Elsevier

Energy and Buildings

Volume 196, 1 August 2019, Pages 157-168
Energy and Buildings

Measuring energy poverty based on energy embodied in exports of vertical specialisation trade in the construction sector

https://doi.org/10.1016/j.enbuild.2019.05.022Get rights and content

Highlights

  • Effects of energy embodied in exports of the construction sector on energy poverty from a perspective of vertical trade.

  • The influence of the trade pattern of vertical specialisation on energy flow for the phenomenon of energy poverty in 40 countries.

  • Energy poverty measured by the energy embodied in vertical specialisation trade from the aspect of value added in the construction sector.

Abstract

Energy requirements have expanded significantly in the process of global development while the energy crisis as an issue is becoming a limitation for economic development and environmental sustainability. The construction sector has contributed to the total energy consumption at a national and global level. The quality of human life is still impacted by energy and fuel poverty. This paper aims to examine the effects of energy embodied in intermediate and final goods of the construction sector on energy poverty from a perspective of vertical trade. The modified Energy Development Index (EDI) in the construction sector is applied to measure the extent of energy poverty in a country. Based on the World Input-Output Database (WIOD), the energy embodied in the exports of vertical trade has been measured in the construction sector. The results show that the developing trend in 40 countries increased in different increments in the research period. Comparing the results at the beginning and the end of the research period, the modified EDIs measured by energy embodied in exports of vertical trade increased in 19 countries but decreased in 21 countries. The positive implications for reducing energy/fuel poverty is proposed in policy making and strategic management in foreign trade within the construction sector.

Introduction

Energy requirements have expanded significantly in the process of global development. The economic growth has a positive impact on energy consumption [1]. The energy flows through international trade has also affected global energy distributions. The imbalanced distribution leads to an energy shortage in some countries even an energy crisis, which restricts the development of the local economy. The construction sector shares important responsibility in regard to the total energy consumption at a national and global level in order to satisfy the requirements of human beings. The energy consumption related to buildings was about forty percent of worldwide energy consumption [2], and the energy and fuel poverty diminishes the existing quality of normal life. Fabbri [3] argued that the performance of building energy was one important factor that leads to the presence of fuel poverty. A comprehensive definition of energy poverty was described as the inability of households to access secure, quality and clean energy service [4]. The construction sector had a great potential of energy saving in the aspect intermediate input due to its high proportion in global energy consumption [5]. Meanwhile, the construction sectors in many countries were dependent on energy imports from the sectors of foreign countries [6]. Vertical specialisation trade plays a significant role in the global value chain. The transmission of energy embodied in the trade of vertical specialisation might influence deeply energy allocation in the construction sector. Inequitable distribution increases difficulty in access to energy service and worsens the energy poverty. The quantity of energy flow is determined by the position of the construction sector in the global value chain.

Export activities supply the route for energy transmission and change the relationship among the participants in the global value chain. The gross exports from a given country can be divided into three components: value added exports, the intermediate goods used by an importer to produce products and then returned back to the exporter, and the foreign contents [7]. The second component is represented by the sign of VS in the study of Hummels et al. [8], which is the imported foreign intermediate goods used for the exported production. The third component denoted by the sign of VS1* comes from a part of domestic content. It means that the value of a country's exported goods that are used as imported inputs by the rest of the world to produce final goods that are shipped back to home [9]. The sum of the second and the third parts represents total components of a given country in the vertical trade. From the perspective of vertical specialisation, the final goods produced for exports originate from supports of domestic capital and labour, domestic intermediate goods, and foreign intermediate goods. The value added exports originate from the domestic capital and labour. Thus, the intermediate goods and related production play an important role in vertical trade because those are the dominant exports for each participant in the global supply chain. The exported final goods are consumed by the final demand of importers. Meanwhile, the energy embodied in both intermediate and final goods transfers from original countries to destinations by the vertical specialisation trade. Fig. 1 illustrates the framework for measuring the energy development index (EDI) based on energy embodied in the products of vertical specialisation trade. Energy embodied in the imported goods transfers from Country a to Country b and is used for the production of exports in Country b. Then Country b exports the intermediate and final goods to Country c, including the exports of vertical specialisation trade and value added exports, which indicates the energy transmission embodied in trade flow.

