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Economy-wide Estimates of Rebound Effects: Evidence from Panel Data

Morakinyo O. Adetutu, Anthony J. Glass, and Thomas G. Weyman-Jones

Year: 2016
Volume: Volume 37
Number: Number 3
DOI: 10.5547/01956574.37.3.made
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Abstract:
Energy consumption and greenhouse emissions across many countries have increased overtime despite widespread energy efficiency improvements. One explanation offered in the literature is the rebound effect (RE), however there is a debate about its magnitude and the appropriate model for estimating it. Using a combined stochastic frontier analysis (SFA) and two-stage dynamic panel data approach, we explore these two issues of magnitude and model for 55 countries over the period 1980 to 2010. Our central estimates indicate that in the short-run, 100% energy efficiency improvement is followed by 90% rebound in energy consumption, but in the long-run it leads to a 136% decrease in energy consumption. Overall, our estimated cross-country RE magnitudes indicate the need to consider or account for RE when energy forecasts and policy measures are derived from potential energy efficiency savings.



Cost Efficiency Analysis of Electricity Distribution

Kamil Makiela and Jacek Osiewalski

Year: 2018
Volume: Volume 39
Number: Number 4
DOI: 10.5547/01956574.39.4.kmak
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Abstract:
This paper discusses a Bayesian approach to analyzing cost efficiency of Distribution System Operators when model specification and variable selection are difficult to determine. Bayesian model selection and inference pooling techniques are adopted in a stochastic frontier analysis to mitigate the problem of model uncertainty. Adequacy of a given specification is judged by its posterior probability, which makes the benchmarking process not only more transparent but also much more objective. The proposed methodology is applied to one of Polish Distribution System Operators. We find that variable selection plays an important role and models, which are the best at describing the data, are rather parsimonious. They rely on just a few variables determining the observed cost. However, these models also show relatively high average efficiency scores among analyzed objects.



Impact of High-Powered Incentive Regulations on Efficiency and Productivity Growth of Norwegian Electricity Utilities

Livingstone Senyonga and Olvar Bergland

Year: 2018
Volume: Volume 39
Number: Number 5
DOI: 10.5547/01956574.39.5.lsen
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Abstract:
This study examines the hypothesis that changes to high-powered incentive regulations have a positive efficiency and productivity growth effects in a regulated electricity distribution industry. We estimate an input distance function using the stochastic frontier analysis method to compute technical efficiency scores for 121 Norwegian utilities over the period 2004-2012. We explore sources of productivity growth by parametrically decomposing the Malmquist productivity index into efficiency change, technical change, and scale change. Unlike previous studies, we examine the difference in performance across two regulatory regimes: yardstick competition (2007-2012) and RPI-X incentive regulation (2004-2006). Results show significant efficiency and productivity growth improvements with embodied technical change as the main driver.Keywords: Yardstick competition, Productivity growth, Efficiency, Input distance function, Stochastic frontier analysis, Electricity distribution, True fixed effects model



Can China's Energy Intensity Constraint Policy Promote Total Factor Energy Efficiency? Evidence from the Industrial Sector

Shuai Shao, Zhenbing Yang, Lili Yang, and Shuang Ma

Year: 2019
Volume: Volume 40
Number: Number 4
DOI: 10.5547/01956574.40.4.ssha
View Abstract

Abstract:
As part of the country's efforts to achieve green development, China implemented a mandatory energy intensity reduction target in its 11th "Five-Year Plan (FYP)" in 2006, and then began to roll out a series of relevant measures. However, existing studies have paid little attention to the actual effects of China's energy intensity constraint policy (EICP). In this paper, using panel data from China's 36 industrial sub-sectors covering the years from 2001 to 2014, we adopt the difference-in-differences (DID) method to investigate for the first time the EICP's (marginal) effect on total factor energy efficiency growth (TFEEG). We also estimate the superposition effect caused by the introduction of a carbon intensity constraint policy (CICP) on TFEEG, through the difference-in-difference-in-differences (DDD) strategy. Finally, using counterfactual, re-grouping and quasi-DID analyses, we conduct a series of robustness tests of the empirical results. The results show that the TFEEG in China's industrial sector experienced an overall declining trend between 2001 and 2014. The implementation of the EICP has had a significantly negative effect on the improvement of the TFEEG of sub-sectors with higher levels of energy intensity. After the implementation of the EICP, the TFEEG rate of these sub-sectors declined by 4.31%, compared to the rate of the other sub-sectors. The results of a series of robustness tests indicate that such a negative effect is credible. The marginal effect in the first two years after the implementation of the EICP was significantly negative, while the superposition effect of the introduction of a CICP on industrial TFEEG remained negative. Thus, the Chinese government should reinforce the implementation of energy-saving policies by introducing additional market-oriented auxiliary policies to propel the green development transformation of China's industrial sector.



