Is industrial energy inefficiency transient or persistent? Evidence from Swedish manufacturing

Abstract

Energy inefficiency in production implies that the same level of goods and services could be produced using less energy. The potential energy inefficiency of a firm may be linked to long-term structural rigidities in the production process and/or systematic shortcomings in management (persistent inefficiency), or associated with temporary issues like misallocation of resources (transient inefficiency). Eliminating or mitigating different inefficiencies may require different policy measures. Studies measuring industrial energy inefficiency have mostly focused on overall inefficiencies and have paid little attention to distinctions between the types. The aim of this study was to assess whether energy inefficiency is transient and/or persistent in the Swedish manufacturing industry. I used a firm-level panel dataset covering fourteen industrial sectors from 1997 to 2008 and estimated a stochastic energy demand frontier model. The model included a four-component error term separating persistent and transient inefficiency from unobserved heterogeneity and random noise. I found that both transient and persistent energy inefficiencies exist in most sectors of the Swedish manufacturing industry. Overall, persistent energy inefficiency was larger than transient, but varied considerably in different manufacturing sectors. The results suggest that, generally, energy inefficiencies in the Swedish manufacturing industry were related to structural rigidities connected to technology and/or management practices.

Keywords

Stochastic energy demand frontier model; Persistent and transient energy inefficiency; Energy inefficiency

Published in

Applied Energy
2022, Volume: 309, article number: 118324Publisher: ELSEVIER SCI LTD

SLU Authors

• Lundgren, Tommy

  • Department of Forest Economics, Swedish University of Agricultural Sciences
    
  • Umea University

Sustainable Development Goals

SDG7 Affordable and clean energy


UKÄ Subject classification

Energy Systems


Publication identifier

DOI: https://doi.org/10.1016/j.apenergy.2021.118324

Permanent link to this page (URI)

https://res.slu.se/id/publ/116845