Industrial agglomeration effect for energy efficiency in Japanese production plants

Abstract Improving energy efficiency is a highly effective policy for protecting the environment and preserving resources. Previous studies have measured energy efficiency in the industrial sector. We further contribute to understanding the factors that affect energy efficiency changes. This study measures energy efficiency based on plant-level data in Japan's paper/pulp and cement industries as representative energy intensive sectors. We analyze the relationship between the industrial agglomeration effect and the energy efficiency of each studied industry. Our results reflect several important findings. First, energy efficiency has improved in the paper and pulp industry as well as the cement industry between 2000 and 2010. However, the factors for improving energy efficiency differ between the industries. Second, industrial agglomeration affects energy efficiency. In the paper and pulp industry, the same industry agglomerations contribute to improvements in energy efficiency. However, the agglomeration effect is negative for energy efficiency in the cement industry. Our results indicate that one must consider regional circumstances more carefully when seeking to improve energy efficiency.