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Energy use efficiency: the role of firm's characteristics

Student name: Ms Gargi Pal
Guide: Prof M N Murty
Year of completion: 2015
Host Organisation: TERI University
Supervisor (Host Organisation): Dr Arabinda Mishra
Abstract: The aim of this study is to measure the energy use efficiency of companies under some of the most energy intensive sectors of the Indian economy and to find whether firm specific characteristics explains some of the variation in the computed energy use efficiency. The large variation in energy intensities within the same sectors are indicative of the scope for energy efficiency improvement. The sectors under consideration are as identified by the Perform Achieve Trade (PAT) Scheme under the National Mission for Enhanced Energy Efficiency (NMEEE) and the scheme assigns energy efficiency targets to each plant of each firm. Such comprehensive target setting is reflective of the heterogeneity among the firms. This heterogeneity brings out the need to study the role of firm specific characteristics like age, ownership, size etc. in explaining the variation in energy use efficiency of the firms. The Prowess database by CMIE is used for firm level financial data for the period 2000- 2013. The energy use efficiency is calculated using the Data Envelopment Analysis (DEA) which assigns efficiency scores to each firm. A comparative analysis is done to understand the role of firm specific characteristics for the best performing firms within each sector. It is found that the iron and steel sector is the most energy efficient among the four sectors considered in the study, and there is variation in firm specific characteristics even among the top performers in the industry which is indicative of the fact that the Indian industries can support a cap and trade mechanism of the likes of the PAT scheme Keywords: Energy Efficiency, Energy Intensive Sectors, Data Envelopment Analysis