Abstract
This thesis investigates relative aggregate energy efficiency for a panel of 39 developing countries using two stochastic frontier analysis (SFA) approaches over the period 1989 to 2008. The first adopts an energy demand function (EDF) approach and the second an input distance function (IDF) approach. The EDF approach attempts to estimate a measure of the ’true’ aggregate energy efficiency across the panel of countries over the investigated time. Estimates of the ’true’ energy efficiency from this approach approximates the economically efficient use of energy, thus capturing both technical and allocative efficiency. The results from the analysis confirm that energy intensity should not be considered as a de facto standard indicator of energy efficiency. While, by controlling for a range of socio-economic factors, the measurements of energy efficiency obtained by the analysis are deemed more appropriate and hence it is argued that this analysis should be undertaken to avoid potentially misleading advice to policy makers. The energy efficiency results from this first approach are also used to estimate potential reductions in CO2 emissions that might be achieved if countries were to move towards the estimated efficient frontier. Using IDF and two-stage dynamic panel data approach both relative energy efficiency and the so-called rebound effect (RE) for each country in the panel is estimated. Benefits from better technologies evoke behavioural responses by economic agents that can cause that the full benefit of the technological energy efficiency improvements can not be realised. Hence, failing to consider the magnitude of the RE may undermine the emissions reductions designed by policy makers. Especially in the case of developing countries, these effects are expected to be higher because of the unmet energy demand. This is, as far as is known, the first attempt to model energy demand and energy efficiency in a panel of developing countries using both approaches. Moreover, the results from such analysis is arguably particularly relevant in a world dominated by environmental concerns, especially in the aftermath of the Paris agreement in December 2015. the thesis concludes by comparing the different methodologies adopted and the policy messages that come from the analysis.