Determinants of energy productivity in 39 countries: An empirical investigation

- Sector-level energy productivity improvements were the primary factor behind economy-wide gains.
- Structural economic shifts played a lessor role in aggregate energy productivity improvements.
- Demographically and economically similar nations have similar levels of energy productivity and rates of improvement.
- Nations undergoing economic liberalization have higher rates of improvement but are less energy productive than developed nations.
- Higher levels of income and higher energy prices are associated with greater energy productivity improvements.

This paper uses three types of analysis to investigate the drivers of energy productivity changes occurring in 39 countries during 1995-2009. We find that increases in sectoral energy productivity were the primary driver behind economy-wide energy productivity improvements. Structural economic shifts away from industry and towards service-oriented sectors played a lesser role in aggregate energy productivity improvements. Nations with similar demographic and economic characteristics showed similar levels of energy productivity and rates of improvement. Most notably, former communist countries and nations undergoing economic liberalization exhibited the highest rate of improvement-although they are still less energy productive than developed nations. Moreover, the econometric analysis reinforces the long-standing hypothesis that higher levels of income per capita and higher energy prices are associated with greater energy productivity, while a greater share of output from industry is associated with lower energy productivity levels. In particular, higher energy prices and income levels are associated with improvements in sectoral energy productivity.