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Interfuel Substitution: A Meta Analysis

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Author Info
David I.Stern () (Arndt-Corden Division of Economics, Research School of Pacific and Asian Studies, The Australian National University, Australia)

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Abstract

Interfuel substitutability has been of longstanding interest to energy economists and policy makers. However, there has been no quantitative meta-analysis of this literature. This research report fills this gap by analysing a broad sample of studies of interfuel substitution in the industrial sector, manufacturing industry or sub-industries, and macro-economy of a variety of developed and developing economies. The primary study sample size has been included in the meta-regression to control for publication bias. At the industrial level, results for the shadow elasticities of substitution between coal, oil, gas, and electricity for forty-six primary studies show that, except for gas-electricity and coal-electricity, there are easy substitution possibilities between all the fuel pairs. Substitution possibilities seem more constrained at the macro level and less constrained in sub-industries. Estimates also vary across countries. Publication bias does not appear to be present, but model and data specification issues very significantly affect the estimates derived by each individual study. Estimates from cross-section regressions are generally largest, and fixed effects panel estimates are intermediate. Time-series estimates are mostly much smaller. Econometric research suggests that the fixed effects estimates, although biased downwards, are likely to be the best among the existing studies.

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Paper provided by Environmental Economics Research Hub, Crawford School, Australian National University in its series Environmental Economics Research Hub Research Reports with number 0933.

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Date of creation: Jun 2009
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Handle: RePEc:een:eenhrr:0933

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Find related papers by JEL classification:
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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    Other versions:
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  1. Stern, David I., 2009. "Energy quality," MPRA Paper 16857, University Library of Munich, Germany. [Downloadable!]
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