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Interfuel Substitution - Upper Bound Estimates

Brian Sullivan

Year: 1981
Volume: Volume 2
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol2-No2-6
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Abstract:
The degree to which alternative energy sources can be substituted for each other is an important consideration in several energy policy areas. This article examines the issue of interfuel substitution within a very limited framework, namely, the capability of the steam electric industry to switch among coal, oil, and natural gas in plants able to bum all three fuels. In this sense, we claim that our substitution possibility estimates will be upper bounds, since the necessary capital is already in place to accommodate each fuel. Section II describes the theoretical model used in describing the behavior of steam electric plants. Section III discusses the justification of the empirical technique presented; Section IV discusses this study's data and presents results; Section V discusses the implications of these results.



Natural Gas Availability and the Residential Demand for Energy

Gail R. Blattenberger, Lester D. Taylor, and Robert K.Rennhack

Year: 1983
Volume: Volume 4
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol4-No1-2
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Abstract:
Not all households have access to pipeline-delivered natural gas.This fact affects not only the demand for natural gas but the demand for electricity and fuel oil as well. Since electricity and natural gas are substitutes in cooking, space heating, water heating, and (to a much lesser extent) cooling, the price elasticity of demand for electricity will be larger when gas is available than when it is not. Fuel oil and natural gas are substitutes in cooking, space heating, and water heating, so that oneshould also expect larger price elasticities for fuel oil when gas is available.



Technological Innovation and a Changing Energy Mix - A Parametric and Flexible Approach to Modeling Ontario Manufacturing

Dean C. Mountain, Bill P. Stipdonk and Cathy J. Warren

Year: 1989
Volume: Volume 10
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol10-No4-9
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Abstract:
For the purposes of explaining historical trends in relative fuel usage and energy efficiency, an encompassing framework must incorporate both the influence of changing fuel prices and technological change. Schurr (1982), Rosenberg (1983), Jorgenson (1984, 1986) and Berndt (1986) have provided recent documentation of the importance of these two factors in explaining productivity growth. Moreover, these studies indicate that a key to understanding such trends is analysis at the individual industrial sector level.In ignoring the influence of technological change on interfuel substitution, modern studies (e.g., Gopalakrishnan, 1987; Moghimzadeh and Kymm, 1986) have left unaltered the approach taken in the pioneering studies of Berndt and Wood (1975), Fuss (1977), Griffin and Gregory (1976) and Halvorsen (1977).



Manufacturing Energy Use in Eight OECD Countries: Trends through 1988

Richard B. Howarth and Lee Schipper

Year: 1991
Volume: Volume 12
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-No4-2
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Abstract:
This paper reviews the evolution of manufacturing energy use in eight industrialized nations: West Germany, Denmark, France, Japan, Norway, Sweden, the United Kingdom, and the United States. Manufacturing energy use fell in these nations by 16% between 1973 and 1988 while manufacturing value-added increased by 41%. Reduced energy intensities in six industry groups -- paper and pulp; chemicals; stone, clay and glass; iron and steel; nonferrous metals; and other manufacturing -- were the primary source of this apparent decoupling of energy use and output. Between 1973 and 1988, intensity reductions would have driven down sectoral energy use by 32% if the level and composition of output had remained constant. Structural change, or shifts in the product mi, would have reduced energy use by 11% if the total level of output and the energy intensities of each industry group had remained constant.



Estimating Disaggregated Price Elasticities in Industrial Energy Demand

Mahmoud A. T Elkhafif

Year: 1992
Volume: Volume 13
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol13-No4-11
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Abstract:
Econometric energy models are used to evaluate past policy experiences, assess the impact of future policies and forecast energy demand. This paper estimates an industrial energy demand model for the province of Ontario using a linear-logit specification for fuel type equations which are embedded in an aggregate energy demand equation. Short term, long-term, own- and cross-price elasticities are estimated for electricity, natural gas, oil and coal. Own- and cross-price elasticities are disaggregated to show the overall price elasticities and the "energy-constant" price elasticities when aggregate energy use is held unchanged. These disaggregations suggest that a substantial part of energy conservation comes from the higher aggregate price of energy and not from interfuel substitution.



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

Isamu Matsukawa, Yoshifumi Fujii and Seishi Madono

Year: 1993
Volume: Volume14
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol14-No4-3
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Abstract:
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.



