Measuring Non-residential Electric Energy Efficiency in the Portuguese Economy

This paper focuses on efficiency of electricity consumption in the Portuguese productive sector using stochastic frontier analysis. It accounts for the rebound effect - the extent to which energy efficiency savings are re-spent on energy consumption - since this can significantly alter the interpretation of the data on measured energy efficiency. Conventional stochastic frontier analysis does not allow for autoregressive errors in estimation and the measured efficiency scores can be seriously biased in the presence of error terms that are not identically and independently distributed. Therefore we allow for autoregressive errors by extending the generalized least squares estimator to include an error components model of stochastic frontier analysis.