IDEAS home Printed from https://ideas.repec.org/a/eee/eneeco/v38y2013icp153-159.html
   My bibliography  Save this article

A marginal measure of energy efficiency: The shadow value

Author

Listed:
  • Khademvatani, Asgar
  • Gordon, Daniel V.

Abstract

Economists are well aware of the importance of marginal versus average measures of energy efficiency. Yet in the energy literature, there is no consensus on the appropriate method for defining and measuring energy efficiency. This paper sets out the shadow value of energy as a proper and meaningful marginal energy efficiency index. A restricted profit function is used to model the shadow value. We explore four scenarios to characterize and evaluate the shadow value of energy; a within country comparison of different production processes with different energy requirements, a comparison of different countries with different resource endowment, a government policy to impose a tax to alter the shadow value to address environmental issues and a within country comparison of externalities arising from two sources of energy. A comparative static analysis is carried out to sign the functional arguments defined for the shadow value.

Suggested Citation

  • Khademvatani, Asgar & Gordon, Daniel V., 2013. "A marginal measure of energy efficiency: The shadow value," Energy Economics, Elsevier, vol. 38(C), pages 153-159.
    • Handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:153-159
    DOI: 10.1016/j.eneco.2013.03.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0140988313000571
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.eneco.2013.03.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Brookes, Len, 1990. "The greenhouse effect: the fallacies in the energy efficiency solution," Energy Policy, Elsevier, vol. 18(2), pages 199-201, March.
    2. Schankerman, Mark & Nadiri, M. Ishaq, 1986. "A test of static equilibrium models and rates of return to quasi-fixed factors, with an application to the Bell system," Journal of Econometrics, Elsevier, vol. 33(1-2), pages 97-118.
    3. Liu, X.Q. & Ang, B.W. & Ong, H.L., 1992. "Interfuel substitution and decomposition of changes in industrial energy consumption," Energy, Elsevier, vol. 17(7), pages 689-696.
    4. Phylipsen, G. J. M. & Blok, K. & Worrell, E., 1997. "International comparisons of energy efficiency-Methodologies for the manufacturing industry," Energy Policy, Elsevier, vol. 25(7-9), pages 715-725.
    5. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    6. Gunn, Calum, 1997. "Energy efficiency vs economic efficiency? : New Zealand electricity sector reform in the context of the national energy policy objective," Energy Policy, Elsevier, vol. 25(4), pages 445-458, March.
    7. Lau, Lawrence J., 1976. "A characterization of the normalized restricted profit function," Journal of Economic Theory, Elsevier, vol. 12(1), pages 131-163, February.
    8. Dreze, Jean & Stern, Nicholas, 1990. "Policy reform, shadow prices, and market prices," Journal of Public Economics, Elsevier, vol. 42(1), pages 1-45, June.
    9. J.W. Sun, 2003. "Energy intensity versus per capita GDP in seven developing countries, 1973-1995," International Journal of Global Energy Issues, Inderscience Enterprises Ltd, vol. 20(1), pages 95-114.
    10. Freeman, Scott L. & Niefer, Mark J. & Roop, Joseph M., 1997. "Measuring industrial energy intensity: practical issues and problems," Energy Policy, Elsevier, vol. 25(7-9), pages 703-714.
    11. Nagata, Yutaka, 1997. "The US/Japan comparison of energy intensity. Estimating the real gap," Energy Policy, Elsevier, vol. 25(7-9), pages 683-691.
    12. Jenne, C. A. & Cattell, R. K., 1983. "Structural change and energy efficiency in industry," Energy Economics, Elsevier, vol. 5(2), pages 114-123, April.
    13. Morrison, Catherine J, 1988. "Quasi-Fixed Inputs in U.S. and Japanese Manufacturing: A Generalized Leontief Restricted Cost Function Approach," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 275-287, May.
    14. Jorgenson, Dale W., 1986. "Econometric methods for modeling producer behavior," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 3, chapter 31, pages 1841-1915, Elsevier.
    15. Patterson, Murray G, 1996. "What is energy efficiency? : Concepts, indicators and methodological issues," Energy Policy, Elsevier, vol. 24(5), pages 377-390, May.
    16. Harty D. Saunders, 1992. "The Khazzoom-Brookes Postulate and Neoclassical Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 131-148.
    17. Jorgenson, Dale W, 1984. "The Role of Energy in Productivity Growth," American Economic Review, American Economic Association, vol. 74(2), pages 26-30, May.
    18. L.G. Brookes, 1990. "Energy Efficiency and The Greenhouse Effect," Energy & Environment, , vol. 1(4), pages 318-333, December.
    19. J. Daniel Khazzoom, 1987. "Energy Saving Resulting from the Adoption of More Efficient Appliances," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 85-89.
