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Price, Environmental Regulation, and Fuel Demand: Econometric Estimates for Japanese Manufacturing Industries

In this paper, we analyze interfuel substitution according to Japanesemanufacturing sectors. We examine the impact of environmental regulations and technical changes on fuel choice, and the effects of price on fuel substitution, using pooled data on fuel consumption and purchase price for 58 regions in the period 1980-88. The empirical results, based on the estimation of translog unit fuel cost functions by sector, indicate that (1) substitution possibilities were found for most combinations of fuel types in every sector; and (2) environmental regulations and technical changes significantly impact fuel consumption for most sectors, but their effects on fuel demand differ both across sectors and fuel types.

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Energy Specializations: Energy Modeling – Sectoral Energy Demand & Technology; Energy and the Environment – Policy and Regulation

JEL Codes:
Q55 - Environmental Economics: Technological Innovation
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Environmental regulation, Japan, Manufacturing industry, Interfuel substitution, Techonology change

DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No4-3

Published in Volume14, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.