Energy efficiency and policy in Swedish pulp and paper mills: A data envelopment analysis approach

Abstract

The paper provides an empirical assessment of the electricity efficiency improvement potential in the Swedish pulp and paper industry by employing data envelopment analysis (DEA) and mill-specific input and output data for the years 1995, 2000 and 2005. The empirical results are discussed in relation to the reported outcomes of the Swedish voluntary energy efficiency programme PFE. The estimated electricity efficiency gap is relatively stable over the time period; it equals roughly 1TWh per year for the sample mills and this is three times higher than the corresponding self-reported electricity savings in PFE. This result is largely a reflection of the fact that in the pulp and paper industry electricity efficiency improvements are typically embodied in the diffusion of new capital equipment, and there is a risk that some of the reported measures in PFE simply constitute an inefficient speed-up of capital turnover. The above does not preclude, though, that many other measures in PFE may have addressed some relevant market failures and barriers in the energy efficiency market. Overall the analysis suggests that future energy efficiency programs could plausibly be better targeted at explicitly promoting technological progress as well as at addressing the most important information and behaviour-related failures.