Inequality and Convergence in Energy Intensity in the European Union

Disparities in energy intensity across the European Union member countries are large, especially after the enlargement that took place in 2004 when Central and Eastern European countries with high energy intensities accessed the European Union. All member countries have committed themselves to the target of reducing energy intensity, however the rate of change in energy intensity differs across countries. In this context, monitoring the convergence process among member countries is crucial to assess the progress in achieving the energy saving targets stated by the European Union. In this article, the convergence process in energy intensity is examined by using an approach based on inequality decomposition. The change in inequality is broken down into two components measuring β-convergence in energy intensity and the re-ranking of countries within the energy intensity distribution, respectively. Since the change in inequality measures the relative variation of energy intensity dispersion, the inequality change in itself is a measure of σ-convergence. Moreover, the inequality change and its components are further decomposed to detect the spatial components of convergence and re-ranking. The convergence in energy intensity in the European Union from 2003 to 2014 is investigated. Results show that convergence mainly occurs in the first years of the period considered, whereas there is a slowdown of the convergence process in the following years. In this second phase, spatial effects on convergence and re-ranking are more evident.