Analysing the Pattern of Productivity Change in the European Energy Industry

Djula Borozan,Dubravka Pekanov Starcevic

doi:10.3390/su132111742

Abstract

For an industry to succeed in a competitive market, it should continuously take care of not only its stakeholders but also its technical efficiency and productivity. In this paper, data envelopment analysis was combined with Malmquist productivity analysis to investigate the pattern of multifactor productivity changes in the European energy industry over the period from 2005–2016. The results showed that the whole industry was technically inefficient and had large potential for improvement. A slight average increase in productivity that was observed over the studied period proved to be sensitive to the financial and economic situation and equally sensitive to technological and efficiency advances. As for efficiency gains, they reflected the nature of the energy industry, implying that they were due to scale efficiencies rather than human resource improvements. Although technological innovation and the optimal scale of production increased productivity, the slow pace at which this occurred and the negative outlook highlighted by the observed trends call for more serious consideration of the future productivity deployment of the European energy industry, particularly in the context of its decarbonisation, diversification, and modernisation.

Highlights

The increasing need for renewables and energy supply diversification as well as for continuous technological progress poses major challenges to the energy sector, which plays an important role in the European economy, directly employing around 1.61 million people and generating around EUR 250 billion in value added, equivalent to the around 4% of value added of the non-financial European Union (EU) business economy [1]
Using the Tukey box plot method, outliers were removed from further analysis because they could have affected the shape of an efficiency frontier, leading to unreliable data envelopment analysis (DEA)
Consistent with this finding, Lo Storto and Capano [13] observed a downward trend in the efficiency of aggregate renewable electricity generation capacity during the period 2002–2011, but they realised that countries with a higher share of installed renewable electricity generation capacity experienced an increase in efficiency during the period from 2009–2011

Summary

Introduction

The increasing need for renewables and energy supply diversification as well as for continuous technological progress poses major challenges to the energy sector, which plays an important role in the European economy, directly employing around 1.61 million people and generating around EUR 250 billion in value added, equivalent to the around 4% of value added of the non-financial European Union (EU) business economy [1].The EU is committed to ensuring energy security, sustainability, and affordability in the context of sustainable development. Transformation is critical to achieving the Paris Agreement targets [4] and the 2050 climate neutrality target set out in the European Green Deal [5], which aims to promote economic growth through the use of green technologies and to support the transition to a low-carbon economy. It proposes a reduction in greenhouse gas (GHG) emissions to at least 55% by 2030 compared to 1990 levels, which is a significant increase from the 40% target set in the 2030 Climate and Energy Framework [6], as well as achieving the 7th and 3th United Nations Sustainable

Objectives

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Results

Conclusion