Material demand and material efficiency for sustainable development in the European Union countries: A stochastic frontier analysis

Materials are of great importance as they are fundamentally integrated into many different critical topics, including green transition, technological progress, industrial emissions, and supply chains. Therefore, the amount of materials we demand and employ in the production process or how efficiently we use them become highly crucial. In this paper, we study the emerging role of materials with a special focus on the key role of material efficiency (ME) in climate mitigation. To this end, we empirically investigate the main determinant of material demand and evaluate the ME performance in the European Union (EU) countries over the period of 1995–2019 based on a four‐component Stochastic Frontier Analysis (SFA) panel data approach that separates unobserved country effects from persistent and transient inefficiency. We obtain the following outcomes. First, material demand function estimates reveal that economic growth and energy consumption are the main drivers of domestic material consumption, highlighting the need for promoting sustainable energy and economic growth. Second, although the SFA‐based ME scores significantly vary across countries, transient inefficiency is the main source of overall inefficiency for most countries, suggesting that there is considerable potential for improvement in ME. While Finland, Sweden, Denmark, Bulgaria, Cyprus, France, and Slovenia improve their ME performance over time, the ME score of some other countries, such as Ireland, Portugal, Italy, Spain, and the Slovak Republic reveal an opposite outcome. Third, the results show that material intensity is not always a good proxy for ME.