Regional persistence of the energy efficiency gap: Evidence from England and Wales

Abstract

The pursuit of reducing imported energy dependence via energy efficiency measures has become crucial to achieving sustainability goals, reducing greenhouse gas emissions, and minimising reliance on imported energy. Despite the significant heterogeneity of energy dependence across regions, heavy reliance on energy imports can expose countries to energy security risks that impact wholesale market energy prices and global energy security, especially in periods of geopolitical conflict. Recent geopolitical conflicts and pent-up demand from post-pandemic recovery have caused global energy prices to rise, leading to high inflation and a severe cost-of-living crisis worldwide. The existence of persistent patterns of energy efficiency gap can quickly exacerbate the associated environmental and economic losses caused by energy price shocks. This paper aims to provide robust empirical evidence of the existence of patterns of persistence of the energy efficiency gap and analyses cross-sectional heterogeneity in such persistence. In a large sample of 18,361,088 domestic dwellings across England and Wales, this study incorporates observable cross-sectional heterogeneous factors, such as socioeconomic conditions, regional characteristics, and structural constraints, to understand the potential barriers preventing residents from adjusting their energy efficiency ratings and their energy efficiency gaps. Notably, the study finds that the energy efficiency gap exhibits an average high degree of persistence of almost 50%, a finding that is statistically and economically significant across all of the LSOAs in England and Wales. The study also finds significant evidence of cross-sectional heterogeneity. This analysis is unique, both in terms of methodology and the subject of investigation, as it is the first empirical analysis that investigates regional patterns of persistence of the energy efficiency gap across England and Wales with such a large degree of granularity. The findings of this study contribute to the scarce academic literature in the field and provide valuable information for designing effective policies that can help achieve energy security and climate change goals while tackling growing socioeconomic inequalities.