughout the country. According to the results of this study, the efficiency effect in most provinces except Ardabil, South Khorasan, North Khorasan, Mazandaran, Sistan and Baluchestan, Qazvin, Kurdistan, Kerman and Golestan has increased energy intensity. And structural effect in the provinces of East Azerbaijan, West Azerbaijan, Ardabil, Isfahan, Eelam, Tehran, Khorasan Razavi, Semnan, Fars, Qom, Kurdistan, Lorestan and Hamedan has reduced energy intensity. Improving industrial energy intensity in Iran requires drastic measures which include increasing energy prices proportionally to inflation rate for industrial uses, replacing obsolete and inefficient industrial processes by more efficient ones especially in energy intensive industries, technology transfer, creating energy audit units in energy intensive industries, developing mandatory standards and regulating energy uses in industrial processes and equipment.