Capturing energy efficiency in European iron and steel production—comparing specific energy consumption and Malmquist productivity index

Abstract

European iron and steel producers are working towards increased energy efficiency to meet requirements set by European policies such as the Energy Efficiency Directive. In this study, we show that the specific energy consumption (SEC), representing the iron and steel sector in the Odyssee energy efficiency index (ODEX)—the tool for policy evaluation recommended by the European Commission—is insufficient for capturing energy efficiency trends of European iron and steel production. European producers focus on niche markets, diversifying and specialising their set of products well beyond crude steel, which is the benchmark product for deriving the SEC. We compare the SEC with the more comprehensive Malmquist productivity index (MPI) methodology, which is calculated using data envelopment analysis (DEA) techniques. An evaluation of energy efficiency trends during 2000–2010 showed that the SEC overestimated energy efficiency improvements for European steel industries, while underestimating the improvements achieved by Swedish steel industries. A comparison between the SEC, the MPI/DEA approach, and energy intensity based on value added in the Swedish case provides further insight to the methodological differences between the approaches. We conclude that the approaches highlight different aspects of energy efficiency analyses and that the SEC is not sufficient for capturing the energy efficiency of steel industries.