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Technological Change, Fuel Efficiency and Carbon Intensity in Electricity Generation: A Cross-Country Empirical Study

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  • Elena Verdolini

    (Fondazione Eni Enrico Mattei)

  • Nick Johnstone

    (OECD Environment Directorate)

  • Ivan Hašcic

    (OECD Environment Directorate)

Abstract

This paper provides an empirical analysis of the determinants of energy efficiency in fossil fuel electricity generation across 28 OECD countries over the period 1981-2006, with particular attention to the role played by technological development and the availability of energy efficient technologies in the market. This contribution is novel in three respects: first, empirically assess the effects of different determinants of energy efficiency, which include the input mix in electricity generation, the capacity ratio at which power plants are run, as well as the characteristics of the production technology. Second, we focus on the role of technological availability: using patent data for carefully selected innovations in fossil-fuel technologies, we build an indicator which proxies for technological developments in fuel-efficient electricity generation. Third, by formalizing the relationship between fuel efficiency and carbon intensity, we assess the impact of changes in the input mix and in technological availability on CO2 emissions in the electricity sector. Results show that input mix, capacity utilization and new investment in capacity play a significant role in increasing energy efficiency. Increasing the stock of available technologies (or stock of knowledge) is also associated with higher efficiency levels. Given the link between increased efficiency and lower CO2 emissions, we conclude that technological change has a negative and significant effect on carbon intensity, while the changing input mix affects CO2 intensity both through an increase in efficiency as well as by lowering the input-weighted emission factor.

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Bibliographic Info

Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2011.92.

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Date of creation: Dec 2011
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Handle: RePEc:fem:femwpa:2011.92

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Keywords: Fossil Fuel Electricity Generation; Energy Efficiency; Carbon Intensity; Technological Change; Patents;

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  1. Verdolini, Elena & Galeotti, Marzio, 2011. "At home and abroad: An empirical analysis of innovation and diffusion in energy technologies," Journal of Environmental Economics and Management, Elsevier, vol. 61(2), pages 119-134, March.
  2. Elisa Lanzi & Elena Verdolini & Ivan Hašcic, 2011. "Efficiency Improving Fossil Fuel Technologies for Electricity Generation: Data Selection and Trends," Working Papers, Fondazione Eni Enrico Mattei 2011.10, Fondazione Eni Enrico Mattei.
  3. John W. Kendrick, 1961. "Productivity Trends in the United States," NBER Books, National Bureau of Economic Research, Inc, number kend61-1, October.
  4. Graus, Wina & Worrell, Ernst, 2009. "Trend in efficiency and capacity of fossil power generation in the EU," Energy Policy, Elsevier, Elsevier, vol. 37(6), pages 2147-2160, June.
  5. James Ko & Carol Dahl, 2001. "Interfuel substitution in US electricity generation," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(14), pages 1833-1843.
  6. Abbott, Malcolm, 2005. "Determining Levels of Productivity and Efficiency in the Electricity Industry," The Electricity Journal, Elsevier, Elsevier, vol. 18(9), pages 62-72, November.
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