Nordic: A helicopter look at energy dependence
-
Energy inputs into production varies significantly across the Nordics. The Danish manufacturing sector runs on far less energy compared to the OECD average. The Norwegian runs on a lot more.
-
The direct energy consumption share is relatively low in the Nordics. Taking indirect energy input in to account, the energy intensity of consumption reflects the Nordics’ production patterns.
-
A model experiment confirms findings and shows DK/SWE/FIN production is less sensitive to an oil price shock. The same goes for private consumption, which is only affected by half as much as the euro area.
The importance of efficient energy usage has been pushed further forward by high energy prices
Energy prices have soared over the last eight months along with carbon emission prices. That leaves many businesses with large bills of which they might decide to pass all or some on in the value chain and to their customers. Having as energy efficient a production as possible is both a short term and long-term priority for businesses. We have taken a helicopter look at the energy intensity of the Nordic economies. We have used OECD’s TiVA (Trade in Value Added) database, which maps global supply chains in a way not possible with conventional trade data.
The energy input in the Nordic manufacturing sectors varies significantly across countries
Among OECD countries, the energy input is particularly high in the production of chemicals and basic metals. Low energy intensive production includes pharmaceuticals, transport equipment and computers and electronics. The composition of production is key to a country’s overall energy dependence.
Norway has a much higher energy input in its manufacturing exports compared to other countries, reflecting a large production of basic metals and refined petroleum products; both energy intensive production. Cheap hydropower gives Norway an edge here, and the electricity/gas input in production is also significantly higher than the OECD average. Zooming in on basic metals production, particularly the electricity/gas input is high. It constitutes 10.3% of total input in Norway compared to the 3.3% OECD average.
Sweden is slightly above the 6.4% OECD average, largely due to its production of refined petroleum products. Its large transport equipment production on the other hand pulls down in the overall energy intensity of manufacturing with Swedish transport equipment production being more energy efficient than the OECD average.
Author
Danske Research Team
Danske Bank A/S
Research is part of Danske Bank Markets and operate as Danske Bank's research department. The department monitors financial markets and economic trends of relevance to Danske Bank Markets and its clients.
