International sanctions’ impact on energy efficiency in target states

Abstract

This paper investigates the impact of international sanctions on energy efficiency by employing the panel fixed effect as well as average marginal effect from the Tobit model via data on 30 sanctioned states over the period 1996–2015 with international sanctions including unilateral, plurilateral, U.S., EU, UN, economic, and non-economic cases. Overall, we find that the imposition of unilateral sanctions leads to a 0.067% decrease in energy efficiency, but that of plurilateral sanctions positively contribute to energy efficiency in the case of the full sample of countries. Moreover, the imposition of UN sanctions has a greater decrease on energy efficiency in the target states than the 0.042% reduction of energy efficiency when the sanctionist is the U.S. For robustness, empirical results indicate that the imposition of plurilateral sanctions results in a drop of energy efficiency in Islamic countries, but an increase in non-Islamic countries, while there are also negative shocks induced by the imposition of EU sanctions on energy efficiency in Asian countries, but not for non-Asian countries. We also consider endogenous problems and dynamic specification by using indicator variables and System GMM. In summary, our empirical findings provide policy suggestions for those sanctioned countries about how to maintain energy efficiency when facing international sanctions.