A Meta Stochastic Frontier Analysis of Industry-level Energy Efficiency in OECD Countries

This research follows the two step output stochastic frontier analysis (SFA) approach of Huang et al. (2014), but instead applies the panel data input SFA model proposed of Honma and Hu (2014) to estimate the total factor energy efficiency (TFEE) of industries across countries in different years. The metafrontier TFEE denotes a product of the group TFEE and the technological gap ratio (TGR). Using four inputs (labor, capital stock, energy, and non energy intermediate inputs) and one output (value added), we take economic data and purchasing power parity (PPP) data from EU KLEMS (2008). The energy and economic dataset contains seven industries in 14 developed countries for the period 1995 2005. The European continental countries have a higher technical level in their energy use for the chemical and petrochemical industries, since their TGR scores are generally higher than those in other countries. These countries also have a higher average metafrontier energy efficiency for the chemical industry and perform better than the other (non European continental) group with respect to technology gap ratios for most industries, except for the iron, steel, and non ferrous metals industries. The European continental group performs better than the other group with respect to metafrontier energy efficiency for all seven industries.