There has been concern about energy poverty for more than 50 years. A comprehensive definition of energy poverty was presented as the unaffordable ability of households to access energy service with security, quality, and cleanliness [4]. A similar definition for fuel poverty emphasised economic factors for the inability of households in achieving energy service [10]. All these concepts are related to the influence of economic development and energy use, so the energy and fuel poverty can be combined based on a common premise in a conceptual framework. In this study, the energy poverty integrates the concepts of energy poverty and fuel poverty and is defined as the unaffordable status of energy consumption without a clean, secure, sustainable, and renewable condition for households. In this paper, the construction sector refers to an industry with one type of specific product. The energy embodied in the vertical specialized trade export of the construction industry affects energy or fuel poverty from the perspective of the supply side. The existence of energy poverty involves many factors in economic and social areas. The structure of energy service has a close connection to domestic energy deprivation [11]. National economic development directly influences household's income, while the income of households is associated with the quality of energy access and residential environment [12]. For example, the uneven distribution of economic development in geography has worsened the energy poverty in southern and eastern European Union (EU) member states [13]. Thus, the limitation of family income is one determinant from the perspective of economy for energy poverty. More importantly, the dwelling's residential building and living facilities satisfy families’ lives, while reduction of energy poverty at the household level can be attributed to the cost of energy supply at a national level as well as the insulation property of residential buildings. Excellent insulation can decrease thermal exchange both inside and outside, which reduces the total energy consumption and the influence of environmental temperature. For instance, the high and low levels of dwelling's maintenance and insulation can result in a difference of about 12% in the consumption of natural gas for one household [14]. So, improving the energy efficiency in the construction sector can optimise the energy consumption in the maintenance of the building's internal environment. Moreover, since the construction sector is closely connected to the buildings and households, it is possible to explore the reduction of energy poverty from the perspective of energy flows in vertical specialisation trade of the construction sector.

The factors relevant to energy or fuel poverty have been analysed from the aspects of socioeconomic policy [15] and the function of the buildings [16], [17]. However, the connection between the vertical trade pattern and the phenomenon of energy poverty is not clear. In other words, to what extent the energy embodied in intermediate and final goods in a country's vertical trade affects energy poverty in the construction sector. This paper aims to examine the effects of embodied energy in the construction sector on energy poverty from a perspective of vertical trade by the modified EDI. The assessment of the effects is conducted from the perspective of vertical trade to contribute exploration of these relationships. The modified EDI based on the energy consumption of the construction sector in vertical trade has been constructed to examine the phenomenon of energy poverty in forty countries. The trade and energy flow in national exports have been measured by picking up the components of vertical trade in gross exports. The impacts of vertical trade on energy poverty have been indicated by the evolution of the modified EDI in each country.

Section snippets

Literature review

The sustainability of energy development is a continuous focus in the context of the global energy crisis. This point has also been put into practise as an indicator to measure the performance of the energy system of a country in the aspect of sustainability [18]. The measurement of sustainable energy development indicates the importance of the worldwide demand for energy consumption. Furthermore, the various trade patterns affect the direction of energy development in many countries and the

Decomposition of gross exports from a perspective of vertical specialisation trade

For a specific country, the measurement of gross exports are based on multi-regional input-output tables in this study. The multi-regional input-output tables are assumed as m countries and n sectors. The export of vertical specialisation trade is a part of gross exports, which measures the trade activities from the perspective of value added. The vertical specialisation trade consists of the terms of VS and VS1* trade. VS denotes the imported intermediate goods that are used to produce goods

Exports of the construction sector in vertical specialisation trade

The VS means that the imported intermediate goods are used in the production of exported goods, which is the affected consequence of the globalisation on the reallocation of production fragments. The geographical distribution of production fragments indicates the trade pattern of vertical specialisation. The quantity of VS value shows the degree of the participant for a country in the global supply chains. While measuring the VS from a value-added perspective indicates sectoral competitiveness

Discussion

The export in vertical specialisation trade differs widely from traditional export according to the statistical method. Conventional export statistics are measured by the trade value based on the quantity of exported intermediate and final goods in a given country. But in the perspective of vertical specialisation trade, the measuring of sectoral exports needs to consider both imports and exports for the given country, and the input of labour and capital as value added in the production.

Conclusions

This study demonstrates the connection between the energy poverty and the energy embodied in exports of vertical specialisation trade in the construction sector. Moreover, the assessment of energy poverty has been examined by the modified EDI. The decomposition of gross exports is applied to analyse the energy embodied in the VS and VS1* exports respectively. The conclusions are conducted as follows. The VS exports of the construction sector clearly increased in the majority of world countries

Acknowledgements

The authors thank the anonymous referees for their insightful comments and valuable suggestions on an earlier version of the paper.

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