Sectoral energy efficiency improvements in Taiwan: Evaluations using a hybrid of top-down and bottom-up models

Improving energy efficiency is an important strategy for reducing energy demand and carbon emissions. Numerous studies reveal that improvements in energy efficiency lead to reductions in the total energy demand and the enhancement of economic growth. However, mainstream papers have adopted top-down or bottom-up approaches to investigate energy efficiency improvements. In this study, a hybrid of the aforementioned approaches is adopted. A soft-link between the Asia-Pacific Integrated Model/Computable General Equilibrium for Taiwan (top-down) and the Taiwan 2050 Calculator (bottom-up) is employed to evaluate the effects of energy efficiency improvements in Taiwan. We investigate the influence of energy efficiency improvements on the industrial, residential and service, and transport groups, respectively. Energy efficiency improvements decrease energy demand and enhance the growth of gross domestic production (GDP). Moreover, energy efficiency improvements result in a decrease in CO₂ emissions. The industrial group has a comparative advantage over other groups in terms of energy efficiency improvements. However, the subsidies on energy efficiency investments crowd out household consumption. An appropriate fiscal balance scheme could mitigate the crowding-out effects on household consumption, as indicated by our counterfactual analysis. Therefore, energy efficiency improvements are one of the most important strategies for conserving energy and reducing carbon emissions.