Energy efficiencies of European countries

Improving energy efficiency is essential for sustainable development; therefore, an accurate assessment of energy efficiency is needed to inform policymakers on how to set energy efficiency goals. Using a stochastic frontier model, we estimate energy efficiencies of 44 countries in Europe from 1990 to 2015. Comparing average energy efficiencies across countries among three time periods, 1990 to 1998, 1999 to 2007, and 2008 to 2015, we find the following trends: (1) countries with highest energy efficiency cluster geographically suggesting spillover effects; (2) from the first period to the second period, 67.44% of European countries’ average energy efficiency increased, while only 59.09% of European countries’ average energy efficiencies increased between the first and the third period; (3) gains in energy efficiency may be levelling off or decreasing over time; and (4) when countries face economic downturn, they experience a decrease in energy efficiency signalling possible future decreases in energy efficiency in light of the recent recessions caused by the Covid-19 pandemic. Finally, we compute potential energy savings from a counterfactual experiment in which countries realize full efficiency. The results show substantial energy savings can be obtained by Russia in particular, and less savings can be obtained by countries with smaller populations.