Effects of Ownership and Business Portfolio on Production in the Oil and Gas Industry

Binlei Gong

Year: 2020
Volume: Volume 41
Number: Number 1
DOI: 10.5547/01956574.41.1.bgon
View Abstract

Abstract:
The Shale Revolution and the two oil crises have overwhelmingly reshaped the petroleum industry in the last decade. Heterogeneity across companies is also a big concern as many multi-product (oil and gas) and multi-segment (upstream and downstream) firms exist, both state-owned and privately-owned. Therefore, a varying coefficient model is introduced to capture the effects of time, ownership, and business portfolio on both productivity and input elasticities to closely observe the fundamental transition, which is further interpreted using decomposition equations. The shape of the production function is indeed firm- and time-variant, which confirms the transition of the industry and the necessity of using the varying coefficient model. The average productivity achieved tremendous growth after the 2007-2009 financial crisis but lost momentum following the 2014 price crash. Finally, privately-owned, gas production and downstream activities are more productive than state-owned, oil production and upstream activities, respectively. Some policy implications are also discussed.



Carbon Tax and Energy Intensity: Assessing the Channels of Impact using UK Microdata

Morakinyo O. Adetutu, Kayode A. Odusanya, and Thomas G. Weyman-Jones

Year: 2020
Volume: Volume 41
Number: Number 2
DOI: 10.5547/01956574.41.2.made
View Abstract

Abstract:
Prior empirical studies indicate that carbon taxes have a negative impact on energy intensity, yet, the literature is unable to shed much light on the channels through which a moderate carbon tax reduces industrial energy intensity. Using a two-stage econometric approach, we provide the first comprehensive analysis of the five components of the energy intensity gain (EIG) arising from the UK climate change levy (CCL). First, we propose an EIG decomposition based on a stochastic energy cost frontier and a confidential panel of UK manufacturing plants covering 2001-2006. In the second stage, we identify the impact of the CCL on EIG components using an instrumental variable (IV) approach that addresses the endogeneity of the carbon tax rules. Factor substitution and technological progress are the dominant firm responses to the CCL, while energy efficiency is surprisingly the least responsive component. Our findings underscore the challenge arising from overreliance on narrow energy policy objectives such as energy efficiency improvements, suggesting that a broader policy approach aimed at improving overall firm resource allocation might be more appropriate.



Transient and Persistent Energy Efficiency in the Wastewater Sector based on Economic Foundations

Stefano Longo, Mona Chitnis, Miguel Mauricio-Iglesias, Almudena Hospido

Year: 2020
Volume: Volume 41
Number: Number 6
DOI: 10.5547/01956574.41.6.slon
View Abstract

Abstract:
Given the increasing importance of the wastewater sector in terms of energy usage, the understanding of the level of energy efficiency of wastewater treatment plants (WWTPs) is useful to both the industry itself as well as policy makers. Here, based on economic foundations, we apply a Stochastic Frontier Analysis (SFA) approach for energy demand modelling to estimate energy efficiency in the wastewater sector. Using specific SFA models and panel data from 183 Swiss WWTPs over the period 2001 to 2015, the paper illustrates that distinguishing between persistent and transient inefficiency is essential to deduce appropriate energy efficiency diagnosis in WWTPs. In this respect, persistent energy inefficiency is found to be more severe than transient energy inefficiency. Furthermore, it is shown that the age of the equipment influences the demand for energy and the energy savings due to technological innovation are quantified. Finally, economies of output density and scale are estimated demonstrating that for plants operating below optimal scale significant energy savings can be achieved if plants would be operated at higher size. Moreover, our analysis reveals also that for plants larger than 100,000 Population Equivalent, at least from an energy efficiency point of view, it would be no more beneficial to increase their scale.





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