Assessing energy efficiency improvements and related energy security and climate benefits in Finland: An ex post multi-sectoral decomposition analysis

Energy efficiency is widely considered a cost-effective strategy for reducing energy demand, energy-related carbon dioxide emissions and dependence on foreign energy sources. At the national level in EU Member States, improvements in energy efficiency are measured against model-based scenarios and ex ante engineering estimates, which might provide inaccurate indications of the actual energy savings delivered by energy efficiency. Thus, the objectives of this study are to provide new insights on (i) the contribution of energy efficiency improvements to reducing energy consumption in Finland over the 2005–2015 period by employing an ex post multi-sectoral decomposition analysis approach—Logarithmic Mean Divisia Index I—and (ii) the energy security and climate benefits associated with energy efficiency improvements. The results indicate that from 2005 to 2015, efficiency saved 0.58 Mtoe of final energy; without the energy efficiency improvements that occurred between 2005 and 2015 (ceteris paribus), the final energy consumption in 2015 would have been 2.4% higher. Compared to the energy savings reported by the Finnish government to the European Commission, the savings calculated with the Logarithmic Mean Divisia Index I are significantly lower. Energy efficiency improvements between 2005 and 2015 reduced Finland's carbon dioxide emissions and dependence on energy imports by 3.5% and 5% in 2015, respectively. Future energy efficiency policies should be targeted at residential space heating demand; chemical, mining, food, and construction industries; and heavy-duty vehicles as energy efficiency was not effective in reducing energy consumption.Energy efficiency is widely considered a cost-effective strategy for reducing energy demand, energy-related carbon dioxide emissions and dependence on foreign energy sources. At the national level in EU Member States, improvements in energy efficiency are measured against model-based scenarios and ex ante engineering estimates, which might provide inaccurate indications of the actual energy savings delivered by energy efficiency. Thus, the objectives of this study are to provide new insights on (i) the contribution of energy efficiency improvements to reducing energy consumption in Finland over the 2005–2015 period by employing an ex post multi-sectoral decomposition analysis approach—Logarithmic Mean Divisia Index I—and (ii) the energy security and climate benefits associated with energy efficiency improvements. The results indicate that from 2005 to 2015, efficiency saved 0.58 Mtoe of final energy; without the energy efficiency improvements that occurred between 2005 and 2015 (ceteris paribus), the final energy consumption in 2015 would have been 2.4% higher. Compared to the energy savings reported by the Finnish government to the European Commission, the savings calculated with the Logarithmic Mean Divisia Index I are significantly lower. Energy efficiency improvements between 2005 and 2015 reduced Finland's carbon dioxide emissions and dependence on energy imports by 3.5% and 5% in 2015, respectively. Future energy efficiency policies should be targeted at residential space heating demand; chemical, mining, food, and construction industries; and heavy-duty vehicles as energy efficiency was not effective in reducing energy consumption.