Measurement of Energy Efficiency Based on Economic Foundations

38 Pages Posted: 6 Jun 2015

See all articles by Massimo Filippini

Massimo Filippini

ETH Zürich; University of Lugano - Faculty of Economics

Lester C. Hunt

University of Surrey - Department of Economics

Date Written: June 5, 2015

Abstract

Energy efficiency policy is seen as a very important activity by almost all policy makers. In practical energy policy analysis, the typical indicator used as a proxy for energy efficiency is energy intensity. However, this simple indicator is not necessarily an accurate measure given changes in energy intensity are a function of changes in several factors as well as ‘true’ energy efficiency; hence, it is difficult to make conclusions for energy policy based upon simple energy intensity measures. Related to this, some published academic papers over the last few years have attempted to use empirical methods to measure the efficient use of energy based on the economic theory of production. However, these studies do not generally provide a systematic discussion of the theoretical basis nor the possible parametric empirical approaches that are available for estimating the level of energy efficiency. The objective of this paper, therefore, is to sketch out and explain from an economic perspective the theoretical framework as well as the empirical methods for measuring the level of energy efficiency. Additionally, in the second part of the paper, some of the empirical studies that have attempted to measure the energy efficiency using such an economics approach are summarised and discussed.

Keywords: economic foundations of energy efficiency, energy demand, stochastic frontier analysis

JEL Classification: D, D2, Q, Q4, Q5

Suggested Citation

Filippini, Massimo and Hunt, Lester C., Measurement of Energy Efficiency Based on Economic Foundations (June 5, 2015). Available at SSRN: https://ssrn.com/abstract=2614927 or http://dx.doi.org/10.2139/ssrn.2614927

Massimo Filippini (Contact Author)

ETH Zürich ( email )

ETH-Zentrum
CH-8092 Zurich
Switzerland

University of Lugano - Faculty of Economics ( email )

Via Giuseppe Buffi 13
CH-6900 Lugano, CH-6904
Switzerland

Lester C. Hunt

University of Surrey - Department of Economics ( email )

Guildford
Surrey GU2 7XH
United Kingdom

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