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Input substitution effect in China׳s chemical industry: Evidences and policy implications

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  • Lin, Boqiang
  • Long, Houyin

Abstract

The chemical industry is one of the six high energy-consuming and emission-intensive sectors in China, and the Chinese government has focused its attention on energy saving and emissions reduction in the sector. With the aim of contributing to the objective of energy saving and emission reduction in the sector, this article studies the external substitution relationship of capital-energy and labor-energy using the translog production function and ridge regression. The results are as follow: the output elasticities of energy, labor and capital are positive; the substitution elasticities of capital-labor, capital-energy and labor-energy are positive and stable, and their values are close to 1, which indicates that the three factors are substitutes for one another. Furthermore, based on the above function, we measure the level of energy saving and emissions reduction under different scenarios in 2012. Policy implications of the results are provided.

Suggested Citation

  • Lin, Boqiang & Long, Houyin, 2016. "Input substitution effect in China׳s chemical industry: Evidences and policy implications," Renewable and Sustainable Energy Reviews, Elsevier, vol. 53(C), pages 1617-1625.
    • Handle: RePEc:eee:rensus:v:53:y:2016:i:c:p:1617-1625
    DOI: 10.1016/j.rser.2015.09.071
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