Aggregating physical intensity indicators: results of applying the composite indicator approach to the Canadian industrial sector

Abstract Issues surrounding the development, application and interpretation of energy intensity indicators are a continuing source of debate in the field of energy policy analysis. Although economic energy intensity indicators still dominate intensity/efficiency studies, the use of physical energy intensity indicators is on the rise. In the past, physical energy intensity indicators were not employed since it was often impossible to develop aggregate (sector-level or nation-wide) measures of physical energy intensity due to the difficulties associated with adding diverse physical products. This paper presents the results of research conducted specifically to address this “aggregation” problem. The research focused on the development of the Composite Indicator Approach, a simple, practical, alternative method for calculating aggregate physical energy intensity indicators. In this paper, the Composite Indicator Approach is used to develop physical energy intensity indicators for the Canadian industrial and manufacturing sectors, and is then compared to other existing methods of aggregation. The physical composite indicators developed using this approach are also evaluated in terms of their reliability and overall usefulness. Both comparisons suggest that the Composite Indicator Approach can be a useful, and ultimately suitable, way of addressing the aggregation problem typically associated with heterogeneous sectors of the economy.