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The Role of Energy in Productivity Growth

Dale W. Jorgenson

Year: 1984
Volume: Volume 5
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol5-No3-2
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Abstract:
The objective of this paper is to analyze the role of energy in the growth of productivity. The special significance of energy in economic growth was first established in the classic study Energy and the American Economy 1850-1975, by Schurr and his associates (1960) at Resources for the Future. From 1920 to 1955, Schurr noted, energy intensity of production had fallen while both labor and total factor productivity were rising.' The simultaneous decline of energy intensity and labor intensity of production could not be explained solely on the basis of substitution of less expensive energy for more expensive labor. Since the quantity of both energy and labor inputs required for a given level of output had been reduced, technical change would also be a critical explanatory factor.From 1920 to 1955 the utilization of electricity had expanded by a factor of more than ten, while consumption of all other forms of energy only doubled. The two key features of technical change during this period were that (1) the thermal efficiency of conversion of fuels into electricity increased by a factor of three, and (2) "the unusual characteristics of electricity had made it possible to perform tasks in altogether different ways than if the fuels had to be used directly."2 For example, as Schurr noted, the electrification of industrial processes had led to much greater flexibility in the application of energy to industrial production.



Alternative Technological Indices and Factor Demands in the Electric Power Industry

Randy Nelson

Year: 1987
Volume: Volume 8
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol8-No3-7
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Abstract:
The role of technical progress as a means of extending energy resources, together with the widespread use of flexible functional forms, has led to increased interest in the estimation of nonneutral technical change in recent years. Studies by Binswanger (1974), Berndt and Khaled (1979), and Berndt and Wood (1982) at the aggregate level and Wills (1979), Toevs (1980), Moroney and Trapani (1981), and Jorgenson and Fraumeni (1981) at the sectoral level have provided estimates of biased technical change. Stevenson (1980), Gollop and Roberts (1981, 1983), and Nelson (1984, 1986) have also estimated models of nonneutral technical change for the electric power industry.Almost all these studies have two features in common. To begin with, they have employed a time trend to represent the rate at which new technology is introduced.' A recent study by Kopp and Smith (1985), however, indicates that time trends may fail to provide a consistent description of the direction of technical change and calls for the use of technologically explicit indicators of the pace of innovation.



Energy Efficiency and Capital Embodied Technical Change: The Case of Mexican Cement Manufacturing

Thomas Sterner

Year: 1990
Volume: Volume 11
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No2-9
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Abstract:
This paper analyses energy efficiency in the Mexican cement industry by studying disaggregated data at the plant and production unit level. A short-run production function is examined to look at the substitution possibilities between labour and energy with given equipment, but these are found to be limited (as expected). Instead, reduction of energy use per unit of output is mainly due to capital embodied technical progress: the most important improvements in plant efficiency are related to investments in new pieces of specific equipment. Average energy intensity of the branch as a whole is, therefore, mainly explained by capacity expansion. Finally, the importance of factor prices and the relevance of our results to other industries are discussed.



Resource Depletion and Technical Change: Effects on U.S. Crude Oil Finding Costs from 1977 to 1994

Marie N. Fagan

Year: 1997
Volume: Volume18
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol18-No4-4
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Abstract:
A dramatic decline in U.S. crude oil finding costs has provoked intense interest in the extent to which technical progress has mitigated the effects of resource depletion. Analysis of depletion and technical change using data for 27 large U.S. oil producers from 1977-1994 is conducted using a translog cost function. The translog provides a flexible representation of the underlying production function, and controls for changing factor prices. The model also controls for the effect of prospect highgrading. Results show that an accelerating rate of technical change reduced average finding cost 15 percent (onshore) and 18 percent (offshore) per year by 1994. Resource depletion increased cost at an average annual rate of 7 percent onshore and 12 percent offshore. Technical change was relatively labor-using bothonshore and offshore.



The Dynamics of Carbon and Energy Intensity in a Model of Endogenous Technical Change

Valentina Bosetti, Carlo Carraro and Marzio Galeotti

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-9
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Abstract:
In recent years, a large number of papers have explored different attempts to endogenise technical change in climate models. This recent literature has emphasized that four factors � two inputs and two outputs � should play a major role when modeling technical change in climate models. The two inputs are R&D investments and Learning by Doing, the two outputs are energy-saving and fuel switching. Indeed, R&D investments and Learning by Doing are the main drivers of a climate-friendly technical change that eventually affect both energy intensity and fuel-mix. In this paper, we present and discuss an extension of the FEEM-RICE model in which these four factors are explicitly accounted for. In our new specification of endogenous technical change, an index of energy technical change depends on both Learning by Researching and Learning by Doing. This index enters the equations defining energy intensity (i.e. the amount of carbon energy required to produce one unit of output) and carbon intensity (i.e. the level of carbonization of primarily used fuels). This new specification is embodied in the RICE 99 integrated assessment climate model and then used to generate a baseline scenario and to analyze the relationship between climate policy and technical change. Sensitivity analysis is performed on different key parameters of the energy module in order to obtain crucial insights into the relative importance of the main channels through which technological changes affects the impact of human activities on climate.



