Market-Related Reforms and Increased Energy Efficiency in Transition Countries: Empirical Evidence

Energy efficiency improvement is considered to be a desirable response to growing climate change and security of energy supply concerns. This paper studies the impacts of a varied set of macro-level market-oriented reforms on economy wide measure of energy efficiency across a group of transition countries. These countries experienced a rapid marketization process, which, since the early 1990s, transformed their economies from central planning towards market-driven models. We use a bias corrected fixed-effect analysis technique to estimate this effect for the 1990-2010 period. The results suggest that reforms aimed at market liberalisation, financial sector and most infrastructure industries drove energy efficiency improvements. We find significant differences in improvements in energy efficiency between transitional Central European and Baltic States, South East Europe ones, and the Commonwealth of Independent States. The reasons for these differences are also discussed.