Measuring economy-wide energy efficiency performance: A parametric frontier approach

This paper proposes a parametric frontier approach to estimating economy-wide energy efficiency performance from a production efficiency point of view. It uses the Shephard energy distance function to define an energy efficiency index and adopts the stochastic frontier analysis technique to estimate the index. A case study of measuring the economy-wide energy efficiency performance of a sample of OECD countries using the proposed approach is presented. It is found that the proposed parametric frontier approach has higher discriminating power in energy efficiency performance measurement compared to its nonparametric frontier counterparts.