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Why is the US so energy intensive?: evidence from US multinationals in the UK

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  • Ralf Martin
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    Abstract

    At 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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    File URL: http://eprints.lse.ac.uk/28703/
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    Bibliographic Info

    Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 28703.

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    Length: 40 pages
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:ehl:lserod:28703

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    Keywords: Energy efficiency; multinationals; energy demand elasticity; climate change;

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    1. Roy, Joyashree & Sanstad, Alan H. & Sathaye, Jayant A. & Khaddaria, Raman, 2006. "Substitution and price elasticity estimates using inter-country pooled data in a translog cost model," Energy Economics, Elsevier, Elsevier, vol. 28(5-6), pages 706-719, November.
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    12. Mary O’Mahony & Willem de Boer, 2002. "Britain’s Relative Productivity Performance: Has Anything Changed?," National Institute Economic Review, National Institute of Economic and Social Research, National Institute of Economic and Social Research, vol. 179(1), pages 38-43, January.
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