Energy Efficiency for Emerging Market Economies : A Panel Stochastic Frontier Analysis

Abstract: Using the stochastic frontier analysis (SFA) model, this research measures total-factor energy efficiency (TFEE) for 21 emerging market economies (EMEs) by analyzing the panel data collected from World Bank indicators, which stretches from 1990 up to 2015. Capital stock, labor force, carbon dioxide, and gross domestic product (GDP) are input variables and energy use is used as the output variable, while renewable energy consumption and urban population are the environmental variables. The results provided not only the TFEE scores but also the factors behind inefficiency. Note that statistical noise is considered while counting for TFEE. Firstly, Korea, Peru, Thailand, Greece, and Mexico perform better concerning energy efficiency than other countries in Emerging Market Economies (EMEs). Secondary, the energy efficiency scores from 1990 to 2015 of the 21 countries exhibit a gradual upward trend except for Turkey, South Africa, Malaysia, Russia, Brazil, Poland, and Egypt that exhibited technical inefficiencies. Lastly, as it has also been revealed by (Hsiao et al., 2018), the inefficiency estimates, the higher the renewable energy consumption, and urban population the higher TFEE scores.