The Impact Of Technological Innovation On Energy Efficiency

Over the past century,global energy consumption has risen exponentially,propelled by the growing population and economic growth,with energy use accounting for approximately67% of global anthropogenic greenhouse gas emissions.Therefore,managing the growth in energy demand is an essential component of climate change mitigation.Efficiency in energy use is considered the best and cost-effective means of mitigating pollution from energy consumption.Therefore,countries have strategically considered some energy efficiency measures in their national policies.But measuring energy efficiency continues to be a daunting and complicated task,and so researchers and policymakers often resort to an indirect indicator such as energy intensity.To contribute to providing a reliable measure of energy efficiency,this study measures economy-wide energy efficiency for several panels of countries.To our knowledge,few scholars have estimated economy-wide energy efficiency using the Stochastic Frontier Analysis(SFA).More importantly,a common limitation or problem observed in the previous SFA models that estimate economy-wide energy efficiency is the failure to include undesirable outputs in the production process.The literature shows that the energy efficiency estimates are biased if the only desirable output is considered in the model.Thus,by adopting both the energy demand function(EDF)and Shephard energy distance function(SEDF)approach,the study builds on the SFA model by providing a reliable measure of economywide energy efficiency,first for a panel of 71 countries(both developing and developed)between 1990 and 2014,second for a panel of 18 developing countries between 1995 to2017,third for a panel of 24 developed countries between 1985–2013,and finally for a panel of 48 countries in the belt and road region.Aside,defining a better energy efficiency measure,the growing concern among researchers is what promotes energy efficiency? Technology is one of such important factors assumed to influence energy efficiency.But the empirical literature on the concrete effects of technological innovation(especially green technology)is relatively modest.More importantly,the investigation of the various technical factors that influence energy efficiency is often neglected in the literature.To this end,while estimating the economy-wide energy efficiency,the study contributes to the growing body of literature on determinants of energy efficiency by simultaneously investigating multiple technological factors on energy efficiency.In modeling these issues,first,a parametric stochastic frontier approach built on SEDF is used to assess the effects of green technologies on energy efficiency in a panel of 71 countries between 1990 and 2014.Second,the study investigates the impact of foreign technology(measured as imported machinery from OECD and non-OECD countries)and its corresponding research and development(R&D)spillover on energy efficiency performance in 18 sub-Saharan Africa(SSA)countries from 1995-2017.Third,the study investigates the effect of various technological factors,including successful invention efforts of a neighboring country on a country's energy efficiency performance using patent data for 24 developed countries between the periods 1985–2013.Finally,using a newly developed panel data,stochastic frontier model the study provides a complete picture of the level of persistent,transient,and total energy efficiency estimates from a cross country perspective for a panel of48 countries in the Belt and Road region during the period 1990–2015.The uniqueness and the innovativeness of this study are illustrated first through the investigation of various broad panel countries from all over the world,allowing a deeper and comparative assessment of energy efficiency performance across several countries for the first time.To improve the econometric modeling,the study made a unique contribution to the SFA energy efficiency model by applying a novel approach where both desirable and undesirable outputs are incorporated into the production framework.It is often ignored in the SFA approach because the modeling fails in the case of multiple outputs.Another benefit of this study should be its ability to capture the multiplicity of effects of the various technological variables on energy efficiency,something the previous literature did not consider.Thus,the study contributes to the literature by providing pieces of evidence on the effects of multiple technological factors on energy efficiency.In terms of scope,it is broader in this study as the various effects of the different technologies have been captured,improving the model identification in terms of parameter estimates and interpretation of what type of technology can improve energy efficiency or not.The study reveals several interesting results.First,about the energy efficiency measure,the results show an upward,but an erratic trend,while energy efficiency still varies widely across the countries,with high-income countries performing better than the lower-income countries,suggesting that there is more room for energy efficiency improvement globally.But in general,the energy efficiency path for the developing countries appears to be rising fast to converge with the developed countries.Second,with regards to the persistent and transient energy efficiency levels,a low level of persistent energy efficiencies compared to high transient efficiencies is observed in countries along the belt and road region.Third,concerning the factors influencing energy efficiency,the study reveals that domestic green innovation positively affects energy efficiency.Furthermore,this study reveals that the presence of foreign technology among developed countries improves energy efficiency.But,for the developing SSA countries,the study shows that R&D spillover embodied in foreign technology does not influence energy efficiency.The role of geographic distance is considered in building the international knowledge stock,and the result demonstrates that increased physical distance is accompanied by a smaller probability of spillover of foreign technology.In addition,the study reveals that technology imported from OECD countries improves energy efficiency in developing SSA countries,while the same cannot be said for imports from non-OECD countries.The conclusion drawn from this study suggests that while technological progress is key to improving global energy efficiency,the effects of various technological factors on energy efficiency differ.For instance,the spillover of foreign innovations among developed innovative countries seems to increase energy efficiency while spillover of foreign innovations in the form of import of machinery and its associated R&D spillover to developing countries seems not to have any effect on the energy efficiency of these countries.Like other studies,the level of absorptive capacity and internal R&D seems to play a role here.Also,the very low persistent energy efficiencies observed in countries along the belt and road region imply that government policies on energy efficiency should target changing long-term behaviors instead of short-term behaviors.