Friday, September 16, 2011

Energy efficiency in transition: do market-oriented economic reforms matter?

Global climate change and security of supply concerns pose significant challenges for sustainable development in transition and developing economies. Meanwhile, it also largely underscores the need to improve energy efficiency in these countries. Economic theory suggests that market-based economic policies and reforms are crucial for accelerating energy efficiency in developing and transition countries. Hence, this paper analyses the impacts of several market-oriented economic reforms on energy efficiency across the popularly termed ‘transition countries’. The transition economies experienced a rapid marketization process which transformed their economies from central planning towards more market-oriented since the early 1990s. The econometric results from the bias corrected fixed-effect analysis (LSDVC) suggest that both large and small scale privatisation process has been the sole driver of energy efficiency during the two decades of reforms. However, the lack of suitable institutions to support overall-market reforms implies that other market based economic reforms remain ineffective in improving energy efficiency among transition countries.

Keywords: market reforms, energy efficiency, transition countries, institutions

JEL Classification: P28; Q54; C33

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