Decarbonizing the Global Economy with Induced Technological Change: Scenarios to 2100 using E3MG

Terry Barker, Haoran Pan, Jonathan Kohler, Rachel Warren, and Sarah Winne

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-12
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Abstract:
This paper reports how endogenous economic growth and technological change have been introduced into a global econometric model. It explains how further technological change might be induced by mitigation policies so as to reduce greenhouse gas emissions and stabilize atmospheric concentrations. These are the first results of a structural econometric approach to modeling the global economy using the model E3MG (energy-environment-economy model of the globe), which in turn constitutes one component in the Community Integrated Assessment System (CIAS) of the UK Tyndall Centre. The model is simplified to provide a post-Keynesian view of the long-run, with an indicator of technological progress affecting each region�s exports and energy use. When technological progress is endogenous in this way, long-run growth in global GDP is partly explained by the model. Average permit prices and tax rates about $430/tC (1995) prices after 2050 are sufficient to stabilize atmospheric concentrations at 450ppm CO2 after 2100. They also lead to higher economic growth.



Endogenous Structural Change and Climate Targets Modeling Experiments with Imaclim-R

Renaud Crassous, Jean-Charles Hourcade, Olivier Sassi

Year: 2006
Volume: Endogenous Technological Change
Number: Special Issue #1
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI1-13
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Abstract:
This paper envisages endogenous technical change that results from the interplay between the economic growth engine, consumption, technology and localization patterns. We perform numerical simulations with the recursive dynamic general equilibrium model Imaclim-R to study how modeling induced technical change affects costs of CO2 stabilization. Imaclim-R incorporates innovative specifications about final consumption of transportation and energy to represent critical stylized facts such as rebound effects and demand induction by infrastructures and equipments. Doing so brings to light how induced technical change may not only lower stabilization costs thanks to pure technological progress, but also trigger induction of final demand�effects critical to both the level of the carbon tax and the costs of policy given a specific stabilization target. Finally, we study the sensitivity of total stabilization costs to various parameters including both technical assumptions as accelerated turnover of equipments and non-energy choices as alternative infrastructure policies.



Mitigation of Methane and Nitrous Oxide Emissions from Waste, Energy and Industry

K. Casey Delhotal, Francisco C. de la Chesnaye, Ann Gardiner, Judith Bates, and Alexei Sankovski

Year: 2006
Volume: Multi-Greenhouse Gas Mitigation and Climate Policy
Number: Special Issue #3
DOI: 10.5547/ISSN0195-6574-EJ-VolSI2006-NoSI3-3
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Abstract:
Traditionally, economic analyses of greenhouse gas (GHG) mitigation focused on carbon dioxide (CO2) emissions from energy sources, while nonCO2 GHGs were not incorporated into the studies, due to the lack of data on abatement costs of non-CO2 GHGs. In recent years, however, increasing attention has been dedicated to the benefits of reducing emissions of non-CO2 GHGs such as methane and nitrous oxide. Increased attention to the potential role of these gases in a GHG reduction policy increased the need for better data on the costs of non-CO2 GHG abatement for countries and regions outside of the US and the European Union (EU). Using a net present value calculation, this analysis develops regionally adjusted costs per mitigation option and marginal abatement cost curves by region for use in economic models. The result is worldwide cost estimates for methane and nitrous oxide from waste, energy and the industrial sectors. This paper also demonstrates the ability to significantly reduce greenhouse gases from these sectors with current technologies and the low cost of methane and nitrous oxide relative to CO reductions.



A Note on Price Asymmetry as Induced Technical Change

Hillard G. Huntington

Year: 2006
Volume: Volume 27
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-1
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Abstract:
This note evaluates whether fixed time effects (yearly dummy variables) are a better representation than separate price-decomposition terms for induced technical change in energy and oil demand. Fixed time effects are a proxy for all omitted variables that change similarly over time for all countries. Many of these omitted variables have little relevance to technical change. Empirically, statistical tests applied to previous studies reject an important premise of the fixed-time-effect model that energy or oil demand responds symmetrically to price increases and decreases. Moreover, when price-decomposition techniques allow for price-asymmetric responses, the estimated income elasticities are not dramaticalxly different from their fixed-time-effect counterparts, as it is sometimes alleged. There are also practical reasons for choosing models that allow for asymmetric responses to price, especially when evaluating the longrun implications of a number of important energy and environmental issues.



Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?

Reyer Gerlagh and Bob van der Zwaan

Year: 2006
Volume: Volume 27
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol27-No3-3
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Abstract:
This paper compares both the main physical options and the principal policy instruments to realize a deep cut in carbon dioxide emissions necessary to control global climate change. A top-down energy-economy model is used that has three emission reduction options: energy savings, a transition towards less carbon-intensive or non-carbon energy resources, and the use of carbon dioxide capture and storage technology. Five policy instruments - carbon taxes, fossil fuel taxes, non-carbon (renewable) energy subsidies, a portfolio standard for the carbon intensity of energy production, and a portfolio standard for the use of non-carbon (renewable) energy resources - are compared in terms of costs, efficiency and their impact on the composition of the energy supply system. One of our main conclusions is that a carbon intensity portfolio standard, involving the recycling of carbon taxes to support renewables deployment, is the most cost-efficient way to address the problem of global climate change. A comprehensive introduction of the capture and storage of carbon dioxide would contribute to reducing the costs of climate change control, but would not obviate the large-scale need for renewables.




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