Energy Efficiency of Mexican states: A Stochastic Production Frontier Approach

Abstract

Mexico’s goals of reducing carbon emissions and improving the Energy Efficiency (EE) cannot be attained if EE indicators are not estimated. Nevertheless, given the lack of information at state level, there are not yet indicators at regional or state level. Using a Stochastic Production Frontier model this paper offers an estimation of EE for 29 states and identifies energy inefficiency determinants. The main findings are threefold: first, most states have improved their EE, except for Jalisco, Baja California and Veracruz. Second, three variables are identified as energy inefficiency drivers, namely, population density, market potential and high presence of materials industries. Third, electricity demand is not deterred through the price. Upon these results, we recommend that EE policies must incorporate the regional component, based on the mentioned variables. This work contributes with the first estimation of EE indicators for states in Mexico, its main limitation is that due to data availability, the estimations only include electricity as primary energy input.