Convergence of Energy Intensity in OECD Countries

Cem Canel,Begüm Öktem,Recep Oktem,Burak Guris,Selahattin Guris

doi:10.4236/me.2017.87066

Abstract

This paper investigates whether there is energy intensity convergence in the Organization for Economic Cooperation and Development (OECD) countries or not by using annual data from the 1980-2011 period. OECD countries are Australia, Austria, Belgium, Canada, Chile, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, North Korea, South Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, UK, and USA. Energy intensity is measured by the ratio of total energy consumption to total output. Energy intensity measures the energy consumption of an economy and its overall energy efficiency. We used linear and nonlinear unit root tests from the recent literature to accomplish this goal. An analysis of the test results shows that there is no convergence in Chile, Finland, Greece, Ireland, South Korea, Luxembourg, Mexico, Netherlands, New Zealand, Portugal, Spain, Sweden, Switzerland, and the UK. These countries should start implementing changes to their energy policies to achieve effective energy use.

Highlights

Energy intensity is measured by the ratio of total energy consumption to total output
Energy intensity is measured by the ratio of total energy consumption to total output, measured as Gross Domestic Product (GDP)
We investigate the convergence of energy intensity among Organization for Economic Cooperation and Development (OECD) countries (Australia, Austria, Belgium, Canada, Chile, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Japan, North Korea, South Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, UK, USA) and use a nonlinearity test established by Harvey et al, [13]

Summary

Introduction

Energy intensity is measured by the ratio of total energy consumption to total output, measured as Gross Domestic Product (GDP). Low energy intensity indicates a lower price or cost of converting energy into GDP This ratio is a measurement used in the comparison of the countries in this. Liddle [7] investigated convergence in energy intensity using two new large data sets: A one hundred eleven-country sample spanning from 1971 to 2006, and a one hundred thirty-four-country sample spanning from 1990 to 2006. This convergence type is defined as follows in the study conducted by Barro and Sala-i-Martin [10]:

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Empirical Methodology

Nonlinear Unit Root Test

Linear Unit Root Test with Structural Breaks

Empirical Findings

Conclusions