Regional Sustainability and Energy Efficiency

Abstract

Energy intensity has not been deemed a suitable index of energy efficiency because it depends on various socioeconomic factors, such as energy prices and production size. Therefore, this chapter identifies desirable energy efficiency indices that overcome the concerns of energy intensity using the stochastic frontier analysis (SFA) approach. The SFA approach controls for prices and income, mechanization, vintage, and climate factors to derive accurate energy efficiency levels. By using this approach, this chapter clarifies the energy efficiency level for Japan’s industrial and commercial sectors and evaluates the impact of regional agglomeration and inter-regional networks on energy efficiency. The results reveal that improved inter-regional networks have a positive impact on energy efficiency. Regions with well-developed transportation networks are highly energy efficient. This result suggests that policies aimed at strengthening inter-regional networks can significantly contribute to improving energy efficiency in Japan. Meanwhile, the results reveal that regional agglomeration has mixed effects on energy efficiency. That is, there are positive and negative impacts on energy efficiency. Initially, agglomeration economies inherently have a mixture of advantages and disadvantages, such as spatial externalities, congestion, and heat islands. By considering the nonlinear effects, this chapter identified that there is a threshold in the agglomeration effects, and both a positive and negative effect of agglomeration are at play. This result suggests that agglomeration sizes beyond the threshold level are necessary to enjoy agglomeration benefits.