    20. Bosseboeuf, Didier & Chateau, Bertrand & Lapillonne, Bruno, 1997. "Cross-country comparison on energy efficiency indicators: the on-going European effort towards a common methodology," Energy Policy, Elsevier, vol. 25(7-9), pages 673-682.
    21. Fox, Kevin J. & Grafton, R. Quentin & Kirkley, James & Squires, Dale, 2003. "Property rights in a fishery: regulatory change and firm performance," Journal of Environmental Economics and Management, Elsevier, vol. 46(1), pages 156-177, July.
    22. Diewert, W.E., 1993. "Duality approaches to microeconomic theory," Handbook of Mathematical Economics, in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 12, pages 535-599, Elsevier.
    23. Brookes, Leonard, 2004. "Energy efficiency fallacies--a postscript," Energy Policy, Elsevier, vol. 32(8), pages 945-947, June.
    24. Renshaw, Edward F., 1981. "Energy efficiency and the slump in labour productivity in the USA," Energy Economics, Elsevier, vol. 3(1), pages 36-42, January.
    25. Sam H. Schurr, 1982. "Energy Efficiency and Productive Efficiency: Some Thoughts Based on American Experience," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 3-14.
    26. Schurr, Sam H., 1985. "Energy conservation and productivity growth : Can we have both?," Energy Policy, Elsevier, vol. 13(2), pages 126-132, April.
    27. Brookes, Leonard, 2000. "Energy efficiency fallacies revisited," Energy Policy, Elsevier, vol. 28(6-7), pages 355-366, June.
    28. J. Daniel Khazzoom, 1980. "Economic Implications of Mandated Efficiency in Standards for Household Appliances," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4), pages 21-40.
    29. J. Daniel Khazzoom, 1989. "Energy Savings from More Efficient Appliances: A Rejoinder," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 157-166.
    30. Paul C. Stern, 1986. "Blind spots in policy analysis: What economics doesn't say about energy use," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 5(2), pages 200-227.
    31. W. Kip Viscusi & Wesley A. Magat & Alan Carlin & Mark K. Dreyfus, 1994. "Environmentally Responsible Energy Pricing," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 23-42.
    32. Cornillie, Jan & Fankhauser, Samuel, 2004. "The energy intensity of transition countries," Energy Economics, Elsevier, vol. 26(3), pages 283-295, May.
    33. Morrison, Catherine J, 1985. "Primal and Dual Capacity Utilization: An Application to Productivity Measurement in the U.S. Automobile Industry," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 312-324, October.
    34. Jaffe, Adam B. & Stavins, Robert N., 1994. "The energy-efficiency gap What does it mean?," Energy Policy, Elsevier, vol. 22(10), pages 804-810, October.
    35. Markandya, Anil & Pedroso-Galinato, Suzette & Streimikiene, Dalia, 2006. "Energy intensity in transition economies: Is there convergence towards the EU average?," Energy Economics, Elsevier, vol. 28(1), pages 121-145, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ouyang, Xiaoling & Sun, Chuanwang, 2015. "Energy savings potential in China's industrial sector: From the perspectives of factor price distortion and allocative inefficiency," Energy Economics, Elsevier, vol. 48(C), pages 117-126.
    2. Xie, Wei & Sheng, Pengfei & Guo, Xiaohui, 2015. "Coal, oil, or clean energy: Which contributes most to the low energy efficiency in China?," Utilities Policy, Elsevier, vol. 35(C), pages 67-71.
    3. Wang, Xiaolei & Bai, Mengqi & Xie, Chunping, 2019. "Investigating CO2 mitigation potentials and the impact of oil price distortion in China's transport sector," Energy Policy, Elsevier, vol. 130(C), pages 320-327.
    4. Giovanni Marin & Alessandro Palma, 2015. "Technology invention and diffusion in residential energy consumption. A stochastic frontier approach," SEEDS Working Papers 1415, SEEDS, Sustainability Environmental Economics and Dynamics Studies, revised Sep 2015.
    5. Sha, Ru & Li, Jinye & Ge, Tao, 2021. "How do price distortions of fossil energy sources affect China's green economic efficiency?," Energy, Elsevier, vol. 232(C).
    6. Opeyemi Akinyemi & Philip O. Alege & Oluseyi O. Ajayi & Lloyd Amaghionyeodiwe & Adeyemi A. Ogundipe, 2015. "Fuel Subsidy Reform and Environmental Quality in Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 540-549.
    7. Karanfil, Fatih & Pierru, Axel, 2021. "The opportunity cost of domestic oil consumption for an oil exporter: Illustration for Saudi Arabia," Energy Economics, Elsevier, vol. 96(C).
    8. Pengfei Sheng & Jun Yang & Joshua D. Shackman, 2015. "Energy’s Shadow Price and Energy Efficiency in China: A Non-Parametric Input Distance Function Analysis," Energies, MDPI, vol. 8(3), pages 1-15, March.
    9. Otrachshenko, Vladimir & Hartwell, Christopher A. & Popova, Olga, 2023. "Energy efficiency, market competition, and quality certification: Lessons from Central Asia," Energy Policy, Elsevier, vol. 177(C).
    10. Nuri Ozgur DOGAN & Can Tansel TUGCU, 2015. "Energy Efficiency in Electricity Production: A Data Envelopment Analysis (DEA) Approach for the G-20 Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 246-252.
