Like labor or capital productivity, energy productivity measures the output and quality of goods and services generated with a given set of inputs. MGI measures it as the ratio of value added to energy inputs, which is the inverse of energy intensity of GDP, measured as a ratio of energy inputs to GDP.

Energy productivity is a useful tool with which to analyze the public-policy aims of demand abatement and energy efficiency because it encapsulates both. By looking in terms merely of shrinking demand, there is a danger of denying opportunities to consumers—particularly those in developing economies who are an increasingly dominant force in global energy demand growth. Rather than seeking to reduce end-user demand—and thus the level of comfort, convenience, and economic welfare demanded by consumers—there should be a focus on using the benefits of energy most productively.

The concept of energy productivity provides an overarching framework for understanding the evolving relationship between energy demand and economic growth. Energy-productivity improvements can come either from reducing the energy inputs required to produce the same level of energy services or from increasing the quantity or quality of economic output. Within each of these, there are multiple components that can change over time.

The same level of energy services can be produced with fewer inputs if use is less intensive (e.g., smaller appliances), if technical efficiency improves (e.g., higher-mileage car engines), or if fuel mix shifts, say, from biomass to more efficient electricity. In turn, output can grow more quickly than demand for energy services because of sectoral shifts—say, from energy-intensive industrial sectors to services—or from an increasing share of growth taken by non-energy-intensive, high- value-added activities within a sector (e.g., increasing share of investment banking versus retail banking).

By being explicit about the relative importance of each, energy productivity acts as a useful tool to enable us better to understand the nature and source of change and more effectively seek to improve growth and energy outcomes.