Renewable energy and improvement of macroeconomic efficiency

• Main Authors: Taichen Chien, 簡台珍
• Other Authors: Jin-li Hu
• Format: Others
• Language: en_US
• Published: 2007
• Online Access: http://ndltd.ncl.edu.tw/handle/29753814911100058678

博士 === 國立交通大學 === 經營管理研究所 === 95 === This article analyzes the effects of renewable energy on the technical efficiency of forty-five economies during the 2001-2002 period through data envelopment analysis (DEA). In our DEA model, labor, capital stock, and energy consumption are the three inputs and real GDP is the single output. Increasing the use of renewable energy improves an economy’s technical efficiency. Conversely, increasing the input of traditional energy decreases technical efficiency. Compared to non-OECD economies, OECD economies have higher technical efficiency and a higher share of geothermal, solar, tide, and wind fuels in renewable energy. However, non-OECD economies have a higher share of renewable energy in their total energy supply than OECD economies. If the total amount of traditional energy input is fixed, we could increase the technical efficiency of an economy by replacing traditional energy with renewable energy. However, to further increase technical efficiency, both the traditional energy input and renewable energy input should be reduced. The target traditional energy and renewable energy input are estimated by DEA. We calculate the new ratio of renewable energy in total energy after total adjustments and find that the new ratios of renewable energy after total adjustments for each economy are not greater than before adjustments. That means that if we could reduce both traditional energy input and renewable energy input, there is no need to set up national target of renewable energy ratio. The reduction of traditional energy input and renewable energy input could lead to great improvement in technical efficiency. To sum up, to confirm the relationship between the increase of renewables and the increase of GDP, we need to test whether renewables could increase capital formation or trade balance. We show that capital formation is positively influenced by renewables by path analysis. However, the relationship between renewables and energy imports is significantly positive. Further more, renewables do not have significant impact on trade balance. The results show that renewables do not have import substitution effect and could not influence trade balance. Thus, we confirm the positive relationship between renewable energy and GDP through the path of increasing capital formation but not the path of increasing trade balance.