Interfuel Substitution and Energy Use in the UK Manufacturing Sector
AbstractThis paper investigates interfuel substitution in the UK manufacturing sector. Econometric models of interfuel substitution are applied to energy inputs aggregated by their energy use, and separately for thermal heating processes, where interfuel substitution is technologically feasible. Compared to aggregate data, estimated own-price fuel demand elasticities for all fuels and 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. This study also finds that an increase in real fuel prices resulted in higher substitution elasticities based on aggregate data, and lower substitution elasticities for the heating process. The results of 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.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 1032.
Date of creation: 16 Aug 2010
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climate change levy; elasticities; energy use; interfuel substitution; manufacturing sector; United Kingdom.;
Other versions of this item:
- Jevgenijs Steinbuks, 2012. "Interfuel Substitution and Energy Use in the U.K. Manufacturing Sector," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
- H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-28 (All new papers)
- NEP-ENE-2010-08-28 (Energy Economics)
- NEP-EUR-2010-08-28 (Microeconomic European Issues)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Brannlund, Runar & Lundgren, Tommy, 2004.
"A dynamic analysis of interfuel substitution for Swedish heating plants,"
Elsevier, vol. 26(6), pages 961-976, November.
- Brännlund, Runar & Lundgren, Tommy, 2001. "A Dynamic Analysis of Interfuel Substitution for Swedish Heating Plants," UmeÃ¥ Economic Studies 550, Umeå University, Department of Economics.
- Steinbuks, Jevgenijs & Neuhoff, Karsten, 2014. "Assessing energy price induced improvements in efficiency of capital in OECD manufacturing industries," Policy Research Working Paper Series 6929, The World Bank.
- Papageorgiou, Chris & Saam, Marianne & Schulte, Patrick, 2013. "Elasticity of substitution between clean and dirty energy inputs: A macroeconomic perspective," ZEW Discussion Papers 13-087, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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