To formulate the Synergy Energy Efficiency Index (HK), researchers from City University’s Environmental Policy Research Unit and WGO has constructed a statistical model, namely, the Log Mean Divisia Index I (LMDI I), to determine whether any changes (if any) in Energy Consumption occurred in each Effect over the 10 year time period. The LMDI I is a type of Index Decomposition Analysis often used by energy policy researchers to construct an aggregate energy efficiency index. The LDMI I method applies a log mean function that contains minimal residuals. In addition, this methodology utilizes a simpler formula compared to other statistical formulae.

E= energy consumption (units)

Y= industrial output measure in monetary amount (HKD$)

S= industrial output measure share

I= E/Y for energy intensity (unit/HKD$)

This LMDI I method gives perfect decomposition if the analysis shows that Drsd = 1 (for multiplicative decomposition) and ΔIrsd =0 (for additive decomposition), which satisfies the factor-reversal test. In the multiplicative case, passing the time-reversal test requires the estimated value from year 0 to year T is the reciprocal of the estimated value from year T to year 0 for each estimated effect. In other words, under a Multiplicative Decomposition model, the residuals should equal 1 for perfect decomposition. [Also, this method demonstrates the ratio change in the aggregate energy intensity from year 0 to year T, where Dtot = IT/I 0 and decomposes to give: Dtot = DstrDintDrsd.] However, if the data set contains any negative values, researchers should use an alternative method under the Laspeyres index instead of the LMDI I.

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Energy and Environmental Policy Research Unit, Department of Management Sciences, City University of Hong Kong

The Unit’s mission is to foster academic, industrial, and governmental collaboration in energy and environmental related research activities, with special emphasis on Hong Kong and China. The Unit promotes rigorous and objective empirical research related to energy and environmental policy to support decision-making by government and industry. The results of the research are disseminated through publications, seminars, forums, and other public outreach activities.

World Green Organisation

The World Green Organisation (WGO) is an independent non-governmental organisation concerned with environmental conservation and environmentally related livelihood and economic affairs. It provides a holistic approach to a fully integrated three-pronged solution that combines social, environmental and economic aspects for a environmental revolution. Through science-based policy research and community projects, the WGO aims to enhance the quality of the environment, promote a greener economy, and improve people’s livelihoods. In particular, it will focus on the social concerns of underprivileged groups and on the creation of a green economy, to help realise its vision of sustainable development.

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