Energy efficiency analysis of G7 and BRICS considering total-factor structure

Abstract

Energy is the driving force of world economy, with the increase in the world's population and consumption, additional efforts must be made to guarantee energy availability for all economies and, consequently, to avoid a number of serious problems related to its scarcity. Therefore, measures to ensure energy efficiency are now a priority for any nation willing to develop its economy. Given the fast economic development seen in the BRICS group, which has played an important role in the global economy, the objective of this study is to measure and analyze energy efficiency in the countries that comprise the BRICS group (Brazil, Russia, India, China and South Africa) and the G7 group (Canada, France, Germany, Italy, Japan, United Kingdom and United States) considering the total-factor structure. For this, Data Envelopment Analysis was used, with Slacks-Based Measure model and the window analysis; and the total-factor energy efficiency index was calculated from the slacks provided by this tool for the countries analyzed. The model used as inputs gross fixed capital formation and workforce and energy consumption. Additionally, two outputs were used, carbon dioxide emissions (undesirable output) and Gross Domestic Product (desired output). Moreover, the factors that lead to better energy efficiency measures were sought using an econometric model. The results indicate that the BRICS and G7 are statistically different groups and therefore justify being analyzed separately. Energy efficiency in BRICS ranged from 23.54% to 99.95%, with Brazil as the country which had the highest total-factor energy efficiency index. In the analysis performed for the G7 group, every country had a total-factor energy efficiency index above 95%. The Tobit model was used, and the results show that patents are significant for energy efficiency in the BRICS countries; while in the G7 countries the Gross Domestic Product per capita (measured by purchasing power parity), life expectancy and years of schooling are significant. These findings indicate that in the BRICS countries the results of energy efficiency measures are more related to investments in low energy consumption technologies, while in the G7 countries, the energy efficiency tends to be better when countries have better social conditions, which in addition to high life expectancy, ensures a fair income distribution. The results of this study are important in terms of being useful for public policies related to energy efficiency, especially: (1) to contribute to the discussions related to evaluating the countries' energy use, helping to identify those with the best practices with regard to environmental and economic aspects in each group; and (2) to guide policy decisions regarding government incentives to promote the development of efficient countries in terms of economic growth with minimal use of resources (capital, labor, energy), without harming the environment.