Energy intensity, target level of energy intensity, and room for improvement in energy intensity: An application to the study of regions in the EU

While the previous literature shows that a decline in energy intensity represents an improvement in energy use efficiency, it does not provide a target level of energy intensity, nor what room for improvement in terms of energy intensity could entail. This study establishes an indicator of such room for improvement in terms of energy intensity by measuring the difference between the target level of energy intensity and the actual energy intensity and thereby monitors energy use efficiency. The traditional indicator of energy intensity, defined as energy use over GDP, mainly estimates energy use efficiency, but is a partial effect between the energy input and GDP output. However, our proposed indicator of the room for improvement in terms of energy intensity is the total-factor effects based on the multiple-inputs model. By taking the 27 EU members to investigate their energy use efficiency using the indicator of the room for improvement in terms of energy intensity, this study concludes that an improvement in energy intensity does not fully depend on a decline in energy intensity, and we instead need to confirm whether the room for improvement in terms of energy intensity decreases. This finding is particularly relevant for energy policy-makers.