Investments and Energy Efficiency in Colombian Manufacturing Industries

Abstract

This paper investigates the effects of investments on energy efficiency performance using data from Colombian manufacturing industries. These industries were analysed as a whole and as energy intensive sectors and nonenergy intensive sectors between 1998 and 2005. Using a simple factor demand model, we estimate the structural parameters of the model using both time-series and cross-sectional dimensions of the data, and we include the effect that investments have on energy efficiency in Colombian manufacturing industries. The results showed that in Colombian manufacturing industries overall, as well as in non-energy intensive sectors, the main variables that determine energy efficiency performance are energy prices, machinery and equipment investments and foreign investments. Whereas electricity prices show lower significance levels, investments in research and development (R&D) are not statistically significant. In contrast, for energy intensive sectors, only energy prices and foreign investments are statistically significant. Therefore, these results demonstrate the close relationship between energy prices and investments with respect to energy efficiency improvements in Colombian manufacturing industries. These findings have important implications for policy makers aiming to encourage governments to adopt strategies that combine energy prices and technological change, as well as those policy makers wishing to strengthen foreign investment in order to improve technology development, productivity and energy efficiency in manufacturing industries.

Closing the Energy Efficiency Gap—A Systematic Review of Empirical Articles on Drivers to Energy Efficiency in Manufacturing Firms

“…Energy consumption is measured as energy cost [61], total energy expenditure [62], production output per energy input [63], or as energy intensity [64]. In the studies reviewed here, service output is generally considered constant, and a reduction in energy consumption or energy costs are viewed as increased energy efficiency.…”

“…Examples of such advantages are: replacement of outdated production facilities [28] and increased productivity [22,64] and safety considerations [63]. A study by Ren [25] further found that external limitations through a tight supply of energy (gas feedstock) served as an important driver for the implementation of energy-efficient technologies.…”

“…Demands from the owner are a strong driver for energy efficiency [91]. Particularly, studies conducted in countries with less developed economies show that the presence of foreign ownership [33,63] and foreign investments [64] has a statistically significant and positive impact on energy efficiency.…”

“…The effects of the industry sector have been studied either by comparing the energy efficiency behavior of firms between various sectors [18,48,52], or by comparing energy-intensive and non-energy-intensive sectors [22,30,64,89,99].…”

“…Hasanbeigi, Menke, and du Pont [99] compared drivers to energy efficiency in the cement (energy-intensive) and textile industries (non-energy-intensive) in Thailand, finding that both industries rate the same drivers as most important, namely: reducing final product cost by reducing energy cost, improving staff health and safety, and improving products' quality. Martínez [64] assessed the main determinants for energy efficiency performance in energy-intensive and non-energy-intensive sectors in Colombia. Likewise, she found that both sectors considered the same drivers to be most important, namely; energy prices and foreign investments.…”