Index decomposition analysis
Index decomposition analysis was introduced in the late 1970s to improve the quantitative understanding of the driving forces of industrial energy consumption. The decomposition results obtained, such as the impacts of changes in industry product mix and in industry subsector energy intensity, provide important information on major trends in industrial energy consumption that can facilitate policy development. The technique has gained popularity over time and has since been applied to other energy consumption sectors and in economy-wide analysis. In more recent years, it has also been extended to other application areas, and in particular energy-related CO2 emissions, in light of rising concerns regarding climate change. This chapter introduces the index decomposition analysis methodology, latest developments, application areas, and emerging issues relating to energy and emission analyses. Guidelines on how the technique can be applied are also discussed.