Economic sector


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In order to talk meaningfully about the various activities within a country, economists will often divide the economy into parts called sectors.[1] There are many different ways of dividing the economy into sectors. For example, one could separate the economy into:

  • The public sector - parts of the economy controlled by any level of government. This includes public schools (at any level), libraries or national parks. It would also includes government run companies which are often called crown corporations in Canada.
  • The private sector - parts of the economy not controlled by the government at any level.[1] This includes companies that aren't run by the government, not-for-profit organizations and even individual households.


Another way to separate the economy could be: the public sector, the corporate sector (all corporations) and the personal sector (people and any business that hasn't been incorporated).[1]

There are many ways other ways of dividing up the economies; from an energy generation perspective it makes sense to look at the economy as divided into:

  • The primary sector - parts of the economy using natural resources directly. This is all economic activity directly tied to any sort of resource extraction, including mining, agriculture, forestry or fishing. Primary energy extraction, getting primary fuels and primary energy flows from nature, would be part of the primary sector. This sector also uses a fair amount of energy as well as extracting it from nature.
  • The secondary sector, more commonly called the manufacturing sector - parts of the economy producing goods through some manufacturing process (as opposed to raw resources extracted from nature). This sector transforms a lot of energy from the primary sector into more useful forms. This sector includes making energy currencies like electricity, as well as refining extracted crude oil into oil products like gasoline, kerosene and diesel.
  • The tertiary sector more commonly called the service sector parts of the economy that focus on providing a service as opposed to a product. This includes banking, health services, retail sales, restaurants, education and administration.[1]
Figure 1. Different sectors use different inputs and have different outputs. The primary sector extracts natural resources. The secondary sector transforms those resources into products a user would want to buy. The tertiary sector provides services. [2]

From an energy consumption perspective, it makes sense to divide the economy as being divided into the industrial, transportation, commercial and residential sectors.[3]

  • The industrial sector - The part of the economy that includes extraction (mining), agriculture, fish, forestry, construction and manufacturing of goods (much of the first primary and secondary sectors above).[4] This sector uses more than half of the world's energy.[3]
  • The transportation sector - The part of the economy that involves moving people, goods and commodities around. This includes both government owned transportation (like buses) and private owned transportation (like a person's car, or a taxi) [4] The transportation sector is run mostly by various oil products like gasoline, and diesel.[3]
  • The commercial sector - This part of the economy involves businesses that don't manufacture or transport. Any businesses providing health services, education or financial services would be in this sector (very similar to the tertiary sector above).[4]
  • The Residential sector - This part of the economy represents all of the activity of people living their lives in their homes. This excludes transportation energy, since that's in the transportation sector. In some countries the residential sector includes growing food for personal use (which can be confusing compared to the agricultural portion of the industrial sector).

Figure 2 below shows the energy use by each sector in OECD (wealthy) countries and non-OECD countries.

Figure 2. Global energy consumption (EIA), current and projected energy use by sector (units are quads). Note industrial sector is the largest consumer of energy and that the energy use of OECD (wealthy) countries aren't growing nearly as fast as the non-OECD countries.[5]

All of the above divisions of the economy (and many more!) are used depending on what someone is modeling.


For Further Reading

References

  1. 1.0 1.1 1.2 1.3 "A Dictionary of Economics" published Oxford University Press, 2013. Edited by John Black, Nigar Hashimzade, and Gareth Myles Online version accessed [January 16th, 2020].
  2. Created internally by the Energy Education team
  3. 3.0 3.1 3.2 "International Energy Outlook 2019", Online version accessed January 16th, 2020. https://www.eia.gov/outlooks/ieo/pdf/ieo2019.pdf
  4. 4.0 4.1 4.2 "A Dictionary of Environment and Conservation" edited by Chris Park. 1st edition, published Oxford University Press 2012.
  5. This graph was taken from the report by the Energy Information Agency; International Energy Outlook 2019 available https://www.eia.gov/outlooks/ieo/pdf/ieo2019.pdf accessed April 13th, 2020.

Authors and Editors

Ethan Boechler, Maddy Strange, Jason Donev
Last updated: September 27, 2021
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