A meta-stochastic frontier analysis for energy efficiency of regions in Japan

Abstract

After the Fukushima Daiichi nuclear disaster on March 11, 2011, energy conservation has been an urgent issue in Japan. After the accident, all 54 nuclear reactors in Japan had been shut down. Nowadays, due to newly introduced more stringent regulation and prospect from the public, only three nuclear plants are at work on March, 2016. Although a new feed-in tariff to promote renewable energy was introduced in July 2012, it cannot fully make up for the shortfall resulting from the cessation of nuclear power generation. Improving energy efficiency is a feasible solution to the current energy issues in Japan. To this end, we need detailed information what factors affect energy inefficiency.Technological modernization is one of the key factors for success in improving productivity and environmental management (Yang et al. 2017). In general, a decision-making unit (DMU) can use not all available technology, but only specific technology given the current physical, social, and human capitals. Policy-makers should distinguish two inefficiencies: One is attributed to operating failures under the existing technology and the other is attributed to an inability to access the best available technology. The former can be resolved by the DMU's effort given the circumstance, but the latter cannot be mitigated without investment to state-of-the-art equipment and management system. AbstractThis paper measures the metafrontier total-factor energy efficiency (TFEE) of 47 regions in Japan for the period 1996-2008, using the stochastic frontier analysis (SFA). The twostep output-oriented SFA approach by Huang et al. (J Prod Anal 42:241-254, 2014) is followed but converted into a two-step input-oriented SFA approach. The metafrontier TFEE is defined as a product of the group TFEE and the technological gap ratio (TGR). The mean group TFEE is smaller than the mean TGR for both the groups, which shows that the energy inefficiency in Japanese regions with respect to the metafrontier comes from primarily operating inefficiency, rather technology gap. The mean metafrontier TFEE of the metropolitan areas is smaller than that of rural areas, implying that the former is energy inefficient than the latter. The mean TGR of the metropolitan areas is also smaller than that of rural areas, implying that many Japanese regions with major cities are far below the metafrontier and still have much room for energy savings.

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