Measuring energy performance with sectoral heterogeneity: A non-parametric frontier approach

Abstract

Evaluating economy-wide energy performance is an integral part of assessing the effectiveness of a country's energy efficiency policy. Non-parametric frontier approach has been widely used by researchers for such a purpose. This paper proposes an extended non-parametric frontier approach to studying economy-wide energy efficiency and productivity performances by accounting for sectoral heterogeneity. Relevant techniques in index number theory are incorporated to quantify the driving forces behind changes in the economy-wide energy productivity index. The proposed approach facilitates flexible modelling of different sectors' production processes, and helps to examine sectors' impact on the aggregate energy performance. A case study of China's economy-wide energy efficiency and productivity performances in its 11th five-year plan period (2006–2010) is presented. It is found that sectoral heterogeneities in terms of energy performance are significant in China. Meanwhile, China's economy-wide energy productivity increased slightly during the study period, mainly driven by the technical efficiency improvement. A number of other findings have also been reported.