Exergy and economic inefficiency: A thermodynamic-economic framework for productivity analysis
Improving the efficiency and sustainability of energy systems requires analytical approaches that account not only for input-output performance but also for energy quality and physical irreversibility. This paper develops a thermodynamic-economic framework linking second-law inefficiency, represented by exergy destruction, to frontier-based economic inefficiency expressed as distance from an efficiency frontier. Using standard frontier and Data Envelopment Analysis (DEA) notation, the paper formalizes this relationship and identifies avenues for future empirical implementation. Rather than presenting a full empirical DEA application, the study provides an illustrative aggregate example for the EU-27 energy system using publicly available Eurostat energy-balance data. The illustration shows how a normalized thermodynamic inefficiency indicator can complement conventional energy-efficiency and energy-intensity measures by highlighting losses associated with energy degradation that remain less visible in first-law assessments. The paper argues that thermodynamic inefficiency should be treated as a physically grounded but not exclusive contributor to economic inefficiency, which is also shaped by institutional, behavioral, market, and regulatory factors. The study concludes by outlining the scope conditions, limitations, policy relevance, and future research agenda for integrating exergy-based indicators into frontier and productivity analysis.
Publisert i Social Sciences & Humanities Open (SSHO), 2026
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