Why is the US so Energy Intensive? Evidence from US Multinationals in the UK
AbstractAt present the USA is - in per capita terms - the top greenhouse gas polluter among the world's major economies. This is mirrored by the high energy intensity of all sectors of the US economy including manufacturing industries. A potential explanation for the higher energy intensity is lower US energy price levels. However, common price elasticity estimates are not high enough to explain the observed differences between countries. Alternative explanations include firstly geographic or other locational differences and secondly firm specific technology differences between US firms and others. This study explores this latter possibility by comparing establishments of US firms in Britain with other comparable firms thereby ruling out locational differences. The findings are that on average US firms are not more energy intensive when operating in Britain. However, US firms that have only recently entered the UK market are found to be significantly more energy intensive at an order of magnitude corresponding to the between country US-UK gap. This difference vanishes with an increased duration of stay in the UK; however, with a considerable time lag. This suggests firstly, that barriers to knowledge diffusion are an important concern and secondly, that the long term response to a sustained price increase might be stronger than common price elasticity estimates suggest. The study also provides, for the first time, estimates of energy price elasticities for the UK on the basis of representative plant level panel data for the manufacturing sector.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0965.
Date of creation: Jan 2010
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
Energy efficiency; multinationals; energy demand elasticity; climate change;
Find related papers by JEL classification:
- Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply
- Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
- Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters
- D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
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- Jaffe Adam B. & Stavins Robert N., 1995. "Dynamic Incentives of Environmental Regulations: The Effects of Alternative Policy Instruments on Technology Diffusion," Journal of Environmental Economics and Management, Elsevier, vol. 29(3), pages S43-S63, November.
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