The convergence of energy intensity in developing countries: a spatial econometric analysis with Indonesia’s provincial panel data

Energy intensity convergence can be used to assess the effectiveness of policies in reducing energy intensity. This study analyzes the energy intensity convergence in Indonesia based on panel data of 33 provinces from 2010 to 2018. Spatial econometrics techniques are used in the estimation of beta convergence to measure the spatial dependence of energy intensity. Empirical results show that there is evidence of both absolute and conditional beta convergences with no evidence of sigma convergence. From the results, this study found that other variables, such as provincial income, the role of manufacturing industries, the role of international trade, FDI, and population density, might encourage energy intensity convergence. From the estimation results, several policy recommendations are derived to increase energy efficiency: First, using a more efficient industrial technology. Second, attracting foreign investment to non-industrial sectors. Third, developing exports from sectors that use less energy to increase energy efficiency.