    11. Johnson Kakeu, 2023. "Concerns for Long-Run Risks and Natural Resource Policy," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 84(4), pages 1051-1093, April.
    12. Park, Somin & Shim, Jisoo & Song, Doosam, 2021. "Issues in calculation of balance-point temperatures for heating degree-days for the development of building-energy policy," Renewable and Sustainable Energy Reviews, Elsevier, vol. 135(C).
    13. Ouyang, Xiaoling & Wei, Xiaoyun & Sun, Chuanwang & Du, Gang, 2018. "Impact of factor price distortions on energy efficiency: Evidence from provincial-level panel data in China," Energy Policy, Elsevier, vol. 118(C), pages 573-583.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sorrell, Steve, 2009. "Jevons' Paradox revisited: The evidence for backfire from improved energy efficiency," Energy Policy, Elsevier, vol. 37(4), pages 1456-1469, April.
    2. Alcott, Blake, 2005. "Jevons' paradox," Ecological Economics, Elsevier, vol. 54(1), pages 9-21, July.
    3. Brookes, Leonard, 2000. "Energy efficiency fallacies revisited," Energy Policy, Elsevier, vol. 28(6-7), pages 355-366, June.
    4. Saunders, Harry D., 2014. "Toward a neoclassical theory of sustainable consumption: Eight golden age propositions," Ecological Economics, Elsevier, vol. 105(C), pages 220-232.
    5. Saunders, Harry D., 2008. "Fuel conserving (and using) production functions," Energy Economics, Elsevier, vol. 30(5), pages 2184-2235, September.
    6. Velasco-Fernández, Raúl & Dunlop, Tessa & Giampietro, Mario, 2020. "Fallacies of energy efficiency indicators: Recognizing the complexity of the metabolic pattern of the economy," Energy Policy, Elsevier, vol. 137(C).
    7. Li, Ming-Jia & Tao, Wen-Quan, 2017. "Review of methodologies and polices for evaluation of energy efficiency in high energy-consuming industry," Applied Energy, Elsevier, vol. 187(C), pages 203-215.
    8. Jarke-Neuert, Johannes & Perino, Grischa, 2020. "Energy efficiency promotion backfires under cap-and-trade," Resource and Energy Economics, Elsevier, vol. 62(C).
    9. Michael Huesemann & Joyce Huesemann, 2008. "Will progress in science and technology avert or accelerate global collapse? A critical analysis and policy recommendations," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 10(6), pages 787-825, December.
    10. Karen Turner, 2013. ""Rebound" Effects from Increased Energy Efficiency: A Time to Pause and Reflect," The Energy Journal, International Association for Energy Economics, vol. 0(Number 4).
    11. repec:hal:gemwpa:hal-00991732 is not listed on IDEAS
    12. David I. Stern, 2010. "The Role of Energy in Economic Growth," CCEP Working Papers 0310, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    13. Stela Rubínová, 2011. "Reakce poptávky domácností po energii na zvyšování energetické účinnosti: teorie a její důsledky pro konstrukci empiricky ověřitelných modelů [Reaction of Household Energy Demand to Improvements in," Politická ekonomie, Prague University of Economics and Business, vol. 2011(3), pages 359-378.
    14. Thomas, Brinda A. & Azevedo, Inês L., 2013. "Estimating direct and indirect rebound effects for U.S. households with input–output analysis Part 1: Theoretical framework," Ecological Economics, Elsevier, vol. 86(C), pages 199-210.
    15. A. Greening, Lorna & Greene, David L. & Difiglio, Carmen, 2000. "Energy efficiency and consumption -- the rebound effect -- a survey," Energy Policy, Elsevier, vol. 28(6-7), pages 389-401, June.
    16. Davood, Manzoor & Mohammad, Aghababaei & Haqiqi, Iman, 2011. "Rebound Effects Analysis of Electricity Efficiency Improvements in Iran: A Computable General Equilibrium Approach," MPRA Paper 95810, University Library of Munich, Germany.
    17. Herring, Horace, 1999. "Does energy efficiency save energy? The debate and its consequences," Applied Energy, Elsevier, vol. 63(3), pages 209-226, July.
    18. Figge, Frank & Thorpe, Andrea Stevenson, 2019. "The symbiotic rebound effect in the circular economy," Ecological Economics, Elsevier, vol. 163(C), pages 61-69.
    19. Santarius, Tilman & Soland, Martin, 2018. "How Technological Efficiency Improvements Change Consumer Preferences: Towards a Psychological Theory of Rebound Effects," Ecological Economics, Elsevier, vol. 146(C), pages 414-424.
    20. Copiello, Sergio, 2017. "Building energy efficiency: A research branch made of paradoxes," Renewable and Sustainable Energy Reviews, Elsevier, vol. 69(C), pages 1064-1076.
    21. Tugba Somuncu & Christopher Hannum, 2018. "The Rebound Effect of Energy Efficiency Policy in the Presence of Energy Theft," Energies, MDPI, vol. 11(12), pages 1-28, December.

    More about this item

    Keywords

    Energy efficiency; Marginal index; Shadow value;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:153-159. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/eneco .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.