Energy and environment efficiency of industry and its productivity effect

doi:10.1016/j.jclepro.2016.06.042

Journal of Cleaner Production

Volume 135, 1 November 2016, Pages 184-193

https://doi.org/10.1016/j.jclepro.2016.06.042 Get rights and content

Abstract

It is crucial for the industrial sector to achieve the multifaceted or composite efficiency of energy savings and the minimization of environmental wastes in the present circumstances of worsening global warming and resource depletion. Furthermore, the positive effects of composite energy efficiency on sustainable growth could lead to practical questions for the industrial sector, to ensure that it consistently uses its energy and resources effectively. The present research examines the positive contribution of this composite efficiency to the growth of final outputs in this sector, using the two-stage method of Malmquist efficiency analysis (MEA) and the linear regression of panel data from about 154 Korean industries from 2010 to 2012. The results found that composite efficiency and changes in the production factors have positive impacts on industrial productivity. In particular, relative efficiency has a positive influence on productivity, but technical efficiency does not have a significant impact. Our findings suggest that industries may voluntarily make efforts to improve their use of energy resources, but they also need to invest in energy technologies and develop efficient production structures, with the help of public policies.

Introduction

The acceleration of global warming and repetitive economic recessions signify that economic subjects must transform their rapid economic growth, based on input-intensiveness, into sustainable development with environmental protection. In particular, two energy crises—the crude oil shock in 1973, and the disaster of the Fukushima nuclear power plant in 2011—raise an insecurity problem that is associated with dependence on specific energy sources, and the systemic issue of environmental destruction from the excessive consumption of energy (Lee et al., 2016).

The global industrial sector consumes the largest amount of energy of all other social sectors (Abdelaziz et al., 2011), and Korea's industrial sector's energy consumption per GDP, and its consumption of petroleum, electricity, and coal, has continuously increased (KEEI, 2014). This high level of energy consumption and dependence on several resources can imply industrial fragility of the energy sector, which would be one of the fundamental uncertainties likely to harm the stable economic growth of industries (Acemoglu et al., 2015, Aldasoro and Angeloni, 2015). Furthermore, excessive energy consumption and its side effects, which include the emission of greenhouse gases (GHGs) and environmental destruction, can argue for industry's efficient use of energy and the environment for its self-sustainable development.

The industrial sector needs to acquire the multifaceted or composite efficiency of energy savings and the minimization of energy wastes, in response to increasing social concerns amid the recent energy crises and global climate change. Korea has been one of the top-ten heaviest energy-consuming countries in the world since 2012 (Lim et al., 2009), and the industrial sector has practical incentives for moving to composite efficiency, due to the fact that this sector has greater energy utilization than the rest of Korea's total energy consumption (Kim et al., 2011). In addition, the economic rationale for composite efficiency in this sector could be critical, because of two historic facts: World industries implemented the efficient expenditure of energy sources after the crude oil shock in the 1970s (Taylor et al., 2010) and Korean industries activated energy savings after the east Asian financial crisis in 1997 (Lim et al., 2009, Oh et al., 2010). Therefore, this research raises the following two research questions: Does the composite efficiency of energy and the environment contribute to the economic growth of industries? With regard to relative and technical efficiencies, which type of efficiency can influence industrial productivity?

The present study measured the composite energy and environmental efficiency (hereafter “composite efficiency”) using Malmquist efficiency analysis (MEA), and a transactional dataset of 154 Korean industries from 2010 to 2012. This research investigated the positive contribution effect of composite efficiency to the growth rate of final outputs in the industries with feasible generalized least squares (FGLS), and other linear regression analyses, of panel data. Our analyses found that composite efficiency and production factors have a positive impact on industrial productivity. Of composite efficiency, relative efficiency also has a positive influence on productivity, but technical efficiency does not have a significant effect on the growth rate of the final outputs of industries. This positive relationship between composite efficiency and productivity can imply that industries have an economic incentive to voluntarily make improvements in efficiency. However, since technical efficiency does not have an impact, industries can be required to invest in the R & D of energy technologies and innovative changes in the energy-relevant behavior of supply and demand under the sustainable development of the energy trilemma's supply security, economically affordable pricing, and environmental soundness (Ang et al., 2015).

Section snippets

Literature review and hypotheses development

The sustainable growth of the society naturally requires industries to achieve the multifaceted efficiency of energy consumption and environmental protection. The historic relationships between the outputs of economic development and the inputs of energy consumption in many countries have empirically shown the environmental Kuznets curve of inverted u-shape distribution, which national energy consumption has increased with its outputs, but the volumes consumed have decreased at a certain level

Overview

This research uses the two-stage MEA and FGLS, to measure Korean industries' composite efficiency, and the contribution of efficiency to industrial productivity (Fig. 1). MEA is used to calculate the industrial efficiency of energy and the environment by analyzing the relationship between two dependent variables and three independent variables as shown in Table 1. These factors of intermediate industrial outputs, $C O_{2}$ energy consumption, and non-energy inputs seem to be the variables

Industrial composite efficiency of energy and environment

This research acquired the composite energy and environmental efficiency of 154 industries from 2010 to 2011, and 2011 to 2012, after implementing the first-stage analysis of MEA. The descriptive statistics and test results of the normal distribution indicate that the two dependent variables and the three independent variables do not follow the normal distribution (Table 2). MEA appears to be appropriate for the non-parametric analysis, which, unlike parametric analysis, does not require the

Discussion

This study implemented a two-stage analysis of MEA-regression, and used the results to answer two questions: Does composite efficiency contribute to industrial productivity? Which type of efficiency can influence the industrial productivity between relative and technical efficiency? Our results suggest that the composite and relative efficiencies of industries have significantly positive influences on the growth of their final output year-on-year. The production factors also have similar

Conclusion

This study investigated the productivity effect of the composite energy and environmental efficiency using the two-stage analysis of Malmquist efficiency analysis and the linear regression of panel data, with a dataset of 154 Korean industries from 2010 to 2012. Our results show that composite efficiency, relative efficiency and production factors can have positive impacts on the growth rate of final industrial outputs.

The positive influence of composite efficiency on industrial productivity

Acknowledgement

This work was supported by the National Research Foundation of Korea Grant funded by the Korean Government (2014S1A3A2044459). We appreciate three anonymous reviewers' and editor's valuable comments.

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Energy and environment efficiency of industry and its productivity effect

Abstract

Introduction

Section snippets

Literature review and hypotheses development

Overview

Industrial composite efficiency of energy and environment

Discussion

Conclusion

Acknowledgement

Renew. Sust. Energy Rev.

Renew. Sustain. Energy Rev.

Energy Econ.

Appl. Energy

Appl. Energy

J. Clean. Prod.

Omega Int. J. Manag. Sci.

Res. Policy

Energy

Ecol. Econ.

Eur. J. Oper. Res.

J. Clean. Prod.

Energy Econ.

Telemat. Inf.

J. Econ. Dyn. Control

Energy Policy

Energy Econ.

J. Clean. Prod.

Energy Policy

Energy Econ.

Omega Int. J. Manag. Sci.

Energy Policy

Renew. Sust. Energy Rev.

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Econ. Lett.

Eur. J. Oper. Res.

Eur. J. Oper. Res.

J. Clean. Prod.

Eur. J. Oper. Res.

Eur. J. Oper. Res.