Interfuel and energy-capital complementarity in manufacturing industries
AbstractThe growing importance of energy in the production process due to factors such as fears of the depletion of cheap oil, drastic fluctuations in unit energy prices, and various exogeneous reasons, has led to many studies introducing aggregate energy as an amorphous entity-factor of production. Presently, (a) the relationship between four fossil fuels (coal, oil, gas, and electricity), and (b) the relationship between aggregate energy and aggregate capital, both in manufacturing industries, are being studied. Of prime interest in the relevant literature is the dichotomy characterizing the energy-capital complementarily/substitutability. In a thorough review of the literature of mostly translogarithmic studies we detect interfuel substitutability in the majority of the industrial sectors. More specifically, oil appears to be a substitute for both coal and electricity; gas is leaning towards substitutability with coal and electricity; oil and gas are substitutes in selected industries only, but are complements in most manufacturing processes; and finally, coal and electricity perform as substitutes in aggregate manufacturing. The [`]obscure' contradiction in the energy-capital relationship is marked. Time-series studies favor complementarity but cross-section research supports the substitutability between the two inputs of production. Despite various reconiliation attempts, the dichotomy in the results remains strong. Some explanations are, the insufficient econometric techniques which yield biased estimates, the omission of other significant factors in the estimation process, time-lags, differences in the measurement of capital, and data heterogeneity.
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Bibliographic InfoArticle provided by Elsevier in its journal Applied Energy.
Volume (Year): 35 (1990)
Issue (Month): 2 ()
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Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description
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- David I. Stern, 2009.
"Interfuel Substitution: A Meta-Analysis,"
Departmental Working Papers
2009-06, The Australian National University, Arndt-Corden Department of Economics.
- Stern, David I., 2009. "Interfuel Substitution: A Meta-Analysis," MPRA Paper 13734, University Library of Munich, Germany.
- Stern, David I., 2009. "Interfuel Substitution: A Meta-Analysis," Research Reports 94882, Australian National University, Environmental Economics Research Hub.
- David I.Stern, 2009. "Interfuel Substitution: A Meta Analysis," Environmental Economics Research Hub Research Reports 0933, Environmental Economics Research Hub, Crawford School of Public Policy, The Australian National University.
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