Economy-wide energy efficiency assesment: a cross-Country Comparison Study in Europe

Abstract

Energy efficiency has become one of the “twin pillars” of sustainable energy policy along with renewable energy. Improvements in energy efficiency can reduce the need for investment in energy infrastructure, cut fuel costs, increase competitiveness, increase energy security by decreasing the reliance on imported fossil fuels while at the same time help to save the environment by reducing greenhouse gases emissions and local air pollution. Being an energy deficient developing country whose import reliability reached almost 75% in 2008 and whose current account deficit is based primarily on energy imports, Turkey is in great need of an accurate energy efficiency strategy. This study analyzes economy wide energy efficiency performance of Turkey by means of cross-country comparison, benchmarking with European countries for the period of 1995-2007. The nonparametric linear model used in the study considers capital, labor and total R&D expenditure as non-energy inputs, oil, gas, solid fuels, nuclear energy and renewable energy consumption as energy inputs, and considers GDP as the desirable output and greenhouse gases emissions as the undesirable output. The study also aims to trace energy efficiency changes over time by evaluating the contributing factors such as activity mix of the economy, sources of primary energy-use, share of renewables and changes in energy prices. The results indicate an improvement in energy efficiency over time but the efficiency scores and their improvement pace is considerably lower when environmental factors are taken into account. The findings also reveal that Turkey emerges as one of the energy efficient countries among 32 European countries. The empirical evidence also supports that energy mix, the activity mix of the economy and energy prices have significant effects on energy efficiency.