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Energy demand and energy efficiency in the OECD countries: a stochastic demand frontier approach

Massimo Filippini and Lester Hunt

No 09-68, CEPE Working paper series from CEPE Center for Energy Policy and Economics, ETH Zurich

Abstract: This paper attempts to estimate a panel ‘frontier’ whole economy aggregate energy demand function for 29 countries over the period 1978 to 2006 using stochastic frontier analysis (SFA). Consequently, unlike standard energy demand econometric estimation, the energy efficiency of each country is also modelled and it is argued that this represents a measure of the underlying efficiency for each country over time, as well as the relative efficiency across the 29 OECD countries. This shows that energy intensity is not necessarily a good indicator of energy efficiency, whereas by controlling for a range of economic and other factors, the measure of energy efficiency obtained via this approach is. This is, as far as is known, the first attempt to model energy demand and efficiency in this way and it is arguably particularly relevant in a world dominated by environmental concerns with the subsequent need to conserve energy and/or use it as efficiently as possible. Moreover, the results show that although for a number of countries the change in energy intensity over time might give a reasonable indication of efficiency improvements; this is not always the case. Therefore, unless this analysis is undertaken, it is not possible to know whether the energy intensity of a country is a good proxy for energy efficiency or not. Hence, it is argued that this analysis should be undertaken to avoid potentially misleading advice to policy makers.

Keywords: Energy demand; OECD; efficiency and frontier analysis; energy efficiency (search for similar items in EconPapers)
JEL-codes: D D2 Q Q4 Q5 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2009-10
New Economics Papers: this item is included in nep-eff and nep-ene
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Energy Demand and Energy Efficiency in the OECD Countries: A Stochastic Demand Frontier Approach (2011) Downloads
Journal Article: Energy Demand and Energy Efficiency in the OECD Countries: A Stochastic Demand Frontier Approach (2011) Downloads
Working Paper: Energy demand and energy efficiency in the OECD countries: a stochastic demand frontier approach (2010) Downloads
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