Energy Intensity, Energy Efficiency and Economic Growth among OECD Nations from 2000 to 2019

Abstract

This study examines the energy intensity (EI), energy efficiency (EE), and economic growth, measured by the type of returns to scale (RTS), of 37 nations in the Organization for Economic Co-operation and Development (OECD) from 2000 to 2019. We apply a non-parametric approach to estimate the three measures from their consumption of four primary energy sources, such as coal, gas, oil, and zero emission (e.g., renewable and nuclear power) as inputs and gross domestic product (GDP) as an output. In this study, we have the two types of efficiency measures over time: window-based and cross-sectional-based measures. Three findings are identified from our empirical study. First, the operationally efficient group, including France, Iceland, Japan, Switzerland, UK, and USA, presented a stable status of full efficiency in the window-based efficiency measure. Iceland and Switzerland were also in the higher efficiency group based on the cross-sectional measure. Their efficiencies were high and stable over the observed periods. Second, zero-carbon-emission (e.g., renewable and nuclear) energies outperformed other energy sources (coal, gas, and oil) in terms of a potentiality of EI/EE improvement. In other words, OECD nations can improve on their EI/EE measures by reducing fuel consumption of coal, gas, and oil while maintaining their high GDP levels. Finally, four industrial nations (France, Japan, UK, and USA) had a status of unity in their EI/EE measures for zero-carbon-emission energies with decreasing RTS. These nations would increase zero-carbon emission for energy consumption to increase GDP while keeping optimal EI/EE because such changes in consumption would not largely affect EI/EE due to their constant RTS status. Iceland showed increasing RTS. The nation may improve the EI level by increasing zero-carbon-emission energy consumption and economic size. The four nations can increase zero-emission energy consumption to achieve further economic growth without observing a large deterioration of EI/EE because it is very close to constant RTS. The examination of RTS provides policy directions for the improvement of EI and EE. Switzerland showed decreasing RTS and may deteriorate the EI/EE by increasing energy consumption and the size of each economy. The remaining countries, whose degree of EI/EE measures was less than unity, showed increasing or decreasing RTS. The examination of RTS provides important implications for energy policy to enhance the degree of EI/ EE.