Measuring preferences for energy efficiency in ACI and EU nations and uncovering their impacts on energy conservation

Abstract

Energy efficiency, commonly interpreted as the ratio of output of performance, service, goods or energy, to input of energy, is of critical importance for reducing dependence on oil, controlling greenhouse gas emissions from fossil-fuel combustion and mitigating environmental damages in order to achieve a sustainable global energy system. In this paper, for the first time to the best of our understanding, we measure the (hidden) preferences for energy efficiency and capture their impacts on energy conservation in a panel of ASEAN countries, China and India (in short, the ACI nations) from 1985 to 2020. We apply the state-space models to estimate country-specific preferences for energy efficiency as a latent variable and then explore their impacts on the demand for renewable energy using an efficient generalised method of moments (GMM) estimator for the panel of chosen countries. We find strong evidence that intensities of preferences for energy efficiency increase the demand for renewable energy in ACI nations. In an extension of our study, we replicate our analysis for leading European Union (EU) nations using clean energy to arrive at interesting comparative insights. We gain further insights into the understanding of how structural breaks can influence the impacts of preferences for energy efficiency on the demand for renewables for ACI nations.