Energy intensity is an important indicator describing the relationship between energy inputs and economic outputs. From the perspective of the whole of society, effective reduction of energy intensity is one of the methods to achieve economic development. Therefore, to develop a strategic program for reducing energy intensity is a critical task of the Energy Commission in Taiwan.
Energy intensity means the units of energy input needed to produce a unit of output value. In general, it represents the amount of energy consumed divided by gross domistic products over a period of time, e.g., one year. However, energy intensity is only an overall index. It could be broken down into several components including pure intensity effect, sectoral change effect and output effect. In order to identify effective methods for reducing energy intensity in the economy, one has to first understand these internal components and this in turn requires in-depth economic analysis.
The objective of this study is to examine the components of energy intensity in Taiwan. In order to achieve this objective, a decomposition analysis is conducted, focusing on the periods before the first oil crisis of 1973; between the two oil crises (1974-1980); after the second oil crisis (1981-1985); and after the oil price collapse (1986-1990). The research results are interpreted. Policy implications are drawn based upon the major findings, and strategic suggestions are also made to the Energy Commission for the proper direction of reducing energy intensity in Taiwan.