What is the role of structural shifts toward less energy-intensive activities in reducing energy intensity?

• A. They have no impact on energy intensity.
• B. They reduce energy intensity by shifting economic activity toward sectors that require less energy per unit output.
• C. They increase energy demand due to inefficiency in new sectors.
• D. They only matter for high-income countries.

Answer: (B)

Energy intensity is about how much energy is needed to produce a unit of economic output. When the economy shifts its mix toward activities that inherently use less energy per unit of output, the overall energy intensity falls. For example, growing a larger services sector or other low-energy-input activities while slowing the share of energy- and capital-intensive industries means each unit of GDP requires less energy overall. This composition change matters because it changes the average energy demand of the entire economy, even if energy use within individual sectors doesn’t change. The result is a lower energy intensity as the output mix favors sectors that are less energy-intensive. While improvements inside sectors help too, the shift in what the economy produces is a powerful way to reduce energy intensity across the board. This effect is relevant for economies at all income levels, not just high-income countries.