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Will the aggregation approach affect energy efficiency performance assessment?

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Author Info

  • Liao, Hua
  • Wei, Yi-Ming

Abstract

Aggregate energy is usually measured in the linear weighted summation of various energy types based on thermal dynamics laws. This measurement is scientific and acceptable in the physics or energy engineering world. However, it implicitly assumes that all energy types are perfectly substitutable and thus may result in distorted conclusions in energy-economy research. In economics world, production factors are usually non-linearly aggregated using Divisia approach, which is derived from microeconomic theory and considers the heterogeneity and imperfect substitutability among various energies. Using which “ruler” to measure the aggregate energy, the linear one or the others, will certainly affect the conclusions and energy saving incentives of the economic agents. Inequitable energy aggregations may bring out speculations or discouraged behaviors. According to China's current provincial energy efficiency performance assessment policy, the central government assigned the target of reducing the national aggregate energy intensity by 20% in 2006–2010 to provincial authorities in 2006. And in July 2011, the central government formally released the provincial assessment results based on conventional linear aggregation approach (coal equivalent). Our re-examination review this policy and show that the official results are quite different to that based on Divisia approach. From the perspective of economics, some local performances are overestimated and others are underestimated. To raise the equity and incentive compatibility of the assessment, we suggest the central take the imperfect substitutability or energy structure changes into consideration. We also discuss the difficulties and deficiencies when using Divisia aggregate approach.

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Bibliographic Info

Article provided by Elsevier in its journal Renewable and Sustainable Energy Reviews.

Volume (Year): 16 (2012)
Issue (Month): 7 ()
Pages: 4537-4542

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Handle: RePEc:eee:rensus:v:16:y:2012:i:7:p:4537-4542

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Related research

Keywords: Energy aggregation; Energy efficiency; Elasticity of substitution;

References

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  1. Bert M. Balk, 2005. "Divisia price and quantity indices: 80 years after," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 59(2), pages 119-158.
  2. Stern, David I., 2009. "Energy quality," MPRA Paper 16857, University Library of Munich, Germany.
  3. Zha, Donglan & Zhou, Dequn & Ding, Ning, 2009. "The contribution degree of sub-sectors to structure effect and intensity effects on industry energy intensity in China from 1993 to 2003," Renewable and Sustainable Energy Reviews, Elsevier, vol. 13(4), pages 895-902, May.
  4. Chen, G.Q. & Chen, B., 2007. "Resource analysis of the Chinese society 1980-2002 based on exergy--Part 1: Fossil fuels and energy minerals," Energy Policy, Elsevier, vol. 35(4), pages 2038-2050, April.
  5. Cellura, Maurizio & Longo, Sonia & Mistretta, Marina, 2012. "Application of the Structural Decomposition Analysis to assess the indirect energy consumption and air emission changes related to Italian households consumption," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(2), pages 1135-1145.
  6. Chen, G.Q. & Chen, B., 2007. "Resource analysis of the Chinese society 1980-2002 based on energy--Part 5: Resource structure and intensity," Energy Policy, Elsevier, vol. 35(4), pages 2087-2095, April.
  7. Liao, Hua & Fan, Ying & Wei, Yi-Ming, 2007. "What induced China's energy intensity to fluctuate: 1997-2006?," Energy Policy, Elsevier, vol. 35(9), pages 4640-4649, September.
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Cited by:
  1. Chen, Zhan-Ming, 2014. "Inflationary effect of coal price change on the Chinese economy," Applied Energy, Elsevier, vol. 114(C), pages 301-309.

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