LAUSR

This paper proposes a hybrid method of logarithmic mean divisia index (LMDI), symmetrical components (SC), and stochastic frontier analysis (SFA) to estimate the distribution of energy-saving potential in industrial sectors, while taking into consideration unbalanced components in decomposition analysis. The proposed method uses LMDI to decompose actual energy consumption into activity, structural, and intensity factors, which serve as inputs to SC. In general the results of the decomposition analysis contain some degree of imbalance. The imbalance between these factors may affect economic development of industrial sectors. Since LMDI cannot be used for analyzing the unbalance, SC is used to analyze this. According to this technique, any set of three unbalanced factors could be expressed as the sum of three symmetrical sets of balanced factors. In this research, activity, structural, and intensity factors are selected as unbalanced components. Also, the mean energy consumption is estimated using SC. In this study, SFA is used to measure the technical efficiency of energy conversion in industrial sectors. Therefore, a feasible stochastic frontier production function, which requires only the actual consumption as input and the estimated mean consumption (output from SC) as output, is estimated. Finally, potential savings in these sectors are calculated as technical efficiency. The proposed method is validated by its application to estimate the distribution of energy-saving potential of the selected group of Canadian industrial sectors. The outcome of this study will assist policymakers in reducing industrial energy consumption.