Demand for Ground Transportation Fuel and Pricing Policy in Asian Tigers: A Comparative Study of Korea and Taiwan

Sara Banaszak, Ujjayant Chakravorty and PingSun Leung

Year: 1999
Volume: Volume20
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol20-No2-6
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Abstract:
This paper examines the demand for gasoline and diesel in the ground transportation sectors of South Korea and Taiwan, comparing the effects of their different pricing policies and stages of economic growth. To account for substitutability between the two fuels, the model proposed here uses a system of equations estimated simultaneously with time-series data from 1973-1992. Results yield demand elasticities that confirm previous research showing that oil product demand is generally price inelastic, while income elasticities (reflecting a longer period of economic growth than previous studies in the Asian region) are lower than those previously reported. The estimated demand functions are then used to generate forecasts for both countries and, in particular, for an assumed reduction in a 180% tax on gasoline in Korea. Forecasted increases in demand by the year 2010 range from 40 to 180%, while the tax analysis suggests that Korea's pricing policy has reduced total demand and promoted the use of diesel over gasoline.



Interfuel Substitution within Industrial Companies: An Analysis Based on Panel Data at Company Level

Thomas Bue Bjorner and Henrik Holm Jensen

Year: 2002
Volume: Volume23
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol23-No2-1
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Abstract:
In this paper we estimate two models for interfuel substitution between electricity, district heating and (other) fuels using a micro panel data set containing information for most Danish industrial companies in the period between 1983 and 1997. The main finding of the study is that interfuel substitution is low within the companies, especially between electricity and other fuels. The partial own-price elasticities estimated are small (between -0.04 and -0.13) both for electricity and other fuels, while it is between -0.44 and -0.50 for district heating. The partial own-price elasticity for electricity is smaller than generally found in macro studies. One explanation may be that the macro studies, in addition to technical substitution, capture some derived demand effect (i.e., aggregation bias).



International Evidence on Sectoral Interfuel Substitution

Apostolos Serletis, Govinda R. Timilsina and Olexandr Vasetsky

Year: 2010
Volume: Volume 31
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol31-No4-1
View Abstract

Abstract:
This paper estimates interfuel substitution elasticities in selected devel�oping and industrialized economies at the sector level. In doing so, it employs state-of-the-art techniques in microeconometrics, particularly the locally .exible normalized quadratic functional form, and provides evidence consistent with neo�classical microeconomic theory. The results indicate that the interfuel substitution elasticities are consistently below unity, revealing the limited ability to substitute between major energy commodities (i.e., coal, oil, gas, and electricity). We .nd that on average, industrial and residential sectors tend to exhibit higher potential for substitution between energy inputs as compared to the electricity generation and transportation sectors in all countries, with the United States being the only exception. In addition, we .nd that developed countries demonstrate higher po�tential for interfuel substitution in their industrial and transportation sectors as compared to the developing economies. The implication is that interfuel substi�tution depends on the structure of the economy, not the level of economic devel�opment. Moreover, higher changes in relative prices are needed than what we have already experienced to induce switching toward a lower carbon economy.



Interfuel Substitution and Energy Use in the U.K. Manufacturing Sector

Jevgenijs Steinbuks

Year: 2012
Volume: Volume 33
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol33-No1-1
View Abstract

Abstract:
This paper investigates interfuel substitution, separately accounting for different types of energy use in the U.K. manufacturing sector. Econometric models of interfuel substitution are applied to aggregate energy use, as well as to a specific energy use process--thermal heating--where interfuel substitution is technologically feasible. Compared to the aggregate data, the estimated own-price elasticities for all fuels and the cross-price elasticities for fossil fuels are considerably higher for thermal heating processes. Nonetheless, electricity is found to be a poor substitute for other fuels based on both aggregate data and, separately, for the heating process. An increase in real fuel prices from the Climate Change Levy in 2001 resulted in higher substitution elasticities based on aggregate data, and lower substitution elasticities for the thermal heating process. The results of a counterfactual decomposition of change in the estimated elasticities indicate that technological change was the major determinant of the differences in observed elasticities before and after the energy price increase.

Keywords: Climate change levy, Elasticities, Energy use, Interfuel substitution, Manufacturing sector, United Kingdom




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