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 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 privatisation has been a major contributor of energy efficiency improvements during the two decades of reforms. However, the lack of suitable institutions to support overall-market reforms in many transition countries may indicate that other market based economic reforms remain ineffective in improving energy efficiency