Convergence of Energy Efficiency in OECD Countries

Abstract

Studying energy efficiency is becoming a common trend in energy economics research recently. This chapter aims to explore the stochastic convergence of energy efficiency across 27 OECD countries from 1971 to 2018. For this aim, this chapter calculates the energy efficiency index based on the Fisher's Ideal index. Then, this chapter utilizes the panel stationarity test with sharp and smooth breaks introduced by Bahmani-Oskooee et al. There are two main advantages of this methodology over the conventional panel stationarity tests. First, it considers the cross-sectional dependency in the series. Second, the test combines both sharp and smooth structural breaks in the series. The empirical results of this study state that the energy efficiency index does not converge to the OECD average for 1971-2018. This result shows that the dissemination of the technology is limited across OECD countries. The empirical result of this study provides significant policy implications for energy and environmental issues.