Is industrial energy inefficiency transient or persistent? Evidence from Swedish manufacturing

Golnaz Amjadi and Tommy Lundgren

Applied Energy, 2022, vol. 309, issue C, No S0306261921015786

Abstract: Energy inefficiency in production implies that the same level of goods and services could be produced using less energy. The potential energy inefficiency of a firm may be linked to long-term structural rigidities in the production process and/or systematic shortcomings in management (persistent inefficiency), or associated with temporary issues like misallocation of resources (transient inefficiency). Eliminating or mitigating different inefficiencies may require different policy measures. Studies measuring industrial energy inefficiency have mostly focused on overall inefficiencies and have paid little attention to distinctions between the types. The aim of this study was to assess whether energy inefficiency is transient and/or persistent in the Swedish manufacturing industry. I used a firm-level panel dataset covering fourteen industrial sectors from 1997 to 2008 and estimated a stochastic energy demand frontier model. The model included a four-component error term separating persistent and transient inefficiency from unobserved heterogeneity and random noise. I found that both transient and persistent energy inefficiencies exist in most sectors of the Swedish manufacturing industry. Overall, persistent energy inefficiency was larger than transient, but varied considerably in different manufacturing sectors. The results suggest that, generally, energy inefficiencies in the Swedish manufacturing industry were related to structural rigidities connected to technology and/or management practices.

Keywords: Stochastic energy demand frontier model; Persistent and transient energy inefficiency; Energy inefficiency (search for similar items in EconPapers)
JEL-codes: D22 L60 Q40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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DOI: 10.1016/j.apenergy.2021.118324

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