Convergence of energy productivity in Australian states and territories: Determinants and forecasts

Abstract

The Australian government has recently launched a National Energy Productivity Plan that calls for a 40% increase in energy productivity (economic output divided by energy use) before 2030. Improving energy productivity would help boost economic competitiveness, reduce energy costs, and reduce carbon dioxide emissions in Australia. Understanding energy productivity dynamics at the state level is essential for the success of this program. This research analyses the convergence path of energy productivity in Australian states and territories. Club convergence analysis applied to data over the period 1990–2015 reveals two converging energy productivity clubs. Initial energy productivity, industry structure, and automobile fuel prices are important determinants of higher energy productivity. Based on Australian state energy productivity forecasts to 2030, New South Wales and Victoria will be the forerunners in maintaining higher energy productivity in 2030. Australia will not achieve a 40% increase in energy productivity before 2030 without significant changes to its fuel mix and industry structure.