Abstract
AbstractThe promotion of US energy efficiency policy is seen as a very important activity. Generally, the level of energy efficiency of a country or state is approximated by energy intensity, commonly calculated as the ratio of energy use to GDP. However, energy intensity is not an accurate proxy for energy efficiency given that changes in energy intensity are a function of changes in several factors including the structure of the economy, climate, efficiency in the use of resources, behaviour and technical change. The aim of this paper is to measure persistent and transient energy efficiency for the whole economy of 49 states in the US using a stochastic frontier energy demand approach. A total US energy demand frontier function is estimated using panel data for 49 states over the period 1995 to 2009 using two panel data models: the Mundlak version of the random effects model (which estimates the persistent part of the energy efficiency) and the true random effects model (which estimates the transient part of the energy efficiency). The analysis confirms that energy intensity is not a good indicator of energy efficiency, whereas, by controlling for a range of economic and other factors, the measures of energy efficiency obtained via the approach adopted here are. Moreover, the estimates show that although for some states energy intensity might give a reasonable indication of a state’s relative energy efficiency, this is not the case for all states.
Highlights
The promotion of energy efficiency policies is seen as a major strand of energy policy in the US and across the globe given the need to reduce greenhouse gas emissions and maintain security of energy supply
Generally a state’s energy efficiency is approximated by energy intensity—commonly calculated as the ratio of energy use to GDP. These two indicators, energy intensity and energy productivity, are not good proxies for energy efficiency because changes in both indicators are a function of changes in several factors including the structure of the economy, the level of production, climate, the level of efficiency in the use of resources and technical change
14 As discussed in more detail in Filippini and Hunt (2015), the estimation of an energy demand frontier function allows the possibility to estimate a non-radial measure of the level of EE—based on the concept of input specific efficiency developed by Kopp (1981)
Summary
The promotion of energy efficiency policies is seen as a major strand of energy policy in the US and across the globe given the need to reduce greenhouse gas emissions and maintain security of energy supply. Zhou and Ang (2008), Filippini and Hunt (2011) and Lin and Du (2013) are examples of empirical applications that have attempted to use frontier analysis methods that have been developed in applied production theory These recognise (albeit implicitly in some cases) that, in order to analyse the level of (energy) efficiency, it is important to base the analysis on a theoretical framework that regards energy as an input into a production function for producing an energy service (such as heating and lighting). 14 As discussed in more detail in Filippini and Hunt (2015), the estimation of an energy demand frontier function allows the possibility to estimate a non-radial measure of the level of EE—based on the concept of input specific efficiency developed by Kopp (1981).
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