Discerning the factors explaining the change in energy efficiency

Abstract

Due to the high rates of energy consumption and its impact on environment over the last decades, policy decision-makers are increasingly recognising the need to take actions that allow to address problems associated with the deployment of non-renewable resources and climate changes. One field of action has been the promotion of measures that contribute to improve energy efficiency of countries. The purpose of this study is to identify the main factors explaining changes in energy efficiency applying the multiplicative Log Mean Divisia Index decomposition method for a set of countries (Portugal, UK, Brazil and China) with different socio-economic background and energy mix. The results show that overall energy efficiency trends display different patterns between countries and the same happens within each country from a sectoral perspective. Major drivers of improvements of overall energy efficiency were the intensity effect and the affluence effect, whereas the driver that hampered those improvements was the energy consumption per capita. Some policy implications derived from the results achieved are: policy decision-makers should support measures that promote the adoption of energy-saving technologies resulting from new technological developments; policy measures should be directed to raise awareness of end-users regarding energy efficiency and energy conservation efforts; policy measures promoting economic growth through the development (or expansion) of sectors of activity that consume less energy can also be implemented; finally, policy instruments may also be used to reduce the costs of implementing energy efficiency and energy-saving measures to households and firms.