Abstract
This study aims to explore the impact of energy prices on energy consumption and energy efficiency using industry data for Taiwan over the period of 1982–2011. A frontier-based framework is proposed with a microeconomic foundation to measure energy efficiency and decompose energy consumption into energy utilization and energy wastage in the short and the long run. We learn that the traditional energy efficiency indicators are essentially ambiguous measures. In contrast, the frontier-based framework can focus the measure on energy relatively specifically and capture the essence of a proper efficiency measure more precisely. The empirical analyses reveal that the values of short- and long-run energy efficiency in the Taiwan manufacturing sector are on average 0.6016 and 0.8040, respectively. Moreover, energy utilization is price inelastic in the short run, but in the long run, it is elastic at −0.79. The energy price elasticity of energy wastage in the short run is −0.61, which is somewhat higher than the −0.52 in the long run. The energy price elasticity of energy efficiency in the short run is 0.077 and that in the long run is 0.144. All the energy price elasticities obtained using the frontier-based framework are lower than those obtained using the common framework of the past without distinguishing the heteroscedasticity between the energy utilization and energy wastage.
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Notes
The GRG is an algorithm specifically designed to solve nonlinear programming problems and has been used since the seminal work of Abadie and Carpentier (1969). It conceptually searches for the optimization of a nonlinear objective function under conditions of nonlinear constraint. Even if the constraints are inequalities, it converts the constraints to equalities by bringing in surplus variables. The GRG has been proven to be a superior solution in nonlinear programming due to its robustness and efficiency (Bazaraa et al. 1993). For more detail on the GRG, please refer to Abadie and Carpentier (1969).
In Taiwan, 51.4 % of the energy is consumed by the manufacturing-related sector.
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Chen, KH., Yang, HY., Lee, JM. et al. The impact of energy prices on energy consumption and energy efficiency: evidence from Taiwan. Energy Efficiency 9, 1329–1349 (2016). https://doi.org/10.1007/s12053-016-9426-y
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DOI: https://doi.org/10.1007/s12053-016-9426-y