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Underlying Energy Efficiency in the US

Author

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  • Massimo Filippini

    (Centre for Energy Policy and Economics (cepe), ETH Zurich and Department of Economics, University of Lugano)

  • Lester C Hunt

    (Surrey Energy Economics Centre (SEEC), Department of Economics, University of Surrey)

Abstract

The promotion of US energy efficiency policy is seen as a very important activity. Generally, the level of energy efficiency of a country or state is approximated by energy intensity, commonly calculated as the ratio of energy use to GDP. However, energy intensity is not an accurate proxy for energy efficiency given that changes in energy intensity are a function of changes in several factors including the structure of the economy, climate, efficiency in the use of resources, behaviour, and technical change. The aim of this paper is to measure persistent and transient underlying energy efficiency for the whole economy of 49 states in the US using a stochastic frontier energy demand approach. A total US energy demand frontier function is estimated using panel data for 49 states over the period 1995 to 2009 using two panel data models: the Mundlak version of the random effects model (which estimates the persistent part of the underlying energy efficiency) and the true random effects model (which estimates the transient part of the underlying energy efficiency). The analysis confirms that energy intensity is not a good indicator of underlying energy efficiency whereas, by controlling for a range of economic and other factors, the measure of persistent underlying energy efficiency obtained via the approach adopted here is. Moreover, the estimates show that although for some states EI might give a reasonable indication of a state’s relative UEE this is not the case for all states, California being a prime example.

Suggested Citation

  • Massimo Filippini & Lester C Hunt, 2015. "Underlying Energy Efficiency in the US," Surrey Energy Economics Centre (SEEC), School of Economics Discussion Papers (SEEDS) 150, Surrey Energy Economics Centre (SEEC), School of Economics, University of Surrey.
  • Handle: RePEc:sur:seedps:150
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    2. Arik Levinson, 2017. "Energy Intensity: Prices, Policy, or Composition in US States," Development Working Papers 414, Centro Studi Luca d'Agliano, University of Milano.
    3. Turki Alajmi & Patrick Phelan, 2020. "Modeling and Forecasting End-Use Energy Consumption for Residential Buildings in Kuwait Using a Bottom-Up Approach," Energies, MDPI, vol. 13(8), pages 1-19, April.
    4. Broadstock, David C. & Li, Jiajia & Zhang, Dayong, 2016. "Efficiency snakes and energy ladders: A (meta-)frontier demand analysis of electricity consumption efficiency in Chinese households," Energy Policy, Elsevier, vol. 91(C), pages 383-396.
    5. Filippini, Massimo & Hunt, Lester C., 2015. "Measurement of energy efficiency based on economic foundations," Energy Economics, Elsevier, vol. 52(S1), pages 5-16.
    6. Sergej Vojtovic & Alina Stundziene & Rima Kontautiene, 2018. "The Impact of Socio-Economic Indicators on Sustainable Consumption of Domestic Electricity in Lithuania," Sustainability, MDPI, vol. 10(2), pages 1-21, January.
    7. Mohammad Imdadul Haque, 2021. "Oil price shocks and energy consumption in GCC countries: a system-GMM approach," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 23(6), pages 9336-9351, June.
    8. Aam S. Rusydiana & Nisful Laila & Naelati Tubastuvi & Mohamad Andri Ibrahim & Lina Marlina, 2021. "Energy Efficiency in OIC Countries: SDG 7 Output," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 74-81.
    9. Nisful Laila & Aam S. Rusydiana & Muhamad Iqbal Irfany & Imron HR & Popon Srisusilawati & Muhamad Taqi, 2021. "Energy Economics in Islamic Countries: A Bibliometric Review," International Journal of Energy Economics and Policy, Econjournals, vol. 11(2), pages 88-95.
    10. Macharia, Kenneth Kigundu & Gathiaka, John Kamau & Ngui, Dianah, 2022. "Energy efficiency in the Kenyan manufacturing sector," Energy Policy, Elsevier, vol. 161(C).
    11. Massimo Filippini & Luis Orea, 2014. "Applications of the stochastic frontier approach in Energy Economics," Economics and Business Letters, Oviedo University Press, vol. 3(1), pages 35-42.
    12. Ricardo F. Díaz & Blanca Sanchez-Robles, 2020. "Non-Parametric Analysis of Efficiency: An Application to the Pharmaceutical Industry," Mathematics, MDPI, vol. 8(9), pages 1-27, September.
    13. Massimo Filippini & Lin Zhang, 2013. "Measurement of the “Underlying energy efficiency” in Chinese provinces," CER-ETH Economics working paper series 13/183, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.

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    More about this item

    Keywords

    US total energy demand; efficiency and frontier analysis; persistent and transient underlying energy efficiency.;
    All these keywords.

    JEL classification:

    • D - Microeconomics
    • D2 - Microeconomics - - Production and Organizations
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics

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