Abstract
We investigate the direct role of technological innovation and other factors influencing industrial energy intensity across 17 EU countries over 1995-2009. We develop an innovative industry-level patent dataset and find compelling evidence that patent stock negatively influences industrial energy intensity. In particular, we find a much stronger effect of patent stock on energy-intensive industries with an estimated coefficient of -0.138 which almost double that of less energy-intensive industries (estimated at -0.085). While our results show that energy price remains the major determinant of energy intensity, the chemicals industry, which is not covered by the EU Emissions Trading Scheme (ETS) during the sample period, appears more susceptible to energy prices relative to other energy-intensive industries that are covered by the EU ETS. Exploring regional differences in carbon taxation, we find a significant decline in energy intensity in Northern Europe owing to the carbon tax policy implemented in the early 1990s across the Nordic countries.
Highlights
Energy efficiency is often seen as perhaps the most straightforward ‘no-regrets’ means of delivering energy security, greenhouse gas emissions reductions and decoupling economic growth from rising energy use (Jaffe, Newell & Stavins, 2004)
A great deal of debate about the factors determining energy intensity has centered on the decomposed efficiency change indices, as opposed to the direct effect of technological innovation
Our findings show energy price remains the major determinant of energy intensity across EU manufacturing industries, industry-level results show that energy intensity falls more in response to higher price than it does in less energy-intensive industries
Summary
Energy efficiency is often seen as perhaps the most straightforward ‘no-regrets’ means of delivering energy security, greenhouse gas emissions reductions and decoupling economic growth from rising energy use (Jaffe, Newell & Stavins, 2004). Energy efficiency can act as a bulwark against ever-increasing pressure on energy-intensive industries to reduce emissions and energy use in a carbon-constrained world. Rising fuel prices and their impact on industrial competitiveness have made energy efficiency improvements a central focus of EU energy policy. In response to the mandate received from the European Council, the European Commission issued a report on energy-intensive industries (like steel, ceramic, chemicals, glass) and documents that the competitiveness of these industries may be at risk as a result of increasing energy prices and transmission costs (CEPS, 2014)
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