Energy efficiency in South Asia: Trends and determinants

Abstract

The efficient use of energy can reduce energy demand, improve energy security and economic competitiveness, and reduce environmental degradation. Using data from the United Nations Statistics Division, the paper analyses the trends in energy efficiency across countries in South Asia (SA) and identifies the determinants of the same. Unlike other studies in the context of SA, this study considers energy consumption of all energy-types taking place in all sectors of the economy. The study applies Logarithmic Mean Divisia Index-I to decompose the change in energy consumption during 1990–2014 into activity, structure, and intensity effects. The results show that the expansion in economic activities mainly drives energy consumption, and the shift toward energy intensive sectors further augments it. However, the decline in energy intensity restrains energy consumption in all the South Asian countries barring Nepal and Bhutan. The Composite Energy Intensity Index and the Fisher Ideal Intensity Index are also estimated to check the robustness of these results. The estimation of a panel regression model identifies endowment of energy resources, production of renewable energy, crude price, population density and GDP per capita as significant factors influencing energy efficiency in SA. These results have significant implications for energy use policy.